Alfred Mann has earned billions of dollars over the years building a series of successful technology companies, including medical device maker MiniMed Inc., which he sold in 2001 for more than $3 billion.
But the 79-year-old entrepreneur points to a business deal nearly half a century ago as his really big one.
A doctorate in physics, Mann was approached in 1956 by the military while a young worker at Technicolor. The U.S. Army wanted him to develop an electro-optical technology he had worked on, but for use as a missile guidance system.
Mann could have stayed at his safe job, but smelled opportunity and accepted an $11,200 defense contract, with its demanding specifications and tight deadlines which he met. That company ultimately morphed into Spectrolab Inc., becoming the world’s foremost manufacturer of solar cells used in space.
“Before that, I was a simple scientist, I hadn’t the foggiest notion about going into business,” said Mann, who sold Spectrolab and used the money to start what became a series of companies that has extended beyond MiniMed.
Like Mann, many of the 50 wealthiest Angelenos can point to a single event that was a turning point in their business lives. For some, it was an early deal that irrevocably put them on a path to far greater success. For others, it was investing in the right stock at the right time, or in a couple of cases, cashing in on the family fortune.
At the core, though, they have this much in common: seeing an opportunity and taking it, even if it involved risk that others would find too much to accept.
“Drive and willingness to take risk is common among blockbuster dealmakers,” said Hal & #233; Behzadi, who has managed the wealth of high net worth families for 15 years as Beverly Hills director of Citigroup Private Bank. “It’s adversity that differentiates these people.”
A study commissioned by Citigroup of 120 of its high net worth clients around the world found that those who inherited wealth invested very conservatively. The newly wealthy were more entrepreneurial and interested in lots of transactions, often becoming serial entrepreneurs.
That fits with the life stories of many of L.A.’s richest, who, like Mann, struck risky deals early on that were critical to their success.
Eli Broad, now with a net worth of $4.8 billion, loves to tell the tale of how he hooked up with then-partner Donald Kaufman in the 1950s and went out on a financial limb to build a development of $12,000 bargain basement-priced homes that sold out over one weekend.
Steven Udvar-Hazy, who built International Lease Finance Corp. into one of the top two jet leasing companies in the world, was a student at UCLA in 1966 when he formed a consulting firm that specialized in airline routing and planning. Then, sensing that aircraft leasing was the wave of the future, he and his two partners each pitched in $50,000 and took out a $1.7 million bank loan to buy a DC-8 that they leased to the Mexican government.
That deal also made his partners, Leslie and Louis Gonda, two of the city’s wealthiest residents.
That kind of risk tends to set the tone for a career. Dole Foods Co. owner David Murdock, now 82, continues adding to his empire.
“If you haven’t made your wealth yourself you are not inclined to take risks,” is how another octogenarian billionaire John Anderson, puts it. “I take risks but I take calculated risks.”
Another common trait: the ability to get up and brush oneself off after failure.
Ron Burkle has amassed his fortune by buying up foundering grocery chains. But his first acquisition attempt in 1981 as a 28-year old executive at Stater Bros. was a disaster.
Burkle, along with father and other investors, tried a management buyout, but his low-ball offer was not only rejected but blamed for lowering the chain’s eventual selling price. His reward? He was fired.
But the bankers who had assisted Burkle on his first deal were impressed with his gutsy approach, and a few years later helped him purchase his first grocery chain, the 10-store Jurgensen’s Inc. He got it despite his $3.2 million offer being lower than a competing offer.
Many of the deals cut by the richest have another quality: they involve foresight into opportunity that is not altogether obvious.
Consider Haim Saban, who made his fortune on the “Mighty Morphin’ Power Rangers” franchise, the first in a wave of Japanese cartoons that capture the imagination of American youngsters to this day.
When Saban first saw the cartoon, then called “Dinosaur Task Force Zyuranger,” while traveling overseas, it might not have been apparent that it would have domestic appeal. But Saban was so sure that he cut a deal that got it onto Fox Children’s Network in 1993.
Then there’s investor Kirk Kerkorian, who bought and sold Metro-Goldwyn-Mayer Inc. not once or twice, but three times.
Computer memory mogul John Tu made his fortune in two separate blockbuster deals involving the same company.
With his partner David Sun, the Chinese immigrant started computer memory circuit maker Kingston Technology Co. in 1987 and within two years had sales of nearly $40 million. At the height of the tech boom, Tu and Sun sold an 80 percent stake to Japanese bank Softbank Corp. in 1996 for $1.5 billion. But when Kingston did not meet sales expectations, Tu and Sun voluntarily gave up Softbank’s final $333 million payment and repurchased the company in 1999 for $450 million. Last year, Kingston had revenue of $2.4 billion and was more successful than ever.
Sometimes, the best deal is a good deal rejected for a far better one down the line. Dr. Gary Michelson, an inventor of devices for spine surgery, was initially awarded more than $500 million in a patent lawsuit against Medtronic Inc.
Instead, Michelson ended up spending more than $60 million to fight Medtronic in a court battle. In April, Medtronic decided to settle for $1.35 billion, significantly more than he initially was awarded.
Not even the gutsy Michelson could pass that up. “What was I risking? I was risking everything,” Michelson said. “If they had won, they never would have paid me a royalty again.”
*Staff Reporter Hilary Potkewitz contributed to this story.
