Talking to retiring private equity veterans is always a worthwhile exercise – not only because they have a great perspective on the industry’s extraordinary development over the last 30 years, but also because it’s easier for them to be blunt about its foibles.
In August, it emerged that Kevin Landry was retiring as chairman of US buyout group TA Associates. He’d joined the firm way back in the late 1960s, when private equity as we now know it didn’t really exist. “Our average investment size was $100,000; now it is $150 million”, the 68-year old Landry tells Private Equity International.
Landry admits that what happened next took him by surprise. “I certainly underestimated how much the industry would grow. The mass accumulation of capital during the 1980s changed a lot. In the old days we depended upon the growth of the business to generate our returns; now we are using leverage.”
To some extent, the extra competition has made the industry less interesting, he suggests. “When I got into the business there was very little capital. There were only a few of us and there was co-operation. You can’t make the returns that you made years ago. The high prices have taken some fun out of the business.”
Landry, who cites pharmaceutical company Biogen Idec as one of his favourite investments, has raised about $15 billion during his career. But in the last few years, he has been battling lung cancer, and the constant chemotherapy has taken its toll on his ability to keep putting in the hours the job requires. He will remain a senior advisor to TA, but he won’t be attending all of the strategic meetings. “It’s not good for my health as I get extremely stimulated and then I can’t sleep.”
However, he’s been delegating more of his work in recent years, so he’s confident that TA is well-equipped to manage without him.
The 68-year old actually tried to retire a few years ago, but decided to stay on to navigate TA Associates through the downturn. At the time, he thought our economic woes would be short-lived. “I thought there was going to be some fun in 2010 and 2011, but I was wrong on that.”
Landry can’t hide his disappointment about the banking crisis. “I wish they would get their act together in the financial community. We can’t get rid of this sickness or whatever it is. I used to be so proud to be part of the financial service industry and somehow, in the last decade or so, the industry lost its honesty.”
However, he still believes private equity is the place to invest. “I was talking to one of our LPs the other day and he asked me whether I should do anything more than private equity? And I told him: what else are you going to do? I don’t see where [else] pension funds can put their money. How can anyone trust the markets after the LIBOR [scandal], the London whale and the Facebook public offering? I am not going to a bond fund; I believe in equities. I am not saying it’s as good as it used to be, but I don’t know any place better.”