Page 108 - Forbes - USA (November 2019)

ing increasing GP commitments. Many also want
to invest more in their own deals, and this is a
very efficient mechanism as the proceeds raised
usually are funded over time matching the needs,
and there are some tax advantages,” says Ever-
core’s Saul Goodman, the investment banker on
most of the general-partnership-stake (GP-stake)
deals.
Private equity firms, normally secretive about
104 their internal economics, are loath to discuss
these sales. Gores declined to comment, as did
pretty much all his private equity tycoon peers.
N
O However, based on months of reporting and doz-
I ens of interviews with insiders and investors in
A T
G these funds, Forbes has been able to identify 13
I new billionaires who have unlocked fortunes by
T
S
E this financial engineering. Ever heard of Steven
V B. Klinsky, Egon Durban, Mike Bingle or Scott
N → When the Detroit Pistons
I Kapnick? All are part of a new guard of private

E
H equity titans who are taking advantage of a world
opened their 2017-2018 awash in cheap capital and tax advantages and
T
driving a boom in the buyout business.
season to a sellout crowd private equity—a business predicated on raising
As investment banks and hedge funds struggle,

and a big welcome from capital subject to long-term lockups to invest in
assets using large amounts of leverage—is enjoy-
ing go-go times. The decade-long bull market has
rapper Eminem, the team’s helped the group log average annual returns of

13.69% over the 15 years ending March 31, 2019,
owner, billionaire Tom according to Cambridge Associates, compared
with 8.57% for the S&P 500. Last year alone, PE
Gores, beamed courtside. deals amounted to some $1.4 trillion, and in the
U.S., private equity firms now own more than
8,000 companies, compared with 4,000 in 2006.
Yes, the gleaming new $863 million downtown arena was worth cel- Down the road from Gores’ palatial offices, in
ebrating, but Gores was finalizing the deal of his lifetime, a ten-digit Santa Monica, California, José E. Feliciano and
payout from his Beverly Hills buyout firm, Platinum Equity. Behdad Eghbali operate Clearlake Capital, a bou-
The deal was done quietly, without fanfare or a press release. Gores tique firm with a relatively modest $10 billion
forked over an estimated 15% of his stake in Platinum to another firm, in assets. Feliciano grew up in Bayamón, Puerto
Dyal Capital Partners, which will garner $1 billion for him over four Rico, a city known for fried pork rinds, before at-
years. In doing so, Gores, who’s now worth $5.6 billion after the trans- tending Princeton. Born in Iran, Eghbali arrived
action, scored a huge personal windfall, raised the valuation of his in the U.S. in 1986 at age 10 on a tourist visa with
firm, which he still controls—and avoided taxes. his parents, who wanted to avoid his conscrip-
He’s hardly alone. In the last four years, no tion in the Iran-Iraq War. After graduating from
fewer than 60 private equity firms have followed college, both Feliciano and Eghbali paid their
the same playbook, selling slivers of their general dues toiling at old-guard private equity firms like
partnerships, according to PitchBook, frequently TPG Capital. Then in 2006, they teamed up to
at eye-popping valuations. More than $20 bil- form Clearlake Capital.
lion is being raised this year alone for more By all accounts, their firm, which tends to buy
such deals, half by Dyal, a unit of the large New little-known software, industrial and consumer
York asset manager Neuberger Berman, the rest products companies, has been a roaring success.
by others, including units of Blackstone Group, Clearlake’s 2012 fund, for example, has posted an
Goldman Sachs and Jefferies. Secretary of Educa- annual net internal rate of return of 42.7%. So
tion Betsy DeVos and her husband, Richard, are last year, as the GP-stakes market was exploding,
getting into this game, out of their family office. a bidding war heated up for Clearlake. Feliciano
Former Florida governor Jeb Bush has teamed up and Eghbali got Dyal and Goldman to team up
with Bahrain’s Investcorp to invest in private eq- for a slice that valued Clearlake at a rich $4.2 bil-
uity general partnerships, as well. lion, making Feliciano, 46, and Eghbali, 43, two
“Some firms have grown rapidly and are see- of the youngest billionaires in private equity.

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