The Capitol Game (3 page)

A few calls by one of their executives posing as a corporate headhunter to those firms revealed that Wiley was restless, but a steady rainmaker wherever he went. His former employers described him as pleasant, smart, energetic, but also cautious and diligent, all values the men around the table intensely admired. He produced profit by the bushel wherever he went; this quality they admired even more. That success brought a flood of offers from competing firms, and he jumped without compunction for better pay and more exalted titles.

For the past three years he had been a partner and senior VP at
Cauldron Securities, a small, elite private equity outfit with a solid though stodgy reputation.

Elite because it invested only in midsize, already profitable companies.

And small by choice, because Cauldron was picky. It hired only the best of the best, only from the top five business schools, drowned the associates in work and unbearable pressure for five or six years, spit out nine out of ten, and spoiled the keepers with fat bonuses and perks.

And stodgy because it avoided risk like poison.

The partner, Edward Blank, put a finger in the air and guessed, slightly dismissively, “Probably made two mil last year.”

“More like five,” countered Brian Golightly from the seat directly to his right. “Cauldron had a great year and Wiley got a partner’s split. Five even might be a little light.”

Golightly had taken the initial call from Wiley and, only after a little checking, referred the proposal upstairs. The résumé had been slickly culled from the executive recruiting firm that handled Wiley’s switch to Cauldron. Confidential material, of course, but the headhunters wanted to do a little business with the Capitol Group, favors beget favors, and broaching the trust was, after all, a trifling technicality.

“Wiley’s single,” Golightly continued, filling in a few details not included in the file. “Army brat, born at Fort Benning, straight A’s through high school, two points from perfect on the college boards.” Then, after a brief pause, “Played lacrosse in college. All-America, attackman, nerves of steel.”

The other two men lifted their eyebrows. His academic performance, combat heroism, and business success were impressive, but his prowess on the sports field definitely hit the mark.

Golightly had acquired this valuable tidbit from a Princeton classmate of Wiley’s who happened to belong to his country club. The man was a pompous know-it-all, an unremitting bore, and to boot, an awful golfer. Enduring nine holes of his incessant hacking and slicing and almost endless babbling had been worth it, though. Wiley had started all four years, fearless, lightning
reflexes, very quick around the net. Second team All-America his senior year. He also dated the same girl all four years, an English lit major with killer legs and poetic eyes, who now was making her living pushing weepy romance drivel onto the best-seller lists. She said adieu at graduation, when he chose the Army.

“So what’s he want?” Blank asked, squirming in his seat, a study in festering impatience.

“He described it only as an opportunity. An incredible opportunity—those were his exact words,” Golightly replied, repeating the same answer he had offered the previous three times Blank had asked. This mystery had occupied most of the past thirty minutes. A quick glance at his watch. “In another minute, you can ask him yourself.”

Golightly had tried his best to pry this information from Wiley and been politely and insistently brushed off. For whatever reason, Wiley preferred to play it close to his vest until he met directly with the LBO boys.

The leveraged buyout section of the Capitol Group was the tip of a large, very prosperous, enormously powerful spear. In a firm that viewed business as warfare, they were the assault troops. All were handpicked, chosen for their hunger and their relentless ambition; most important, they had to be cold-blooded and ruthless. They made the deals. They found the targets and kicked down the doors. They located the vulnerabilities and ratcheted up the pressure until the other side caved in to whatever the Capitol Group was willing to pay.

They borrowed money by the boatload and bought companies, nearly always heavily distressed ones in financial decline, then turned them over to management to be squeezed, downsized, bled dry of impurities and imperfections, refurbished, and sold off for usually three times the cost. Sometimes five. Only those companies that proved wildly profitable—and appeared destined to stay that way—were kept, added to the Capitol Group’s swelling stable of permanent properties.

The Capitol Group was a factory. An enormously profitable factory. It was privately held; the owners preferred it that way and
stubbornly resisted the urge to rake in billions by going public. It spawned a bewildering array of products, from rubber tires, to electronic devices of all sorts, to airplane engines, to defense equipment—almost more products than anybody could count.

But nobody cared to count. Why bother? The mix of companies turned over so fast, it would be senseless.

CG owned factories spread around the globe, from Pennsylvania to Hong Kong to the tip of Africa, and raised capital wherever wealth congregated, from New York to Dubai, and most recently Moscow, where ex-Marxist billionaires were now growing like poppies. There were twenty directors at the top, forty so-called partners, and four hundred lesser executives who bought and oversaw a diverse collection of companies employing nearly three hundred thousand workers.

But had anybody cared to count, CG’s arsenal at that moment included sixty-two companies, a figure that churned and changed weekly and, had it been listed on the stock exchange, would’ve been valued at $110 billion. It was a staggering figure by any measure, and all the more remarkable for an outfit founded only twenty years before by a few penniless, insanely optimistic ex-government types.

“I think he’s bringing us a takeover deal,” guessed Barry Caldwell, an accounting assassin brought into the meeting at the last minute to act cold and hard. Spreadsheets were his specialty. His froglike eyes could chew through the debits and credits, gauge the assets and liabilities, dart through the income and expenses, and in lightning speed spit out an amazingly precise portrait of corporate health or disease.

“If not, he’s wasting our time,” Blank answered, slapping a hand on the table. Of course he was bringing a deal. Why else the insistence on meeting the LBO group?

“It’s time,” Golightly announced, standing and buttoning his jacket. He tucked the folder in a briefcase. The other two men stood and buttoned their jackets as well.

The door opened, and after a moment, in walked Jack Wiley hauling a buttery tan briefcase in one hand, a stack of slides and
spreadsheets in the other. He was taller than they expected, probably six-one or six-two. They took note of the soaked-in tan that spoke of long days on the golf course, along with a build that suggested plenty of gym time. Full head of sandy brown hair, a sprinkling of gray showing at the temples, cold blue eyes. The briefcase and slides landed heavily on the conference table. The usual handshakes and nice-to-meet-yous were quickly and insincerely exchanged.

The three men were impressed. Without being asked, Wiley fell into a seat, coolly crossed his long legs, and, as if he owned the place, suggested, “Why don’t you all get seated and we’ll start.”

“Good idea,” Blank answered for all of them. At forty-five, he was the senior man and the only CG partner in the room. He wanted Wiley to know it, too.

As if on cue, a comely assistant poked her head in. “Good morning, gentlemen. Coffee, tea, soda?”

Wiley produced a polite smile and, before anybody could produce an answer, announced, “Not yet, thank you.” His eyes roved across the faces on the other side of the table. “First let us find out if we have anything to discuss.”

Yes, yes, another good idea, the three men across the table agreed. If the meeting was a bust, why prolong the pain with forced small talk and refreshments? Then it’s thanks for stopping by, Jack, don’t let the door bang you in the ass.

Blank edged forward on his elbows and took charge of the conversation. “So you’re a partner at Cauldron.”

“That’s right. Three years now.”

“I’m not familiar with Cauldron. Small, isn’t it?” In other words, You’re lucky to be sitting here with the big boys, Jack—and don’t you forget it.

“Yes, tiny, actually.” Jack took the putdown in stride and nodded. “We like to think of ourselves as a boutique firm. We’re very selective. We pride ourselves on being nimble, and in our view, size would only hamper us.” After a beat, he smiled lightly and added, “It would also water down the profit share for the partners.”

Big smiles from all three CG boys. This outright profession
of greed warmed their hearts. “What’s your firm’s specialty?” Golightly asked, as if they hadn’t just spent thirty minutes hashing over this very issue.

“Good question,” Wiley answered. “Our investors tend to be old money, mostly inherited. Mostly from New York, upper New Jersey, and New England. They have their fortunes, they appreciate it, and they want to appreciate it next year as well. We buy one or two properties each year, no more. Our focus is on lean, well-managed, steadily profitable companies in need of a little capital to expand. Nothing exciting. It’s a good formula, though, and it works.”

The men across the table smirked and made little effort to hide their disdain. They lived and died on the mantra of no big risks, no big payoffs. Cauldron sounded like a bunch of wimps. Little Leaguers hustling for chump change.

“You don’t find it stifling?” Blank couldn’t resist asking. Obviously, it would kill him.

Wiley smiled and ignored the insult. “I spent ten years on the treadmill at the bigger firms. A full decade running the halls, fifteen-hour days, no weekends, plenty of canceled vacations. Ten years of midnight deals hanging by a thread, then trying to turn around turkeys we never should’ve gone near. You boys know the life.”

The three men nodded. Damn right they knew.

“I wasn’t burned out,” Jack continued. “But I can’t say I was enjoying myself, either. When Cauldron offered a fast-track partnership, I jumped at it. Understand, Cauldron is very laid-back, a low-pressure outfit. Lots of long lunches where drinking isn’t off-limits. Weekends are sacrosanct. The partners can often be found napping in their offices. And why not? Our investors are content with ten percent growth a year. They throw a wild bash for us if we hit fifteen.” He produced a weak smile for the hungry sharks across the table.

As he and they knew, at CG, ten would be a disaster. The directors would turn up the heat, pink slips would fly—life would become intolerable for the survivors. This had happened, once, only once, twelve years back. A painful recession had set in.
Growth sank to a mere eight percent that year. Blank was the only one in the room with enough tenure to have lived through it. A bloodbath, 365 days of unmitigated terror, twelve torturous months without a day off, a full year of unbearable stress. His blood pressure shot up forty points. He still had nightmares about it.

“Sounds ideal,” Golightly commented, obviously not meaning it.

“Yes, doesn’t it?” Jack replied, matching his insincerity ounce for ounce.

“So why don’t you explain this irresistible offer you were bragging about?” Blank asked. Having cut Wiley down to size, it was time to cut to the chase.

“In a minute, Mr. Blank. Let me start by telling you, you’re not the only people I’m talking to. I developed a model. Four firms fell out. You’re one of those four and any or all of you could fit the bill. It doesn’t mean only four firms will do, but four of you are ideal.”

Casual nods from across the table. Standard fare, and also empty bluster. Nobody with a noodle of sense ever confessed up-front that CG was the only firm they were talking with. Offers always came juiced up with a little competition. The boys from CG heard it all the time. Nice try, Jack.

They nudged one another under the table and played along. “But we do fit the bill?” Blank suggested, straight-faced, as if there was any chance in hell they might not.

“You might even be the best fit,” Jack agreeably allowed.

“What a relief.”

“Should I go on?”

“Yes, do.”

Jack uncrossed his legs and leaned forward. “It’s a company that came to my attention a few months ago. At first glance it looked like a perfect fit for Cauldron—midsize, profitable, well led, courting an infusion of capital. Their CEO and head financial guy were making the rounds through a few firms like ours. Call it a road show.”

“And you met with them?” Golightly asked.

A fast nod. “It wasn’t my meeting, but I was present, yes. Forty-five years ago, the CEO founded this company. Built it from scratch, the usual story, sweat, smarts, and his bare hands. His life’s work. He’s now in his late seventies, has two sons and a daughter. He’s in fairly good health, but a realist. He had two heart attacks in his late fifties. He quit smoking and watches the cholesterol, but long lives don’t run in his genes. Either of his children could succeed him. He wants to leave them set up for success.”

“So this company’s his property?”

“No,” Jack said. “Not exactly.”

“Meaning what?”

“It’s listed. A penny stock, though. Through his stock and a few friendly stockholders he controls slightly over half of the voting shares.”

Caldwell suddenly developed a deep frown. “If you’d done your homework, Wiley, you’d know we prefer private companies.”