Nicholas Pye: Kill or be killed

There are few things more annoying than watching a bunch of charlatans take some money that should rightfully be yours, just because LPs get hung up on irrelevant details like IRRs and money multiples instead of seeing the bigger picture. Even more annoying, it means that our constant efforts to trash their reputation in the market during the last few months have come to nothing. Clearly we weren’t trying hard enough.

I love it when you read quotes in magazines like Private Equity Multinational from people who have just closed funds, where they try to claim that they’ve been focusing solely on their own fundraising and ignoring what everyone else is doing. Total nonsense. From the moment the process starts, you have two jobs: big yourselves up, and slaughter everyone else. After all, you never know when some short-sighted LP might suddenly read somewhere that large buyouts are going sideways and decide to slash their number of commitments, so it suddenly becomes you against them. At that point, it’s literally a case of ‘kill or be killed’.

Of course, you have to be a bit cute about how you position it; you’d have to be a bit dim just to have ‘Here’s Why Our Competition Stinks” as the second slide in your pitchbook. But there are ways and means. The way Big Shop usually operates is to position it as a ‘Market and Opportunity Overview’. This has precisely the same purpose – to talk about why everyone other than us is rubbish – but it means you can pretend to LPs that you’re being macro and strategic rather than selfish and spiteful. 

I don’t feel the slightest guilt about this. Partly because guilt is an emotion for losers, and partly because all our competitors will be doing exactly the same to us. For instance, I know for a fact that the muppets who just closed their fund have been taking a very unflattering chart about our current fund’s performance to all of their pitch meetings (I say fact; one of our IR people told me).

Unfortunately, our own fundraising continues to progress about as rapidly as a public pension co-invest decision. For some reason I haven’t been taken on any LP meetings for a while. But as my boss put it to me the other day: “We’d probably be collecting more cash if we were standing outside Bank tube station with a paper cup.” 

You know, I sometimes wonder whether his heart is still in this glorious (albeit maddening!) business.

“Boss,” I tried to tell him. “I’m a strong believer that Positive Mental Attitud-”

“Pye, don’t tempt me to tell you what you can do with your PMA. You’re not the one who has to go out there, desperately trying to flog a sow’s ear as a silk purse.”

“Boss, you know I’m always available for selection vis-à-vis fundraising meetings. I think that particularly now I have my own portfolio company to talk about, my value-add would be frankly stellar.”

“Are you crazy, Pye? Do you not think we’re in enough trouble?”

“I guess you’re right, I should probably focus on my investments. Look, I wouldn’t worry, boss. I’m sure JTL has a plan.”

“Leviathan is panicking, Pye. And I’ll tell you how I know that: he just hired a European operating partner.”

This was stunning news. A genuine operator, brought in to create tangible value across the portfolio? There was only one question in my mind.

“An operating partner? Is he getting carry?” 

“Whole fund, Pye. Whole fund.” And the two of just sat there glumly, mentally calculating how many basis points had just been shaved off our carry cheques.