INTERVIEW VIEW

InterviewINTER A Focus on Growth Companies

An Interview with Donald B. Marron, Chairman and Chief Executive Offi cer, Lightyear Capital LLC

senior management team brings extensive ex- have $3.5 trillion in a money market fund. and perience from the fi nancial services industry to much of that money can’t remain there earning portfolio companies, offering expertise in strate- close to nothing. it’s a symptom of a very odd gic management and capital structure forma- situation. clearly, cheap money, which is fuel- tion and an established network of relationships ing the banks and other things being stimulated and contacts. The fi rm has managed approxi- by the government, is going to end sometime mately $3 billion of committed capital through in the next couple of years. as the government its affi liated investment funds. phases out these measures, we have to be ready for what the impact will be. Were you surprised at the depth of the eco- so the fi rst and most important thing you nomic crisis, and as you look at the road to have to do is understand and separate those recovery, where do you see us today? businesses that are successful as a result of some i was surprised at how deep it was. one of fundamental franchise value or some product the differences from the prior crashes is that this rather than cheap money – that’s key. the sec- is the fi rst truly global crash. now you have ma- ond thing is to work your way to a point where jor investors, chinese being among the leaders, reinvestment of capital will get you the best le- all over the world with important commitments verage in this climate. an example in a relatively to our markets. america exports many things – unexciting, but nonetheless crucial industry is in this case, we exported the complex fi nancial , where we now see much more of a Donald B. Marron products, which were part of the problem. focus on specialization. For example, we own second, this is the fi rst 401(k) crash, mean- a crop insurance company, which is very spe- EDITORS’ NOTE Donald Marron served as ing that you have 50 to 70 million americans that cialized and has performed extremely well. the Chairman and CEO of the PaineWebber Group had a direct stake in what happened. in prior company had $175 million in premiums when Inc. for 20 years until its November 2000 merger crashes, americans were relying on pensions we bought it four years ago; today it is writing with UBS AG. He had come to PaineWebber as and social security, and they were spectators. in close to $1 billion. in addition, you have the a result of a merger he led between the fi rm this case, everyone listened to the president and decline and fall of aig that has affected pric- and Mitchell Hutchins & Co., a leading insti- listened to wall street in a very different way. ing and changed the dynamics of the business. tutional brokerage fi rm at which he served as third, there was a radical loss of liquidity so when there is a whole set of moving parts, Chairman and CEO. Immediately following the in the market, which contributed signifi cantly underlying it is the fact that insurance is a basic PaineWebber-UBS merger, Marron and his part- to the crash. if you don’t have liquidity, you’ve business. it is a slow growth business, but it is ners formed the buyout fi rm Lightyear Capital lost the right to change your mind. it wasn’t like a genuine growth business. LLC to further focus on the fi nancial services in- there were a lot of dumb people out there in the other big opportunity is banking. there dustry. In addition, Marron is cofounder of Data the middle of this, doing nothing. they quickly are over 8,000 banks in this country and while Resources Inc. with Harvard economist Dr. Otto fi gured out that they couldn’t sell what they you can say there are going to be fewer than Eckstein. The company became the largest non- held, and they couldn’t do much about it. there are now going forward, we also know that governmental source of economic data on com- For 2010, what are you most focused on communities still need them and banks fl ourish puters in the world and was purchased by The when you look at the economic climate? in the right kind of growth-oriented communi- McGraw-Hill Companies in 1979. Marron is a as investors, we’re basi- ties. how do you fi nd those banks and help member of the Council on Foreign Relations, a cally in the money management business, so strengthen them while at the same time help a trustee of the Center for Strategic and International we have to do well with our investor money small business, provide a mortgage, and stimu- Studies, a member of Memorial Sloan-Kettering and that is our principal focus – getting returns. late the economy? Cancer Center’s board of overseers and manag- since we tend to focus on growth companies, At the time when you were starting ers, a member of the board of trustees of New York part of those returns come from investing our Lightyear, did you ever think about taking University, the Chairman Emeritus of the Center time in helping the managers of these compa- some time off or did you know you wanted for the Study of the Presidency and Congress, and nies – not to run the companies but help them to do this, and has the ride been what you a trustee and President Emeritus of the Museum grow, whether it be by strategic acquisitions, expected? of Modern Art. adding talented board members, or supporting we started it the day after we closed on our their longer-term growth goals. you must also transaction with . this is my fi fth business COMPANY BRIEF Lightyear Capital LLC be aware of what the trends are going forward and i haven’t had a day off yet. this is what i (www.lycap.com) is a New York-based private and what the climate is going to be. For ex- like to do – it’s an exciting era. this is an indus- equity investment fi rm specializing in the fi - ample, if we are entering a low growth econ- try that creates innovation, manages innovation, nancial services industry, providing buyout and omy, you have to ask: how does globalization and fi nances others to innovate, so there is a primarily to companies with eq- change your prospects given the shock that this wide range of things that you can be looking at uity investments up to $150 million. Lightyear’s has created in other areas? in addition, you may all the time.• 72 Leaders posted with permission. copyright © 2010 leaders magazine, inc. volume 33, number 1