00:14:34 · James Andersen
I think that company, in particular, got into the situation of having a whole bunch of not very good businesses, because they'd buy them and they wouldn't do anything with them. They just kind of say, Oh, it's a good business, we'll leave it alone. And I thought being a little more active made more sense. And it was also a company that there was no plan at that time to raise another fund, so there wasn't a long term future for me there. So I started looking around, was offered to join another PE firm as partner, which was great. You know, that was kind of the sure thing. But boy, was at the point, like ten years in, I realized a couple things. One, I'm not a very good employee. Like, I don't want to do what you want to tell me to do. I want to do what I want to do. And I recognize that it's a conflict, right? I knew very well that that's not a great thing for the person who's trying to manage you. I understood that. And I just thought, look, I'm either going to do something on my own now, or I'm never going to do it. I was 37. I had three kids. Like, it's now or never. And so look, it was a much, as I like to say, a lower expected value to start my own thing, but autonomy was the thing I really wanted. It wasn't so much about how much money am I gonna make, but how much freedom and how much control over my own life am I gonna have. So that was what really mattered to me. And that's why I started this with one other guy, Cal Nider, one of the greatest partners you could ever have, in 1999. And like our first few years were touch and go, I'll tell you that. I mean, but we didn't think too much about next week, we thought about today, because we didn't have the luxury of thinking about next week or next year. We just had to try to find a way to get some deals done and make those companies be successful, which is hard when you don't have a fund, and you, quite honestly, I didn't have any money of my own, but we managed to make it work. Again, it was just putting our heads down and playing through it, and not getting all tangled up in all the things that could go wrong, and a lot of things did. But if you worry about those things, like I say, you never get started.
00:16:41 · Mikk, James Andersen
[00:16:41] S0: Do you remember what was the break... Breakthrough moment for you guys where you were like, okay, we we have something in here? Yes. You said you you were focusing on just this one specific day, but I'm sure there was like a moment or a deal or a yes from someone where you felt like, okay, there is something here. [00:17:00] S1: So look, the first time you do your first deal, that's kind of a really big thing. But that, I think we're gonna talk about this later, but that company didn't do very well right out of the gate for a bunch of reasons. But I think that the thing that really, the time when I really feel like maybe we could make it was we ended up buying a company, and we did we did bring in another PE firm because we needed 50,000,000 of equity to get the deal done. So we closed the deal. It was a $100,000,000... It was a $155,000,000 deal. We didn't think we would ever do a deal bigger than $50,000,000 ever. And we closed this $155,000,000 deal, and it was a company we found completely outside of process, an absolute world class manufacturer that actually became a public company and was bought last year by James Hardie for $8,000,000,000 Like, it was a real business. And, you know, when we were able to get that deal done, we really felt like we can do this. That was our third deal, by the way. But it wasn't until then that I really felt like, yeah, we're... We can make this work. [00:18:08] S0: But you brought out the deals. Let's let's talk about the deals. Sure. Let's let's start with the first one.
00:18:08 · Mikk, James Andersen
[00:18:08] S0: But you brought out the deals. Let's let's talk about the deals. Sure. Let's let's start with the first one. [00:18:14] S1: Via. Okay. So that was coming very well out of the box. [00:18:17] S0: Yeah. But I think it's important because there's some great there's some great guys today who are building those great firms. Again, guys in in thirties, early forties. And surprise, surprise. But many of those same guys, the first acquisitions haven't been going so well, but they had a clear thesis, so they just kept going. So I think your story is interesting as well.
00:18:38 · James Andersen
[00:18:38] S1: I guess we were probably nine months into Clearview Capital, eight or nine months, when we closed a company called Via. It's manufacturer of office furniture, essentially chairs. But what was unique about this business that we really liked was two things. First of all, the founder, leader of the business is one of the most impressive people I've ever met. He remains a friend to this day. He's just a winner. And you know, one of things that I think is underappreciated in private equity is, at the end of the day, success is all about people. It's not about business models. Yes, of course, a good business model is better than a bad one, but people are what makes it work, particularly for smaller businesses where one individual can make all the difference for a business. But this guy was really impressive. We loved him. But the business itself was interesting, because if you've ever bought office furniture, you know if it's not black, like, you know, you want something a little bit different. It's twelve weeks. It takes twelve weeks. It's just what it is. These guys could produce everything in their catalog, which was tens of thousands of permutations of styles, options, leathers, fabrics, controls, and they could produce anything in forty eight hours, and ship it in forty eight hours. So we thought, wow, that's really interesting in a market where nobody does that. So we like the business model. So we did a whole bunch of research, and we found that the office furniture business, if you look back over forty years, the worst year it ever had, I think it was 1981, where the industry was down 8.3%. 1981, that was the Paul Volcker, we're going to crush inflation time. Like, wow, that's not bad, really. It's not a very cyclical business. We love that. So we closed the deal on 06/01/2000, and at the time, it was just that the dot com implosion was starting. And what we didn't realize was all these companies that were imploding at the time had two assets. They had servers, and they had office furniture. So what happened was, the dotcom implosion is the market was flooded with used, sometimes actually unopened boxes of furniture. So the industry fell 40% in the first eighteen months of our investment. And if you look back at the data, there's an office furniture association called BIFMA. If you look back, the absolute peak of the market was May 2000.
00:21:08 · James Andersen, Mikk
We closed on June 1. 40% straight down for eighteen months. Well, that's not an easy way to start an investment, particularly a leveraged investment. So eighteen months in, we're basically, our mark at zero. I think we had maybe 2,000,000 EBITDA, but we knew we had a great leader, and we knew we had a really interesting differentiated business model, but even more important than that, we had no choice. We had to be successful, because you can't become a private equity firm and blow up your first deal. This is never you're done, if that happens, because you're never gonna raise money again. So we had no choice. So we invested very heavily in the business to triple our sales and marketing, which, when you don't have money, is not an easy thing to do. And again, because we had a great leader, we were able to come out with a lower cost whole set of products that really appealed to the market at the time. So we got through it. We ended up making two and a half times our money in about five and a half years. In PE, that's fine. That's an okay deal. That was an amazing deal. I am maybe more proud of that two and a half times deal than I am of anything else we've ever done, because we were dead. We were absolutely dead in the water right out of the box. And we were able to salvage that and and make money on the deal. So, you know, again, you just gotta put your head down because you don't have a choice and and plow forward, and it worked out. [00:22:39] S0: What made this Danish guy so special? You've seen a lot now. What what made him so special?
00:22:39 · Mikk, James Andersen
[00:22:39] S0: What made this Danish guy so special? You've seen a lot now. What what made him so special? [00:22:45] S1: It's hard to explain. Well, first of he's personally a very gregarious kind of guy, and he knows how to make people feel good about themselves. But he's just like, he doesn't have a college education, but he's just a great businessman. He can spy on opportunity and know how to take advantage of it. He motivated people. He did a small thing one time that I still remember and actually wrote about. Company had a good quarter, and I think it was coming out of this really difficult time, everybody's struggling. And the company had a good quarter, and he walked around the plant. There are only 40 people in this factory, and handed each person in factory a $100 bill. Now look, at the end of the day, that $100, even for relatively low wage employees I know it's nice, but it's not like the end of the world. But you would have thought that was the most important thing that ever happened to these people, because the way he did it. He just went and said, Look, I just appreciate you. And I learned from him some things about motivating people. And by the way, he did that less, I think, to motivate people and more just because it was the right thing to do. Like, you know, you learn something from people like that. I don't know, just it's really hard to describe. You meet a winner, sometimes you just know it. And he was one of them. And by the way, he's continued to go on to do amazing things. Just it's an incredibly successful guy.