CHICAGO – Bryan Cressey has been a fixture in the private equity industry since his beginnings with First Chicago Equity Group. He is a builder of opportunity, having co-founded Golder Thoma Cressey & Rauner, Thoma Cressey Equity Partners and founded his current firm, Cressey & Co. His particular expertise in the healthcare services field is widely acknowledged.

 

Before he receives the 2009 Stanley C. Golder Medal on December 7th at the IVCA Awards Dinner, he sat down with the IVCA to talk about his career and the current climate.

 

IVCA: What was PE business like when you began your career with First Chicago Equity?

 

Bryan Cressey: Private Equity business was a very small industry, probably $500 million in total assets and it was called Venture Capital Industry – First: the first leveraged buyouts were just being done. Second: the partners in many firms thought that their funds were going out of business because portfolio companies were doing so poorly in mid 1970’s and there was no money available. Third: illiquidity saved them, they all did fine 5 years later.

 

IVCA: You co-founded Golder Thoma Cressey & Rauner, Thoma Cressey Equity Partners and founded Cressey & Co. What has been exciting about starting these new firms and what are the challenges?

 

BC: It’s exciting to start a firm, face great challenges and build them into great enterprises. It's fun to build something new, heading into the unknown with some great teammates, starting with little and growing it into something great. Some challenges – splitting a prior organization is hard and you won’t be working as closely with some good friends.

 

IVCA: You have been recognized as an "industry consolidation leader." What traits and experience have been most helpful in being that leader?

 

BC: The helpful traits of industry consolidation leaders include: Optimism – believing that straw can be woven into gold, and companies can be combined successfully into a larger powerhouse. Next, a willingness to study, do research; to proactively find areas with good futures that may not be apparent today. Also important is a desire to do things differently than the crowd. This manifests in looking for contrarian ideas, and also in willingness to search an area for a year looking for a quality platform, rather than reacting to inbound deals. Finally, tolerance for deals with things that need fixing; smaller companies always need better executives, or better systems, or better direction, or better cost structures. In doing industry consolidations you are always working to improve every part of the enterprise in some way.

 

IVCA: What type of contrarian ideas in business have you backed that have gone on to become successful enterprises or industry standards?

 

BC: We have been contrarian in several ways. In our investing, out of favor areas when we invested were hospital management in the 1980's, home infusion at the beginning of this decade, and institutional pharmacies, hospice and home nursing several years ago.
Devising and implementing the industry consolidation style of investing - premised on superior industry knowledge, economies of scale, and proactive deal sourcing - was new when my partner Carl Thoma and I began that in the 1970's.

 

IVCA: The Healthcare business, your firm's specialty, has been the focus of debate in 2009. Any predictions for the next year?

 

BC: Some sort of Healthcare reform is very likely to be enacted in the next six months, which is very positive for healthcare providers. 25 million additional people will be insured and providers will get 25 million new paying customers. Insurance companies and to some extent pharmaceutical companies will suffer.

 

IVCA: How can healthcare providers best prepare for the extra business and how can investors react now?

 

BC: Smart healthcare providers in sectors that will experience increased volume will respond in two ways: First, rather than hire more full time staff, they will vary their labor needs and attempt to get part time clinicians to work more hours as demand grows, and secondly, they will ensure that they have operating leverage through their software and business processes to handle more volume without adding labor.

 

IVCA: The economy is acknowledged as getting better in 2009. What challenges remain for the overall economy to keep the recovery going?

 

BC: Debt pay down and credit availability will suppress consumer spending. Inflation and much higher interest rates may loom in 18 months.

 

IVCA: How is the IVCA important in helping the industry today?

 

BC: Simply by being an organizing force, the IVCA can promote pro-growth policy initiatives, educational programming and shared communications. Also I know it is a resource for outside entrepreneurs looking to create business and innovation, which can lead to investment opportunities that weren't necessarily available before the IVCA. I'm proud that we're a member.