IVCA 2016 Awards Dinner Profile: Recipient of the Stanley C. Golder Award is Paul Carbone, Managing Partner of Pritzker Group Private Capital

In a little less than two weeks, the Annual IVCA Awards Dinner will be in the spotlight – Monday, December 5th, 2016. The yearly event honors the persons and organizations that have made an impact both within the association, the broader VC/PE industries and the community at large. The individual award recipients were recently announced, and the Stanley C. Golder Award honoree is Paul Carbone of Pritzker Group Private Capital. The IVCA newsletter completes its series of award recipient profiles with Mr. Carbone.

Paul Carbone is the Managing Partner of Pritzker Group Private Capital. Pritzker Group Private Capital acquires North American-based companies with enterprise values between $100 million and $750 million, focusing on quality businesses with leading positions in the manufactured products, services and healthcare sectors. Pritzker Group Private Capital has grown to become a leading family investment firm focused on middle market family and entrepreneur-owned companies.

Prior to joining Pritzker Group in 2012, Mr. Carbone was Managing Partner of the Private Equity Group for Robert W. Baird & Co., which makes venture capital, growth equity and buyout investments in smaller, high-potential companies in the U.S., Europe and Asia. During the 13 years Mr. Carbone ran Baird Private Equity, the group grew from eight professionals in the U.S. to more than 60 worldwide and from a U.S. portfolio of six companies to a global portfolio of 55 companies.

Mr. Carbone is a Phi Beta Kappa graduate of The College of the University of Chicago and received his MBA from Harvard Business School.

Mr. Carbone serves on the board of directors of several civic, cultural and charitable organizations including the Lyric Opera of Chicago (Executive Committee and Chair – Finance Committee), University of Wisconsin Carbone Cancer Center, Misericordia Endowment Fund,  Shedd Aquarium (Executive Committee and Chair – Human Capital Committee) and the University of Chicago Medical Center (Chair – Audit Committee). He also is a member of the Commercial Club of Chicago and the Economic Club of Chicago. In 2016, Mr. Carbone served as an EY Entrepreneur of the Year national judge for family businesses after serving for three years as a regional judge.

“Paul is an excellent leader and a tireless worker. He leads from the front, cares deeply about his team and sets a clear strategic vision,” said Michael Nelson, Pritzker Group Investment Partner. “Paul has a keen insight for unique investment opportunities and often spots value others fail to see. His creative solutions to complex problems gets deals done.”

J.B. Pritzker, Managing Partner of the Pritzker Group, wrote this in his nomination letter for Paul Carbone: “Harry Truman said, ‘It’s amazing what you can accomplish if you do not care who gets the credit.’ Paul Carbone has espoused this philosophy during an illustrious career that includes serving as a leading investment banker, creating a multi-billion dollar global private equity firm, and leading Pritzker Group Private Capital’s strategy to become the preferred investor for middle market family and entrepreneur owned businesses.”

In anticipation of the December 5th Awards Dinner, the IVCA interviewed Paul Carbone, the recipient of the Stanley C. Golder Award.

IVCA: Congratulations on the Stanley C. Golder Award. What does it mean to you to be honored by your peers in the Venture Capital and Private Equity industries?

Paul Carbone: Illinois – and Chicago in particular – is home to many of the nation's leading private equity and venture capital investors and firms. This region has a long and successful history of investing, and the private equity and venture capital industries have grown and prospered over the years. I am proud to be part of this investing community, and to have contributed in a small way to its growth and development. Being recognized by the IVCA only adds to the satisfaction that, as an industry, we have created something special.

IVCA: Going back to the beginnings of your career. What specific interests in your undergrad and graduate studies in business became overriding factors as your career flourished?

Carbone: I grew up in the liberal arts tradition but have long been fascinated by how companies organize themselves to execute missions and achieve objectives. Part of that fascination related to how financials can tell a company's story. Financial statements are a company’s written narrative and great companies leave telltale signs of their success. Detailed analysis of a company's statements reveal meaningful insights into its competitive position, history, and potential, that the savvy analyst can use to their advantage.

Numbers don't lie, but they don't seal a company's fate, either. New owners and management with a new vision, strategy and tactics can meaningfully impact a company's trajectory and potential. I have long been a student of how great leaders can organize teams to achieve higher levels of success and accomplishment and thereby write a new story of a company's potential. Early in my education, I became smitten by the importance of both good analytics and strong leadership in the profession of acquiring and building companies.

IVCA: You had a successful career up to the point that you joined the Pritzker Group. What was the main incentive, beyond compensation, that made the decision for you to join the Group?

Carbone: The Pritzkers have a 70-year history of acquiring and building great companies. They have a compelling ethic and value system based on honesty, integrity and loyalty. Leveraging that history and ethic, Tony and J.B. wanted to build a world-class investment business. They had the passion and drive to make it happen and the resources to sustain that success. Importantly, they had a permanent and proprietary capital base to create real competitive advantage in an increasingly mature and commoditized investing market.

Prior to joining Pritzker Group, I helped build a successful private equity business at Baird, and I learned from my many mistakes as to what could and should be done to build a world-class investment firm. I could not resist the opportunity to help create a new strategy, team and firm using a great brand, strong pedigree and ingrained value system. It's been a real joy over the last five years to help make Tony and J.B.'s vision become a reality.

IVCA: Decision-making is key in investment policy. Without giving away too many secrets, does the Pritzker team need unanimous buy-in towards their investments or is there an eventual buck-stops-here decision maker, based on recommendations from the team? Is there a process?

Carbone: There is a reason why private equity businesses are often formed as partnerships. Investing is a team sport. It is fundamentally an experiential business where mentorship and working on multiple deals helps to fine-tune one's art. At the same time discipline and clear objectives, in addition to proven processes and procedures, help a team come to the right investing decisions.

Pritzker Group operates as a partnership. We have defined processes for making decisions and we have well-understood expectations for what we are trying to accomplish. Similarly, once we make an investment we look to form the same sort of partnership with management – building great companies takes a great team.

IVCA: With the world of high finance ever-evolving and regulated, how does the Pritzker Group seek more simplicity in their transactions, or is that a thing of the past?

Carbone: We buy and build middle market companies. We need to compete and win against any number of competitors and capital alternatives and then we must flawlessly execute our strategy to create lasting value. To achieve our goal of top, sustained returns, we need to have an institutional quality team using state-of-the-art tools and capabilities operating with speed and decisiveness. There is nothing simple about any of this.

Our source of capital is different than traditional private equity. Our permanent and propriety capital gives us competitive advantage, especially with family and entrepreneur sellers who value our differences and what we can do differently. However, in all other respects, we need to operate and succeed in what has become a highly competitive, highly liquid market. The days of simple are behind all of us.

IVCA: In your career, you’ve seen technology go to the forefront of potential investment, with returns that sometimes are stratospheric. Since the future of tech is without limits, do you think the returns will also keep going in that direction, and why or why not?

 

Carbone: I joined an investment bank right out of college. After rescuing the only computer in the office from the closet, it was clear that I was one of the few who knew how to use it. When I went to business school, it prided itself on being at the cutting edge of technology. We were each given ‘portable’ computers which had the size and weight of a medium piece of luggage.

Today, technology permeates every aspect of our lives. That will not change. Technology must be used as a tool to execute any company's strategy. It’s not so much an industry to invest in as it is a mechanic that can create advantage and improve returns. We are aggressively trying to use technology to evolve our companies to help them compete and win in offline, old-world industries.

IVCA: The Pritzker Family has been compared to the House of Medici in Italian history...a family of finance that seeks an interaction with society that is humanistic and arts oriented. What have you observed in your work with the Group that defines those two complimentary elements?

Carbone: One of the things that attracted me to joining the Pritzkers was their view about the compatibility of commercial success and civic engagement. They live this philosophy every day and support this approach with their companies and teams. I have long enjoyed marrying the commercial and the civic. I believe that seeking this unity in a career is good for the soul, good for the community and good for business – a trifecta that can be difficult to find.

My commercial life allows me to contribute valuable skills and capabilities to my civic and charitable endeavors. Similarly, I have learned many new things, and met many terrific people in my civic pursuits.

IVCA: The Award you are receiving was named after Stanley C. Golder, a pioneer in Midwestern private equity. Since there has been such a rapid development of the venture capital and private equity industries since the Golder days, what direction do you think the industries are going, and what do you think we won’t recognize about them 20 years from now?

Carbone: The private equity and venture capital industries are nominally about capital. No doubt we have seen an explosion in the amount of capital coming into these industries. At the same time, these industries have matured with the same ramifications of any maturing industry. In addition, the mechanics of a deal and the sophistication of the financing markets have evolved in significant ways. The importance to return of operational improvement and not just financial engineering is also well understood. We are likely to see these and other aspects of the private equity and venture capital industries continue to evolve.

However, the essence of investing has not changed since Stan's time and likely will lot change in the coming 20 years. At its core, this is a business about finding, retaining and developing people. Having the right investment teams work with the right management teams – alongside the right advisors and service providers – makes all the difference in achieving top returns.