Keeping it in the family

Tom Hicks, a retired giant of the global private equity fund investment industry, is back doing buyouts – this time with his own money. By Jonn Elledge.

When most people think about retirement, they think of pottering in the garden, doing some travelling, or finally getting around to reading War and Peace. Few foresee themselves spending their years of dotage on leveraged buyouts. But then, not everyone has spent twenty-five years in private equity and founded one of the best-known names in US buyouts.

Tom Hicks, late of Hicks, Muse, Tate and Furst

A little over a year and a half after surprising the industry by retiring as chairman of Hicks, Muse, Tate and Furst, Tom Hicks has reappeared with the first buyout from Hicks Holdings, his family investment firm. Hicks has acquired Ocular LCD, a manufacturer of liquid crystal displays and systems for use in technology including mobile phones, for an undisclosed sum. A second deal is expected to close before the year is out, fitting with Hicks’ stated intention to acquire one or two companies a year.
 
Despite its use of private equity investment techniques, Hicks Holdings differs from a conventional private equity firm in two important ways at least. Firstly, buyouts are only part of its activities; it also manages a portfolio of real estate assets, as well as a couple of sports teams including the Texas Rangers Baseball Club.
 
Secondly, Hicks Holdings does not, and will not, manage third party capital; instead, it manages the existing Hicks family fortune. (This is not an insubstantial pool of capital: Hicks is one of the richest men in America, and has the distinction of having given his name to a school in Frisco, Texas, for which he donated the land.)
 
The latter point means that Hicks will not have to deal with limited partners – a welcome change of pace perhaps after the investor relations problems that plagued Hicks Muse a few years back. The firm hit the headlines in 2000 after its $4.1 billion fourth fund stepped off its investment mandate to pursue high tech opportunities that led to heavy losses – and the firm’s investors took it badly. 

Hicks has said that he has no plans to raise a further fund and plans to hold new investments for anything up to a decade, allowing him to focus on long-term value creation. In this he may have achieved the ultimate private equity investor dream: to have funds to invest without having to worry about the demands of LPs, and to know that it is he alone who is taking the risk – and reaping the rewards.