Lawrence Golub: ‘Imagine what it will be like if Warren gets her way’

Asked how his firm was coping in “hyper-competitive” market conditions, Lawrence Golub, chief executive of Golub Capital Partners said things could be a lot worse. “Imagine what it would be like if [Senator Elizabeth] Warren gets her way and the private equity industry is squashed,” he told the audience at sister title Private Debt Investor’s New York Forum, where he was keynote speaker.

He added that a Democratic president and Senate could bring a “significant” increase in tax rates, and said “I think you have to worry” with an impeachment process against President Donald Trump having been launched. “Anyone who thinks Warren or [Senator Bernie] Sanders could not possibly be a nominee is wrong.”

But far from having a downbeat view of current conditions, Golub provided the forum with an early view of his firm’s third-quarter survey of portfolio company performance. This showed Golub’s companies delivering a revenue increase of more than 10 percent and an EBITDA increase of more than 13 percent during the quarter – the highest rate of EBITDA since the survey was first conducted.

He said healthcare companies in particular had shown outperformance over the last three quarters relative to the previous four years. However, he put this down to the prior underperformance of healthcare businesses as they struggled to keep costs under control. There was some “catch-up” going on, he said. Industrial companies, meanwhile, have been having a hard time due to labour cost increases.

Golub said diversification was key to avoiding downside risk and that it was important to diversify in all sorts of ways including by industry and private equity manager. However, he said his firm intends to retain its focus on North America as “so much of Europe is controlled by banks and ultimately by sovereign governments”.

As a leading protagonist of unitranche deals, Golub was asked whether the size of individual deals would continue to grow. He said the limiting factor would be the point at which these deals needed to be syndicated – at which point the value of negotiating with just one or a small number of parties would be lost.