WEBVTT - Henry Cornell on Merchant Banking (Podcast) 0:00:02.200 --> 0:00:06.800 This is Masters in Business with Barry Ridholts on Bloomberg Radio. 0:00:07.280 --> 0:00:10.200 This week on the podcast, I really have an extra 0:00:10.240 --> 0:00:14.080 special guest. Henry Cornell is a rock star in the 0:00:14.120 --> 0:00:18.320 world of merchant banking and private equity. He currently runs 0:00:18.360 --> 0:00:21.279 about three billion dollars at Cornell Capital. He is the 0:00:21.320 --> 0:00:25.760 guy who effectively built out Goldman Sachs merchant banking division 0:00:26.160 --> 0:00:29.880 both in Asia and the US. He's got an incredible 0:00:30.320 --> 0:00:33.599 history of being a successful investor in a number of 0:00:33.600 --> 0:00:39.440 different areas, incredibly knowledgeable about the sort of private equity 0:00:39.479 --> 0:00:43.200 that has generated really solid returns without taking a lot 0:00:43.200 --> 0:00:45.519 of risk. I know, when we think about private equity, 0:00:45.560 --> 0:00:47.360 we sort of have a tendency to think about the 0:00:47.400 --> 0:00:50.600 wacky l b o s where we just saddle a 0:00:50.680 --> 0:00:52.279 company with a lot of debt and then let him 0:00:52.280 --> 0:00:55.680 eventually die. This is not that sort of merchant banking. 0:00:55.720 --> 0:00:58.160 This is not that sort of private equity. This is 0:00:58.240 --> 0:01:02.200 building a portfolio of companies, getting them capital and taking 0:01:02.880 --> 0:01:07.360 already solid working companies and making them that much better. 0:01:07.760 --> 0:01:09.360 And when you hear some of the names he's been 0:01:09.400 --> 0:01:12.160 involved with, you will really understand this. If you are 0:01:12.200 --> 0:01:17.640 at all interested in private equity in finance in global investing. 0:01:18.200 --> 0:01:21.480 You're going to find this conversation to be absolutely fascinating. So, 0:01:21.520 --> 0:01:26.520 with no further ado, my conversation with Henry Cornell. This 0:01:27.000 --> 0:01:31.080 is Masters in Business with Barry Ridholts on Bloomberg Radio. 0:01:31.520 --> 0:01:34.560 My extra special guest this week is Henry Cornell. He 0:01:34.680 --> 0:01:37.440 is the founder of Cornell Capital. Previously, he was one 0:01:37.440 --> 0:01:42.000 of the original architects of Goldman Sachs Merchant Banking Division. 0:01:42.480 --> 0:01:45.680 He is a trustee for the Navy Seal Foundation as 0:01:45.760 --> 0:01:48.680 well as a trustee for the Whitney Museum of Art 0:01:49.160 --> 0:01:52.800 and the Age of Society. Previously, he was chairman of 0:01:52.840 --> 0:01:56.440 the Citizens Committee of New York City. Henry Cornell, Welcome 0:01:56.680 --> 0:01:59.640 to Bloomberg. Thank you, Barry, very nice to be here. 0:01:59.800 --> 0:02:03.040 I'm intrigued by your background somewhat I too, am an 0:02:03.080 --> 0:02:07.520 attorney who uh is now reformed and working in finance. 0:02:08.120 --> 0:02:12.160 You were at Davis Polk before joining Goldman Sachs. How 0:02:12.200 --> 0:02:17.880 did that transition from attorney to investment banker? Come about? Well? 0:02:18.240 --> 0:02:21.520 I thought, frankly, the hand of God had come down 0:02:21.560 --> 0:02:24.200 and touched me. When I got the job at Davis Polk. 0:02:24.560 --> 0:02:27.160 I went to a small law school and I was 0:02:27.200 --> 0:02:29.320 the first one that ever got there, and I couldn't 0:02:29.320 --> 0:02:32.280 believe my good fortune. They were kind and sent me 0:02:32.320 --> 0:02:34.520 to London for a while and had me doing lots 0:02:34.520 --> 0:02:37.720 of stuff in New York. But my last review there 0:02:37.760 --> 0:02:40.320 they said, you know, you're the lawyer, not the banker 0:02:40.440 --> 0:02:42.880 on the deal, and that set off the bell in 0:02:42.960 --> 0:02:47.320 my head. And I interviewed around the street and liked 0:02:47.560 --> 0:02:51.320 the ethos at Goldman Sachs, which was not as concerned 0:02:51.320 --> 0:02:53.840 about where your parents came from or what college you 0:02:53.840 --> 0:02:56.400 went to, but what you could add to the team. 0:02:56.680 --> 0:02:59.840 And so I was fortunate to get that job in 0:03:00.040 --> 0:03:03.680 the spring of four and it was difficult, frankly. The 0:03:03.720 --> 0:03:06.480 first year or two. I went to a shall we say, 0:03:06.520 --> 0:03:10.600 progressive college where you got to choose your own curriculum, 0:03:10.600 --> 0:03:13.240 which is dangerous for an eighteen year old. So I 0:03:13.280 --> 0:03:15.480 hadn't taken a math course in college, and all of 0:03:15.520 --> 0:03:17.880 a sudden I knee deep in financial terms. So it 0:03:17.919 --> 0:03:22.360 took me a while to get up to speed. But then, um, 0:03:22.520 --> 0:03:25.400 then it finally made sense to me. So you you 0:03:25.480 --> 0:03:30.560 moved to Tokyo in to work on building out Goldman 0:03:30.600 --> 0:03:33.239 Sachs real estate efforts in Asia, and then on to 0:03:33.400 --> 0:03:37.320 Hong Kong. And two, what was your experience like in 0:03:37.360 --> 0:03:41.200 Asia in the late eighties when their market peaked and 0:03:41.240 --> 0:03:46.040 then in the early nineties, well coming to Tokyo and was, 0:03:46.160 --> 0:03:49.440 without a doubt, the hottest city on the planet. I 0:03:49.560 --> 0:03:52.680 was fortunate to have worked on a lot of Japanese 0:03:52.720 --> 0:03:54.800 deals while I was in the States, and my boss 0:03:54.800 --> 0:03:56.560 asked me if I would go and see if I 0:03:56.600 --> 0:04:00.320 could build relationships in Japan. So at age third too, 0:04:00.360 --> 0:04:02.960 I kissed my mother goodbye, hopped on a plane and 0:04:03.200 --> 0:04:06.280 it was crazy. I mean, if you recall at the 0:04:06.360 --> 0:04:09.520 time there was a book a week being published saying 0:04:09.600 --> 0:04:12.240 Japan was going to take over the world. The real 0:04:12.360 --> 0:04:15.320 estate value of the Imperial Palace was more than the 0:04:15.360 --> 0:04:20.200 state of California on paper, and Hamburger costs fifty bucks. 0:04:20.240 --> 0:04:22.840 So it was like the best party you ever went 0:04:22.920 --> 0:04:27.280 to in college. But it was like the worst hangover 0:04:27.360 --> 0:04:30.680 you had in college. People were talking to themselves walking 0:04:30.720 --> 0:04:34.200 down the street. And at that time, Bob Ruben, who 0:04:34.240 --> 0:04:38.120 was the chairman of Goldman, authorized the creation of GS 0:04:38.240 --> 0:04:42.800 Capital Partners, and Hank Paulson was ultimately the boss on that. 0:04:42.960 --> 0:04:44.839 And Hank said, how would you like to go to 0:04:45.880 --> 0:04:48.719 Hong Kong and open up Asia for us. And I said, Hank, 0:04:48.760 --> 0:04:51.840 don't want to really run investment banking anymore. I really 0:04:51.839 --> 0:04:55.240 want to get involved in this investment effort. And his comment, 0:04:55.279 --> 0:04:57.600 you don't really know anything about investing, and I said, well, 0:04:57.600 --> 0:04:59.320 you've got no one else who wants to go. So 0:04:59.360 --> 0:05:03.400 it was a mute ul mutual agreement went down. And 0:05:03.480 --> 0:05:05.440 you know, we had about ten people at the time, 0:05:05.520 --> 0:05:08.000 and you know when I left in two thousand, were 0:05:08.040 --> 0:05:11.120 well over a thousand. So it was extraordinary to have 0:05:11.200 --> 0:05:16.000 been in Japan as it rose and then watched that crash, 0:05:16.120 --> 0:05:18.960 and then get to China as Dung Chao Ping opened 0:05:19.040 --> 0:05:23.440 up the country, and people forget we still are far 0:05:23.520 --> 0:05:28.760 far below that peak in Japan, which was six times 0:05:29.160 --> 0:05:35.839 the valuation of our dot com peak. So the hangover continues. 0:05:36.839 --> 0:05:40.520 You really have been at You're almost like Zeleg from 0:05:40.520 --> 0:05:44.000 the Woody Allen movie at these crucial moments in history. 0:05:44.080 --> 0:05:46.360 So you you leave the peak of Japan in the 0:05:46.640 --> 0:05:49.720 early days of the crash to go to the opening 0:05:49.720 --> 0:05:53.240 of Hong Kong. What was that experience? Like? That had 0:05:53.240 --> 0:05:57.800 have been madness? Also, well, it was frankly extraordinary luck 0:05:57.839 --> 0:06:00.960 to be present at the creation of history. I was 0:06:01.040 --> 0:06:05.240 fortunate literally to watch China go from mouth suits to 0:06:05.400 --> 0:06:10.800 blue suits, bicycles to cars, and the greatest explosion of 0:06:10.880 --> 0:06:15.240 human creativity, human wealth creation, I think in history, because 0:06:15.279 --> 0:06:20.520 it was just unleashed and the appetite for knowledge, the 0:06:20.720 --> 0:06:24.560 desire to build was extraordinary. And to be in a 0:06:24.640 --> 0:06:28.200 position where I had a checkbook and could be the 0:06:28.240 --> 0:06:32.680 financial partner in building out and up the country was 0:06:32.760 --> 0:06:35.560 an extraordinary experience. And even when I moved back to 0:06:35.600 --> 0:06:37.880 the States, I still continued to run Asia and it's 0:06:37.920 --> 0:06:41.440 an important part of my firm strategy today. So it's 0:06:41.480 --> 0:06:44.760 a lifelong it was a lifelong gift. Frankly. So you 0:06:44.800 --> 0:06:46.720 mentioned even when you go back to the States, you 0:06:47.080 --> 0:06:50.600 come back to the US and now suddenly you go 0:06:50.880 --> 0:06:54.840 from investing in real estate to private equity. What was 0:06:54.880 --> 0:06:58.640 that transition like? Well, actually, when I moved to Hong 0:06:58.720 --> 0:07:01.760 Kong and nine two, I ran both the real estate 0:07:01.880 --> 0:07:05.000 private equity group as well as the corporate equity group. 0:07:05.240 --> 0:07:07.720 And when I moved back to the States, I just 0:07:07.839 --> 0:07:11.480 focused on corporate corporate equity. And you may recall at 0:07:11.480 --> 0:07:15.280 the time everybody was doing dot coms and Frankly, there 0:07:15.280 --> 0:07:19.400 were so many investments. I'm not sure anyone really knew 0:07:19.480 --> 0:07:21.800 what the right hand was doing to the left hand. 0:07:22.080 --> 0:07:26.480 And again I went to Hank and said, it's really 0:07:26.600 --> 0:07:28.840 a little crazy, and I would like to get back 0:07:28.880 --> 0:07:34.640 to basics, focus on traditional merchant banking and consumer industrial strategy. 0:07:34.920 --> 0:07:38.840 We had strong presence in financial institution investing. I helped 0:07:38.840 --> 0:07:42.120 to create the energy investing platform. So we went back 0:07:42.160 --> 0:07:44.960 to you know, back to the future, so to speak, 0:07:45.160 --> 0:07:47.840 and did not do what we didn't know, but did 0:07:47.880 --> 0:07:50.880 what we did know. And so turn that around in 0:07:51.080 --> 0:07:53.520 two thousand and o one and o two, and at 0:07:53.560 --> 0:07:57.360 the time merchant banking and private equity was a pretty 0:07:57.360 --> 0:08:02.520 small portion of Gold and Sacks revenue stream. Today not 0:08:02.640 --> 0:08:06.000 so much. It's become pretty substantial, hasn't it. Well in 0:08:06.080 --> 0:08:09.320 the time, I would say from two thousand up until 0:08:10.080 --> 0:08:12.280 two thousand and ten, So as the you know, we 0:08:12.400 --> 0:08:15.640 got through the financial crisis, it was a small group, 0:08:15.760 --> 0:08:18.920 but on a per pound basis, we're definitely punching way 0:08:18.960 --> 0:08:23.280 above our weight. The firm supported the effort and was 0:08:23.400 --> 0:08:27.520 roughly the capital. So when and then you had partners 0:08:27.520 --> 0:08:30.840 and employees also co investing, so roughly thirty cents of 0:08:30.920 --> 0:08:34.240 every dollar was family money, so to speak. So when 0:08:34.240 --> 0:08:37.480 you went to talk to other folks to join you, 0:08:37.760 --> 0:08:41.960 it was effectively investing with Goldman Sachs and that was 0:08:42.000 --> 0:08:45.880 a very powerful fundraising tool and we were frankly, very 0:08:45.920 --> 0:08:49.400 profitable for quite some time, and it worked out for 0:08:49.440 --> 0:08:52.760 our investors and certainly worked out for the firm. Fascinating 0:08:53.160 --> 0:08:56.520 before we get into some of the details of that space, 0:08:56.880 --> 0:08:58.440 can you help me out a little bit with the 0:08:58.559 --> 0:09:03.160 terminology I of people using private equity and merchant banking 0:09:03.800 --> 0:09:08.880 and occasionally forms of commercial banking interchangeably. What what's the 0:09:08.960 --> 0:09:13.640 difference between merchant banking and private equity if any? In 0:09:13.679 --> 0:09:19.480 my dictionary, virtually none. It's really making investments to go 0:09:19.520 --> 0:09:23.880 out and support growth, support businesses, you know. I think 0:09:24.000 --> 0:09:28.440 merchant banking has a historic precedent in British terminology of 0:09:28.440 --> 0:09:32.480 the nineteenth century, and private equity is something that was 0:09:32.520 --> 0:09:35.000 developed in the last thirty years. I remember the first 0:09:35.040 --> 0:09:38.559 time I was in Beijing and saw p I A 0:09:38.840 --> 0:09:41.280 on the back of an airplane. I was like, wait 0:09:41.320 --> 0:09:45.559 a minute. The principal investment area no Pakistani international airways, 0:09:45.600 --> 0:09:48.360 So you know, you have to keep your terms straight. 0:09:48.720 --> 0:09:52.000 I'm glad, I asked that. So, so, what sort of 0:09:52.040 --> 0:09:55.120 deals were you doing when you were building the merchant 0:09:55.120 --> 0:09:58.000 bank division at Goldman Sachs. How did these look? If 0:09:58.040 --> 0:10:00.360 I go back to when we were building it in China, 0:10:00.880 --> 0:10:06.120 what was very apparent is that the consumer sector was 0:10:06.160 --> 0:10:11.400 going to take off, and we invested in a bicycle 0:10:11.480 --> 0:10:14.679 business partnered with Giant Bicycle out of Taiwan when they 0:10:14.720 --> 0:10:18.200 were building factories in China. We owned an interest in 0:10:18.240 --> 0:10:23.480 the largest pork company in China, and Apple Juice Company, 0:10:23.760 --> 0:10:28.959 the world's largest manufacture of sneakers for Nike, Reebok, and Adidas. 0:10:29.640 --> 0:10:32.840 And one of my mentors, Steve Friedman, called me and 0:10:32.880 --> 0:10:35.439 he said, you know, insurance is a very good proxy 0:10:35.559 --> 0:10:39.040 for wealth creation in a country. So I studied hard 0:10:39.360 --> 0:10:42.000 and then we wound up making an investment with the 0:10:42.080 --> 0:10:47.719 ping On Insurance Company in at a very low valuation 0:10:47.760 --> 0:10:50.720 and just watched the company explode in growth over the 0:10:50.800 --> 0:10:53.760 next decade. And when I came back to the States, 0:10:54.240 --> 0:10:57.400 continued investing in insurance. That was a very good lesson. 0:10:57.640 --> 0:11:01.880 Started a couple of insurance companies from Scribe and that 0:11:02.000 --> 0:11:05.840 worked out pretty well. Started investing in the energy sector, 0:11:05.920 --> 0:11:10.800 both upstream prospecting deep sea oil drilling in the Gulf 0:11:10.800 --> 0:11:14.240 of Mexico and off the coast of Africa, as well 0:11:14.280 --> 0:11:17.959 as continuing this consumer industrial focus because the States is 0:11:18.000 --> 0:11:22.240 consumer paradise, and it was if you pick your spots appropriately, 0:11:22.840 --> 0:11:25.240 you can back companies that can go out and grow 0:11:25.920 --> 0:11:30.439 grow an access of GDP. So fast forward to after 0:11:30.559 --> 0:11:33.600 a good long run of what is that almost three 0:11:33.600 --> 0:11:38.000 decades at Goldman, you say I'm gonna launch my own shop, 0:11:38.280 --> 0:11:42.240 and that was what were you thinking in terms of 0:11:42.440 --> 0:11:46.800 advantages of a smaller merchant bank versus a big shop 0:11:46.880 --> 0:11:49.160 with a lot of moving parts like Goldman. Well, after 0:11:49.240 --> 0:11:53.480 thirty years at Goldman, it was a wonderful run. Some 0:11:53.600 --> 0:11:56.240 of my best friends, I met my wife at Goldman 0:11:56.760 --> 0:12:00.360 life experiences I'll treasure forever, but it was time to 0:12:00.400 --> 0:12:02.960 hand the baton to a new generation. And one thing 0:12:03.040 --> 0:12:06.640 I had noticed is when you're in your fifties, people 0:12:06.720 --> 0:12:08.600 think you're at the very top of your game and 0:12:08.640 --> 0:12:10.720 you've still got a lot of energy and all that 0:12:10.800 --> 0:12:14.560 wonderful experience. And when you're in your seventies, they tend 0:12:14.600 --> 0:12:17.280 to say, you know, would you join my board? And 0:12:17.320 --> 0:12:19.280 I was like, I realized I had a window of 0:12:19.320 --> 0:12:22.319 about a decade plus, and so I wanted to form 0:12:22.480 --> 0:12:25.679 chapter two. I got married a little later in life 0:12:25.720 --> 0:12:29.240 and have five young kids, and sitting around in my 0:12:29.360 --> 0:12:32.119 library and my gym shorts is not exactly an inspiration 0:12:32.160 --> 0:12:35.400 for your children. And I'm genetically engineered to work. So 0:12:35.480 --> 0:12:38.240 I knew I had to do something. And I was 0:12:38.360 --> 0:12:42.520 very fortunate to have a number of financial partners so 0:12:42.600 --> 0:12:44.720 I didn't have to run around with a tin cup. 0:12:44.920 --> 0:12:50.720 But spent literally two thousand, thirteen, fourteen and fifteen thinking 0:12:50.760 --> 0:12:54.679 about how the landscape had changed, looking at the lessons 0:12:54.720 --> 0:12:58.920 of a lifetime, what worked, what didn't. Since I could 0:12:58.960 --> 0:13:03.040 create my own own ethos in a new enterprise, what 0:13:03.160 --> 0:13:06.320 would my business principles be? John Whitehead, I think in 0:13:06.360 --> 0:13:09.000 the late seventies sat down and wrote the Business Principles 0:13:09.000 --> 0:13:13.040 of Golden Sacks, which has guided generations. And not that 0:13:13.080 --> 0:13:15.000 I'm John Whitehead, but I took a page out of 0:13:15.040 --> 0:13:17.680 his playbook and put down my own thoughts of Chairman 0:13:17.720 --> 0:13:22.200 Mao and kind of put that into action. And so 0:13:22.320 --> 0:13:25.960 today we have over three billion dollars, We've got an 0:13:26.000 --> 0:13:29.280 up and running Hong Kong office that focuses on Asia, 0:13:29.520 --> 0:13:33.120 as well as New York City. So it um it 0:13:33.160 --> 0:13:37.840 was a good time to leave, and it was nice 0:13:37.880 --> 0:13:42.160 to have the time to think. And your comment about 0:13:42.200 --> 0:13:46.240 small verses large, it's it was very interesting to go 0:13:46.440 --> 0:13:49.960 from running a life for better term in Army Division 0:13:50.640 --> 0:13:53.400 to a platoon of Navy Seals. And I sit on 0:13:53.440 --> 0:13:55.680 the board of the Navy Seal Foundations, so I don't 0:13:55.720 --> 0:13:58.320 take that lightly. And you know, a platoon of seals 0:13:58.320 --> 0:14:00.520 can take over a city just like a vision. And 0:14:00.520 --> 0:14:04.920 so having senior folks who I've worked with throughout my career, 0:14:05.280 --> 0:14:08.600 so we actually could finish each other's sentences, we knew 0:14:08.600 --> 0:14:12.200 how we took our coffee. Was also a very exciting 0:14:12.440 --> 0:14:15.800 opportunity to get the band back together again and have 0:14:15.880 --> 0:14:20.120 a focused strategy and have a small group of investors 0:14:20.120 --> 0:14:24.200 who would write large checks frankly and and support our activities. 0:14:24.440 --> 0:14:27.080 That's quite interesting. So one of the things that I've 0:14:27.120 --> 0:14:30.600 noticed over the past decade or so is a lot 0:14:30.640 --> 0:14:35.880 of the negative spotlight has been shined on hedge funds, 0:14:36.000 --> 0:14:39.760 and private equity seems to be capturing all the positive limelight. 0:14:40.400 --> 0:14:44.920 What is it about this sector of alternative investments that 0:14:45.240 --> 0:14:49.520 seems to have had a golden touch, especially since the 0:14:49.560 --> 0:14:54.240 financial crisis ended well, I think frankly, throughout history of 0:14:54.320 --> 0:14:56.520 private equity, which you know, you can go back to 0:14:56.560 --> 0:14:58.680 the end of World War Two and the start of 0:14:58.760 --> 0:15:03.120 ben Rock, and how how in its essence it is 0:15:03.200 --> 0:15:09.479 supporting growth, It is supporting the establishment of companies. If successful, 0:15:09.600 --> 0:15:13.720 it creates jobs, it creates wealth, and it has a 0:15:13.800 --> 0:15:19.400 long term perspective. You really can't buy a company and 0:15:19.480 --> 0:15:22.720 build a company and do it in thirty days. Some 0:15:22.840 --> 0:15:26.080 of my most successful investments we have owned for well 0:15:26.120 --> 0:15:29.480 over a decade, and frankly, but for the terms of 0:15:29.560 --> 0:15:32.520 each fund, these are things that I would own forever. 0:15:32.600 --> 0:15:34.760 And there are some of the investments where I was 0:15:34.800 --> 0:15:38.120 able to take stock which I own forever and will 0:15:38.120 --> 0:15:43.280 own forever. And I think that aspect of business building, 0:15:43.760 --> 0:15:47.680 of the effect and communities, the effect on labor forces, 0:15:47.800 --> 0:15:52.040 and how it can build globally makes it an attractive 0:15:52.040 --> 0:15:55.240 asset class. And frankly, I think the returns over the 0:15:55.320 --> 0:15:58.520 last few decades have been quite superior to the public markets, 0:15:58.520 --> 0:16:01.680 and I think that attracts a lot of interest. And 0:16:01.760 --> 0:16:05.440 of all the alternative investments, it is private equity is 0:16:05.480 --> 0:16:09.280 the one that is least correlated to the public markets, 0:16:09.360 --> 0:16:13.080 and and that is certainly something that is is appealing. 0:16:13.440 --> 0:16:17.600 You mentioned in one of your investments or some of 0:16:17.640 --> 0:16:21.320 your investments, you've taken stock. When I look at the 0:16:21.360 --> 0:16:25.520 world of venture capital, it's almost all stock. How different 0:16:25.640 --> 0:16:30.640 is merchant banking in terms of the structure versus something 0:16:30.680 --> 0:16:35.000 like venture capital. Merchant banking is probably investing at a 0:16:35.120 --> 0:16:39.720 later stage then venture capital, which could literally be an idea. 0:16:40.240 --> 0:16:43.880 An engineer comes in with a new mouse trap. Experienced 0:16:43.920 --> 0:16:47.160 people who understand what it could do will back it 0:16:47.240 --> 0:16:51.240 even before it has any revenues. Uh. And it's a 0:16:51.400 --> 0:16:57.080 pre revenue concept or just possibly small revenue concept, whereas 0:16:57.080 --> 0:17:01.400 more traditional merchant banking, it's established the revenue, there's a 0:17:01.440 --> 0:17:05.400 business plan, there's a need for capital, for growth, for acquisition, 0:17:06.160 --> 0:17:11.040 for foreign establishment. And so it's just a difference in timing, 0:17:11.119 --> 0:17:15.240 if you will, between coming in at inception and coming 0:17:15.280 --> 0:17:18.000 in with a little more maturity and a track record. 0:17:18.119 --> 0:17:22.399 Quite interesting. Let's talk a little bit about your firm, 0:17:22.520 --> 0:17:26.320 Cornell Capital, which I believe you mentioned has about three 0:17:26.359 --> 0:17:30.639 billion dollars in in assets under management. Tell us a 0:17:30.680 --> 0:17:33.720 little bit about your deal sourcing. Do you go out 0:17:34.119 --> 0:17:37.400 and look for deals do deal? Does deal flow come 0:17:37.440 --> 0:17:40.000 to you? How do you how do you find things 0:17:40.040 --> 0:17:42.520 to put money into? Well, when you consider I've been 0:17:42.520 --> 0:17:46.480 doing this now somewhere between thirty five and forty years, 0:17:46.520 --> 0:17:51.880 and at Goldman, Sachs personally lead an investments into one 0:17:51.960 --> 0:17:57.680 hundred plus companies, which probably means I've spoke to three 0:17:57.680 --> 0:18:01.720 to five hundred CEOs over my career. When I left 0:18:01.720 --> 0:18:05.800 Goldman and retired in two thousand thirteen, I spent literally 0:18:05.840 --> 0:18:10.439 two to three years calling every CEO I ever met 0:18:11.160 --> 0:18:14.040 and just letting them know that I was free. I 0:18:14.080 --> 0:18:17.480 was hopeful that they would call me back, and frankly, 0:18:17.520 --> 0:18:19.560 for every call I made, I got to back. And 0:18:19.640 --> 0:18:23.240 once you can get into the CEO network and they 0:18:23.359 --> 0:18:27.680 understand what you would like to do and they understand 0:18:27.800 --> 0:18:31.399 how you would like to do it, that reference, you know, 0:18:31.520 --> 0:18:34.000 John will call Jane, who will call Jack, who will 0:18:34.000 --> 0:18:37.840 call Susan, and all of a sudden deal flow is created. 0:18:38.040 --> 0:18:42.399 And those personal relationships where they've had a good experience 0:18:42.400 --> 0:18:45.439 when you were a sponsor and back them is just 0:18:45.680 --> 0:18:50.439 fantastic recommendation to someone else who's thinking about capital or 0:18:50.640 --> 0:18:54.439 alternatives and looking for a financial partner. We Also because 0:18:54.480 --> 0:18:56.320 of the time I spent at Goldman, Sachs have a 0:18:56.359 --> 0:18:59.439 pretty good relationship with the other houses on the street, 0:18:59.640 --> 0:19:02.880 and half the world is in auction these days, so 0:19:02.920 --> 0:19:06.800 we maintain a strong presence with um Wall Street, generally 0:19:06.880 --> 0:19:09.480 just to hear what's going on. But it's the key 0:19:09.520 --> 0:19:12.399 I think to our success so far is really having 0:19:12.840 --> 0:19:16.359 proprietary deal flow from our CEO network. So what is 0:19:16.400 --> 0:19:20.560 the process like when a possible deal comes in, how 0:19:20.600 --> 0:19:23.760 do you go through the process of evaluating it and 0:19:23.800 --> 0:19:29.000 how do you decide what's an appropriate funding level and valuation. Well, 0:19:29.040 --> 0:19:31.919 after we put the Luigi board away and realize it 0:19:31.960 --> 0:19:35.440 could be a good opportunity, you basically are looking you 0:19:35.960 --> 0:19:38.400 you put your lines in the water, and you know 0:19:38.560 --> 0:19:42.320 what you'd like to do. So, for example, our expertise 0:19:42.560 --> 0:19:46.639 is an insurance so many of the big departments on 0:19:46.680 --> 0:19:49.320 Wall Street, and many of the insurance executives that I 0:19:49.400 --> 0:19:52.440 know are very kind to call us with many ideas, 0:19:52.640 --> 0:19:56.639 and in our portfolio we have to tow insurance investments. 0:19:57.200 --> 0:20:00.640 We also are very interested in consumer industrial and so 0:20:00.880 --> 0:20:04.000 we own the company that produces pyre X and the 0:20:04.040 --> 0:20:08.280 instant pot and corral dishes. We also own the world's 0:20:08.400 --> 0:20:14.240 largest manufacturer of skincare, also purell um and hair care. 0:20:14.480 --> 0:20:18.760 And so when these calls come in, you understand whether 0:20:18.840 --> 0:20:23.280 it fits the criteria you like, and then you spend 0:20:23.320 --> 0:20:27.879 time and you see what the opportunity could be. And 0:20:27.920 --> 0:20:31.360 so taking our investment in KATC, which is the largest 0:20:32.000 --> 0:20:36.639 manufacturer of skincare, it was dominant in North America, and 0:20:36.720 --> 0:20:40.640 we realized that because of our Asia strategy, we could 0:20:40.680 --> 0:20:43.159 actually help take them to Asia, and we could do 0:20:43.200 --> 0:20:46.399 it in a very effective manner. And one of the 0:20:46.480 --> 0:20:49.920 things we do because we're small, and we've told our 0:20:49.960 --> 0:20:53.080 investors that we will create a very focused portfolio where 0:20:53.119 --> 0:20:57.040 we will routinely commit ten to fift of our capital 0:20:57.200 --> 0:21:00.800 in each investment, and we have a very large co investment, 0:21:00.880 --> 0:21:04.240 which has been secret to our ability to punch above 0:21:04.240 --> 0:21:07.240 our weights. So for every dollar of investment in the fund, 0:21:07.640 --> 0:21:10.000 there's a dollar and a quarter of co invest which 0:21:10.320 --> 0:21:13.399 lowers the cost for my LPs, but it also allows 0:21:13.440 --> 0:21:15.560 them to put more capital to work, which they're all 0:21:15.600 --> 0:21:19.680 interested in doing. And so understanding we could take KATIEC 0:21:19.920 --> 0:21:23.120 internationally was one of the reasons why we were very 0:21:23.119 --> 0:21:26.320 aggressive in buying it. And when we bought it, we 0:21:26.480 --> 0:21:30.199 had roughly a hundred million of EBITDA and today on 0:21:30.240 --> 0:21:33.399 a run rate basis, it's about three hundred million. Having 0:21:33.440 --> 0:21:37.960 acquired the world's largest packaging asset and then acquiring another 0:21:38.200 --> 0:21:41.960 personal and house care business and taking them to China 0:21:42.080 --> 0:21:44.879 and partnering with my old friends at Ali Baba, and 0:21:44.960 --> 0:21:48.560 so our ability when you first get the phone call 0:21:48.920 --> 0:21:52.280 to have the creativity and the vision about what value 0:21:52.359 --> 0:21:54.960 you could add, which is a horrible concept, value add 0:21:55.000 --> 0:21:58.600 value AD. Everyone talks about it, but it's actually true. 0:21:58.720 --> 0:22:00.359 You sit there and say, what can I do to 0:22:00.440 --> 0:22:03.840 this What in my experience or in my relationships will 0:22:03.880 --> 0:22:06.480 allow me to take this very fine company and double 0:22:06.600 --> 0:22:11.000 or triple its opportunities going forward? And it takes time 0:22:11.960 --> 0:22:14.760 to develop that, and so far we've only owned it 0:22:14.760 --> 0:22:16.920 for a year and a half and where you know, 0:22:17.000 --> 0:22:19.640 way I had a plan, even even with the setbacks 0:22:19.760 --> 0:22:23.119 that everyone's experiencing because of the virus. I have to 0:22:23.160 --> 0:22:26.440 ask about some name brands you just mentioned. One obviously 0:22:26.560 --> 0:22:29.520 is PUREL. But before I get to that, what are 0:22:29.560 --> 0:22:33.919 the consumer brands of KATC What name brands might a 0:22:33.920 --> 0:22:38.119 listener recognize? Well, they manufacture, they don't own any brands, 0:22:38.160 --> 0:22:41.680 So we will manufacture for St. Lauder, for l Brands, 0:22:41.800 --> 0:22:46.119 for Laureale, for Johnson and Johnson. We are a contract manufacturer, 0:22:46.320 --> 0:22:49.320 so we own no brands, but we support brands with 0:22:49.720 --> 0:22:53.439 you know, manufacturing with R and D because we have 0:22:54.040 --> 0:22:58.440 three laboratories that are constantly creating new compounds to make 0:22:58.480 --> 0:23:02.480 things better and more ecological, um and just better for people. 0:23:02.600 --> 0:23:06.080 And you mentioned Purell. What's your relationship with Purell and 0:23:06.200 --> 0:23:11.639 how are they managing for a crisis that was tailor 0:23:11.760 --> 0:23:15.880 made for them practically, Well, you know, hand sanitizers. Now 0:23:15.960 --> 0:23:19.359 you can't walk into any building or any establishment and 0:23:19.480 --> 0:23:22.840 not have hand sanitizers. So I think that market was 0:23:22.880 --> 0:23:27.399 already strong and now it has exploded because I have 0:23:27.560 --> 0:23:30.600 them in my car. I'm sure you do. And listeners, 0:23:30.640 --> 0:23:32.280 you have them in the home, you have them in 0:23:32.359 --> 0:23:35.840 every office, every bathroom, and so they're managed. They were 0:23:35.920 --> 0:23:41.160 managing brilliantly, and now their businesses has dramatically improved because 0:23:41.200 --> 0:23:45.520 of the public safety issue around contamination. So that will 0:23:45.640 --> 0:23:51.840 probably only continue and many brands are launching sanitizers and 0:23:52.040 --> 0:23:54.879 it's probably a growth area for the next few years. 0:23:55.240 --> 0:23:57.640 I think everybody was caught a little flat footed when 0:23:57.680 --> 0:24:01.760 the demand suddenly spiked back in February. In March, have 0:24:01.880 --> 0:24:06.080 they ramped up production to meet this massive new demand 0:24:06.200 --> 0:24:09.600 for something that can help keep us safe from an 0:24:09.600 --> 0:24:13.520 infectious virus. Yeah, I think production is in full swing. 0:24:14.119 --> 0:24:16.480 There was probably two or three weeks when it was 0:24:16.560 --> 0:24:20.359 in short supply, but that has been completely taken care of. 0:24:20.680 --> 0:24:23.280 Are you guys located in New York City or where 0:24:23.119 --> 0:24:27.680 are you headquartered? We are ordered at Park Avenue, which 0:24:27.720 --> 0:24:30.280 is the corner of fifty nine in Park in Our 0:24:30.600 --> 0:24:32.879 Hong Kong office is in the Bank of China building. 0:24:33.119 --> 0:24:35.760