You really missed out if you didn’t catch CNBC’s “Squawk Box” this morning, which featured an epic lineup of financial industry heavyweights. Guests included Barry Sternlicht, chairman and CEO of Starwood Capital Group; Eddie Lampert, founder of ESL Partners and chairman Sears Holdings; David Bonderman, founding partner of TPG; Barry Volpert, co-founder Crestview; Daniel Stern, founder and co-CEO of Reservoir Capital Group; John Phelan, co-managing partner and co-founder of MSD Capital; John Goff of Crescent Real Estate Holdings; Ken Hersh, co-Founder and the CEO of NGP Energy Capital Management; and John Scully, founder of SPO Partners.
The reason so many hedge fund and private equity hot shots were on this morning is because they were all mentored/ influenced by legendary dealmaker Richard Rainwater and they wanted to pay him tribute.
Rainwater, who is known for his Disney deal in 1984 that helped turn around the company, has been diagnosed with progressive supranuclear palsy (PSP)– a fatal, fast-moving, degenerative brain disease.
We pulled out some of the stories/ quotes from the guests about Rainwater in the subsequent slides.
Scully: 'He would within an about a matter of an hour, on a bad day, figure out if this deal is going to work'
John Scully, the founder of SPO Partners, met Rainwater playing football when he was in his early 20s.
'I actually met him on the touch football field. We were 22, Richard was the quarterback. But when he threw the ball, we realised why he was the quarterback. He could throw it about 50 yards and hit his target, and of course Richard's team won. That was sort of metaphor for his life. He would very instinctually, he would within about a matter of, on a bad day, about an hour figure out if this deal is going to work, if this public market idea is interesting, if this real estate is appropriate or say 'the meeting's over, it's been a pleasure, good-bye... I don't want to waste your time. You're a very nice young man, the deal's not going to work. Send me a Christmas card.''
Barry Sternlicht, Starwood Capital Group chairman & CEO, met Rainwater after attending Harvard Business School when he wrote him a letter.
'He was like a grown up child. It was like he waited his whole life to meet you...He left such a great message for a America because he was so optimistic,' Sternlicht said.
'I felt like I was going to see Darth Vader of deals, except he was so nice. He was the white knight.'
Lampert: 'Richard made people believe in themselves more than they actually believed in themselves.'
Eddie Lampert, the founder of ESL Partners and chairman of Sears Holdings, first met renowned dealmaker Rainwater during the summer of 1987 in Nantucket when he was working in risk arbitrage at Goldman Sachs.
'The first time we met -- bigger than life. Bigger than life,' he told CNBC.
'When I met him, again, there are certain people you meet in your life and it was one of those seminal moments when you say 'This guy is something special,' Lampert said.
Lampert said at that time he was thinking about what he wanted to do with his life besides work at Goldman. Like Lampert, Rainwater had also worked at Goldman.
'Richard made people believe in themselves more than they actually believed in themselves. I think it was contagious,' the hedge fund manager said.
David Bonderman, the founding partner of private equity firm Texas Pacific Group, explained that Rainwater had his own model for investing.
'Richard's view of life was if you were in the business that Richard saw himself being in, as being a guy who did investments and deals, if you will, what you didn't want is to have a big overhead and a whole bunch of people you had to feed. What you wanted to do was have some smart guy like Eddie or Barry show up with some idea where you could put money in. If Barry failed, Barry would be living on the street because he didn't get any money. There was a Richard Rainwater model which was don't raise a fund, don't set up the business, you'll find the money if the deal is right. You'll find the money. And as opposed to getting 20% promote you can get 80% promote.'
'...Richard is a world class character in addition to being a great investor. I remember they had just done the Disney deal, which was swapping down this broken down developer, which turned out the be worth $14 billion at its high. Maybe the best deal done by anybody. Right after that richard is going San Diego to meet with the head of the then nascent computer company which he thought about making an investment in. He didn't own a suitcase, so he took all his clothes in a paper bag. And he tells this guy who is the CEO of some computer company he's going to meet at baggage claim and he'll be the guy carrying a paper bag. So Richard shows up to negotiate this multimillion dollar deal, which is a lot of money in those days, carrying his toothpaste and socks and underwear in a paper bag which he got from the Safeway.'
Dan Stern, founder & co-CEO of Reservoir Capital, said Rainwater still trades stocks despite his disease.
'The disease is such that his cognitive function is perfect. He has a difficulty communicating because it affects your vocal chords, but when he still gets up and goes to the office and trades stocks. It's amazing. He has liked, and been really right, he has liked equities, which is really rare for him and he's been long big-cap high quality equities here.'
'He still loves this -- the game. He's brilliant at it. All of his cognitive functions are there and if you can communicate with him it's incredible... And his sense of humour.'
Volpert: 'You should hve enough conviction to put 25% of your capital into one thing or you shouldn't do it'
Barry Volpert, Crestview Partners co-founder, met Rainwater 20 years ago and said he really got to know him about 10 years ago. Here's a great lesson he learned from Rainwater.
'The ideas are everything. You can always find the capital. The ideas are really rare. You should hve enough conviction to put 25% of your capital into any one thing or you shouldn't do it...Then he said 'If you don't find anything to do, just don't anything.' And I said to him 'for how long?' And he said he had gone as long as two years between his 8th investment and his 9th investment and that was just fine with him. You think about that in a transactional firm such as Goldman Sachs where I came out of... two years is an enormous amount of time.'
'When I went to see Richard for advice for what I should do next in my career. It's another Richard story. I flew from London to Tuscon to Canyon Ranch to meet him and he wasn't there... He was playing golf. He was in Tuscon. Two hours later he showed up off the golf course and saw me and said 'Oh good grief you have been waiting here haven't you?' And we spent 7 hours over dinner and breakfast talking about investments... It was unbelievable. It was like sitting with Yoda, the master,' Volpert said.
John Phelan, co-managing partner and co-founder of MSD Capital (the fund that manages Michael Dell's money), first connected with Rainwater when wrote him a letter for a summer internship.
'I remember it really clearly. He called me on Friday about 4:15 p.m. and I answered the phone and he goes, 'Is John Phelan in?' I said, 'Yes, this is John.' He said, 'This is Richard Rainwater' and I said 'Sure it is' and I used this rather inappropriate expletive. I heard in this southern accent, 'Excuse me?' And I realised it was Richard Rainwater and 'I went oh my God it's Richard Rainwater. I'm really sorry. I apologise. I thought one of my classmates was playing a joke.' He started laughing. He said 'that's a good one.''
'He asked me a question which to this day I still use in interviews, which was 'Of all the businesses you've looked at what's the best one and why?' It's a really tough question if you think about it.'
'My answer -- what I said to him was, I think a great business, I haven't spent lot of time looking at it would be parking garages in New York City because you have a fixed asset, not a lot of capital intensity and you got future development.'
John Goff of Crescent Real Estate Holdings was working as a CPA when and he was assigned to Rainwater as a client.
'For whatever reason he developed a personal interest in me,' Goff said.
'Shortly after, I got the call of my lifetime'
Ken Hersh, co-Founder and the CEO of NGP Energy Capital Management, wrote him a 'cold-call letter' for a summer job after his first year as a business student at Stanford.
'The phone call came the next day and I picked up the phone and he said 'Do you want the quote?... 'I heard you work at Morgan Stanley. I called a buddy over there and heard you were great and I need to talk to you.' I got on a plane and flew down. The fact that he made the call is something I don't think people do today.'
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