Advice for Dangerous Times
- by Matthew Brodsky
Greg Mondre, W’96, took a risk when he joined Silver Lake 14 years ago. He left a successful career on the West Coast at established private-equity firm TPG to help startup another firm from the ground floor. His thinking – the opportunity to specialize in the technology space, to be involved in every acquisition at the young firm of 6 employees, and to help shape company culture – paid off of course. The Silver Lake managing partner now helps to oversee more than 200 employees at a firm with $20 billion in capital and a reputation as one of the best in tech.
He’s personally done successful deals in a long list of years: 1999, 2000, 2003, 2004, 2006, 2009, 2010 and 2011. Yet he has also had a few flops.
“I’ve made a few fundamental mistakes over a 15-year career,” he admitted.
Recently, to a lecture room full of undergraduate students, Mondre shared his life lessons from these experiences. Tough career decisions come early on in life, even while you’re still in school or right out of it, and once settled into a career, you will make mistakes. But you cannot let mistakes change the course of a career, or a life.
“It’s all about keeping a level head and being introspective,” he said.
A level head could be a good thing in today’s private equity world too.
“We’re right now at a pretty dangerous time,” Mondre said.
With the Federal Reserve’s current “easy” monetary policies, cash is flowing again toward riskier assets. Credit is easy to get for private equity deals. Mondre added that many people involved in private equity now lived through the financial crisis and are being cautious when it comes to multiples and leverage.
“You’re not seeing the craziness we saw in 2006 and 2007,” he said of his peers.
Yet private equity funds still do have to make a return for their investors in this modest global economy.
It raises an intriguing question about private equity’s traditional rigid selling strategy, said Mondre. Typically, firms stick to their 10-year plans and do not alter their course if/when the market changes. Like now. In the current market, some buyers are willing to pay multiples above a company’s book value. So why not sell? Diverting from the original plan could work as long as the fund still meets its obligation to its limited partners (LPs) for higher returns through illiquid assets over a period return versus returns attainable through other asset classes.
Mondre spoke at a brownbag luncheon for Wharton undergrads sponsored by Wharton Alumni Relations and the student-run Wharton Alumni Relations Council.