Question: How did you get into investment banking?
Answer: When I got out of law school, I went to management consulting firm Touche Ross. I was brought in to troubleshoot problems for clients in all sorts of industries. I really liked the diversity of assignments and coming up with solutions to help this company or that company get out of its troublesome situation. But it was frustrating in that I rarely got to see the solutions implemented, since the clients decided to take our advice and go from there. I wanted to do something where I could get closure. That's when Sutro & Co., the venerable San Francisco firm, came knocking and wanted me to boost its presence here in L.A. I joined the company in 1981.
Q: Why didn't you go into traditional law?
A: My pursuit of the law was always from an intellectual perspective. I fought censorship of the school newspaper at Santa Monica High School. That prompted interest in the law. But entrepreneurship is in my blood: my grandfather had a chain of general merchandise stores in Austria; my uncle had a couple of chemical plants in Los Angeles and my dad had a leather fashion accessory business, also in L.A. I always knew I wanted to be in business. The law comes in handy at times to help with that.
Q: You joined Sutro in the middle of a recession and a prolonged bear market on Wall Street.
A: Actually, the timing couldn't have been better. Within a few months after I joined, the long bull market began and we were right in the middle of the "go-go" '80s with the mergers and acquisitions boom, Mike Milken and junk bonds, etc. We specialized in middle market companies in Los Angeles. And what was so good about it was that I actually got to close deals, not watch someone else take my work and finish it. Very gratifying.
Q: What were some of these early deals you put together?
A: We took L.A. Gear public, which became one of the hottest IPOs in 1986. By 1990, it was one of the top stock performers in the nation, even better than Microsoft. We also helped sell California Plant Protection in the San Fernando Valley to Pinkerton's, thereby helping to create the modern-day Pinkerton's.
Q: Sounds like you were right in the middle of all the action you so craved. Why did you leave?
A: In 1990, at the age of 34, I was promoted to vice chairman of investment banking for the firm. At the time, the L.A. office was the tail wagging the dog: it was larger and more productive than the home office in San Francisco. But I found that the management duties associated with this position took me away from what I really loved, which was the thrill of the hunt, the deal-making. So, in March of 1992, I struck out on my own with a couple partners and some clients.
Q: March of 1992: sounds like another case of bad timing, with the deep recession we were in and just weeks before the riots that followed the Rodney King verdicts.
A: You're right in that it was a tough time to be in the deal-making business. But we took a contrarian approach. While our competitors were cutting back, we were looking for deals to cut. It allowed us to get a foothold. Then, a year later, we had our first big deal: selling Mrs. Gooch's (natural food stores) to Whole Foods. That deal was a real home run for us and really put us on the map in L.A. at a time when everyone else had bailed out of the market.
Q: So what was the company's focus?
A: We really honed in on representing entrepreneurs, getting them ready to find buyers and then going out and finding potential buyers for them. We focus on middle-market, growth companies. It's a difficult but rewarding business. (Greif pointed to a statue of an owl on a window ledge.) Look at that owl, which was given to us by a client. It's symbolic of what this firm is all about: in Greek mythology it represents wisdom; but it's also a horned owl, which is very aggressive.
Q: What do you mean by wisdom?
A: We tell entrepreneurs not always what they want to hear but what they need to hear about getting their company ready to go to market. We give our clients straight advice. They may or may not like it, but entrepreneurs don't need yes men.
Q: Give me an example.
A: We once represented a consumer products company. Before we were hired, they had tried to put a deal together. The potential buyer came in with a low-ball offer and my client basically screamed at him and threw him out of the office. We got brought in and we had to talk with this rather strong-willed individual and getting him to understand that he was his own worst enemy. That's probably not what he wanted to hear, but it was the only way a deal was going to get done.
Q: What's the most nerve-wracking deal you've put together?
A: Well they're all pretty nerve-wracking. There was this one client who was very attached to his CFO. But when we came in and evaluated the company, we realized the CFO had to go; he was not running the business in an effective manner. We told the client that he had to get rid of his CFO and the client resisted that. Finally, there was a strategic planning session; after my presentation, I asked the CFO some basic questions about how certain divisions in the company were performing. When the CFO couldn't answer those questions, that convinced my client that the CFO had to go.
Q: Sounds like the clients you take on don't really have a good idea of the value of their business.
A: That's often the case. When I first joined Sutro, one of the principals told me that often CEOs tend to overvalue their companies: it's their baby and they have an inflated sense of what it's actually worth. But I have found just the opposite: the client if anything undervalues their company. They don't have the expertise to market their company and maximize its value. When it comes right down to it, an investment manager is really a glorified salesman with financial skills.
Q: By that you mean
A: It's all about the negotiations. Buyers want to be at the low end of the range when it comes to the value of a company; the company wants to be at the high end of the range. The art of negotiations is knowing just when to push and when to pull to move the buyer from the low end to the high end. Take the deal we helped put together in which Albertsons bought Bristol Farms. Albertsons paid 11 times EBIDTA (earnings before interest, depreciation, taxes and amortization) when Bristol Farms was trading at only 6 times EBIDTA. The key was synergy: that Albertsons and Bristol Farms together could make more profits than each of them separately. Albertsons was getting its head handed to it by trying to compete with Kroger and with Wal-Mart. So this deal allowed them to focus on a more upscale niche.
Q: You say you focus on the growth potential of companies in marketing them to buyers. But haven't there been deals where the growth didn't materialize?
A: Yes, this has happened. Whenever you've been in this business as long as I have, there will be examples like that. I'll just say one name: Tower Records. We restructured Tower Records two-and-a-half years ago. In that restructuring, the company eliminated about $90 million in debt, leaving just $30 million in debt. But we don't run the company after the deal is concluded. There's been plenty written about what went wrong at Tower, about how the industry changed and they didn't change fast enough.
Q: It sounds like your job is all encompassing.
A: Yes, investment banking is notorious for 24-hour days and working long hours and weekends. But since our eldest child was born, my wife hung up her legal shingle and focused on the family side. That's been a real help. She's been an invaluable partner. We met at Loyola Law School: she's definitely the best thing that happened to me at Loyola. I'm seldom in the office on weekends; I do quite a bit of work at home. I do spend time with my family on the weekends; I catch my kids' games and am there for them after school. Actually, now that our second child is in high school, my wife is getting back into law. She's working as a mediator, resolving disputes outside of court.
Q: Over the last three years or so, we've seen a tremendous surge in private equity investments in entrepreneurial companies. What's your take on this?
A: Yes, we have seen a huge number of private equity companies getting into the game. So much so that now, there are too many private equity companies chasing too few deals. It has led some firms to team up on deals; others to split up deals amongst themselves. That's brought in the regulators. While outright collusion may be hard to prove, we have seen some distortions in the marketplace.
Q: Still, there's a growing sense on Wall Street that private equity abuses are growing, especially with firms that load a company with debt and then quickly cash out without any effort at restructuring.
A: This is the strategy of dividend recapitalization. I don't think this is healthy. In the old days, private equity invested with an eye towards growing the business, with a five-year or 10-year timetable. Now time frames have shrunk to two to five years. The result is further leveraging of the company; in a strong economy, that's okay, but in a weak economy, it could all come crashing down. Cashing out too soon is a bad thing. If a company has hiccup where it might require more money to get out of a jam, it could lead to more potential for bankruptcies.
Q: You've been a longtime observer of the L.A. economy. What's your take on how the economy has changed in the past 25 years?
A: The L.A. economy used to be very much aerospace and real estate driven. We've seen in recent years how, once many of the Fortune 500 companies have left, entrepreneurs have become incredibly important to the local economy. Now we have a much more diverse economy. Small business people and entrepreneurs have driven the economy and the development of new products. That's what makes this such an attractive market for us.
Q: You serve on the board of the Los Angeles County Economic Development Corporation. What have you observed about economic development efforts in the region?
A: Being on the board of the LAEDC has given me a greater perspective of the difficulties that businesses face in this region. It all ultimately stems from the policies in Sacramento. I can tell you that overall, local elected officials do a pretty good job supporting entrepreneurs, much better than the state, which seems to regard them as a cash cow. Sometimes I feel like an ant pushing against a boulder in trying to change the system to make it more business friendly. The politicians just don't get it. Just last month at the Milken State of the State forum, where five elected officials were on the podium, there was an audience poll taken. The audience said the greatest problem was that California needed to become more business friendly. The politicians, meanwhile, all mumbled things about the need for more bipartisan cooperation, etc. They completely missed the point.
Q: You mentioned one of your hobbies is hunting. What do you hunt?
A: I hunt wild boar and elk. I hunt (deals) for a living and I hunt (game) for fun. I love hunting wild boar because they are not "Bambis." If you're not careful, you can find yourself being the prey.
Q: Where's that?
A: You can hunt boar anywhere in California. It's open season. That's because boars are not native to California and regarded as dangerous to the native plants. Boars are especially damaging because they don't just eat the leaves of plants like deer do, but they also eat the roots. So farmers, vintners, they all want the boars killed. So they let you hunt on private land, anywhere you want to go.
Q: Sounds like an odd hobby for an investment banker.
A: When I was working at Ralphs as a teenager, a couple of friends that worked with me would go on these hunting trips. It was a way to get away from the concrete jungle and get out in the woods. I've been hunting ever since.
Q: It's also a lot different from you other hobby: collecting art. What types of art do you collect?
A: Let me divide that into the art in the company offices and at our home. At the office, we collect art deco pieces. The office itself is built out in an art deco motif. At home, our tastes run more towards 19th century European art, from Barbizon to the post-impressionists. We also are occasionally patrons for contemporary artists.
Title: President, chief executive
Company: Greif & Co.
Born: Los Angeles, 1955
Education: B.A., economics, UCLA; M.B.A. with specialty in entrepreneurial studies, USC; J.D., Loyola Law School
Career Turning Points: Joining investment banking firm Sutro & Co. and then leaving to start own company in the middle of a recession
Most Influential People: Robert J. Emmons, marketing professor at USC; wife Ren & #233;e, an attorney and "calming influence"
Personal: Lives in the Hollywood Hills with wife and three teenage children
Hobbies: Art collecting, reading, hunting
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