Roundtable Presidential Politics & Private Equity Sponsored by Sponsored by 029_MAJOct12 1 9/7/2012 7:07:28 PM Roundtable o explore the impact of the 2012 presidential election on middle- new president, or the existing president, is going to market dealmaking, Mergers & Acquisitions convened a special face. Will taxes go up? Will dividends go up? Will capital gains go up? Will “ObamaCare” get repealed? 5roundtable, held at the Nasdaq exchange and sponsored by Fifth As I’ve canvassed small businesses across the state Street Finance Corp. (Nasdaq: FSC) and Rutan & Tucker LLP. Partici- of Connecticut, I’ve found higher healthcare costs are the number one, two and three things concern pants included four private equity investors, two members of government ing them. I’ve been talking to the 60 or 70 private equity sponsors that we lend to about their portfolio (a Democrat and a Republican), two lenders, an investment banker, an companies, and this is a big issue. So, the question is: attorney and a consultant. Most of the roundtable participants are sup- Does healthcare get repealed? How do you forecast your business, how do you forecast what you want to porting former Governor Mitt Romney (R-Mass.) in the election, which do, and how do you think about deals and lending? This environment creates great uncertainty. underscores the Bain Capital co-founder’s popularity among his private The country is also going to make a choice be equity peers. tween what I call statist and capitalist, not Democrat and Republican. This is a statist president. This is a president who wants a bigger, better government. And I personally don’t believe in a big government. I believe in letting the markets work. Romney clearly Mary Kathleen Flynn, Mergers & Acquisitions The challenge coming up is in dealing with a year in decided that capitalism and free markets are much (moderator): What’s at stake for the middle market which $1trillion dollars has to be cut from the fed- more his style. He doesn’t want big government. He in the presidential election? eral budget. Both sides agree. There definitely has to be $1 trillion of entitlement cuts. The “Grand Com- Leonard Tannenbaum, Fifth Street Finance Corp. promise” will happen in the first quarter of next year. (sponsor): The next president has a great challenge. The Democrat and Republican senators that we have met in Washington both agree nothing is going to happen this year. Something is going to be mandated, but it’s going to be next year. You I just turned 41, have a whole landscape of uncertainty that the and“ in my voting life, this Roundtable Participants is the most Juan Alva, Fifth Street Finance Corp. (sponsor) important Jim Castro-Blanco, Chief Deputy County Attorney, election by far. Westchester County (R-N.Y.) Jeff Cohen, Credit Suisse Bob Duff, State Senator (D-Conn.) Russ Gerson, Gerson Group John Kenney, TSG Consumer Partners LLC William Meehan, Rutan & Tucker LLP (sponsor) ” Paul Murphy, Sentinel Capital Partners Gretchen Perkins, Huron Capital Partners Geoffrey Rehnert, Audax Group Leonard Tannenbaum, Fifth Street Finance Corp. (sponsor) Leonard Tannenbaum 30 MERGERS & ACQUISITIONS October 2012 030_MAJOct12 2 9/7/2012 7:07:46 PM Sponsored Roundtable o explore the impact of the 2012 presidential election on middle- new president, or the existing president, is going to doesn’t think the government is the solution to our convened a special face. Will taxes go up? Will dividends go up? Will country’s problems. capital gains go up? Will “ObamaCare” get repealed? I just turned 41, and in my voting life, this is the roundtable, held at the Nasdaq exchange and sponsored by Fifth As I’ve canvassed small businesses across the state most important election by far. Street Finance Corp. (Nasdaq: FSC) and Rutan & Tucker LLP. Partici- of Connecticut, I’ve found higher healthcare costs are the number one, two and three things concern- Flynn: How might Mitt Romney’s experience as a I consider Mitt private equity investor be relevant if he becomes pants included four private equity investors, two members of government ing them. I’ve been talking to the 60 or 70 private “a mentor. equity sponsors that we lend to about their portfolio the next U.S. president? (a Democrat and a Republican), two lenders, an investment banker, an companies, and this is a big issue. So, the question is: I know the attorney and a consultant. Most of the roundtable participants are sup- Does healthcare get repealed? How do you forecast Geoffrey Rehnert, Audax Group: I consider Mitt person he is. your business, how do you forecast what you want to a mentor. I worked closely with him throughout the porting former Governor Mitt Romney (R-Mass.) in the election, which do, and how do you think about deals and lending? entire time he was at Bain Capital. I was actually one I know his This environment creates great uncertainty. of the two first associates, and so for the first five or six ideology. underscores the Bain Capital co-founder’s popularity among his private The country is also going to make a choice be- years of Bain Capital, there were really only a handful tween what I call statist and capitalist, not Democrat of us. So, I know the person he is. I know his ideology. and Republican. This is a statist president. This is a I know his belief system. president who wants a bigger, better government. Mitt is a strong believer in capitalism and a strong And I personally don’t believe in a big government. believer in markets. And he’s lived that, certainly, in I believe in letting the markets work. Romney clearly his business career. I believe Mitt’s experiences—15 ” The challenge coming up is in dealing with a year in decided that capitalism and free markets are much years in private equity, another 10 years of business which $1trillion dollars has to be cut from the fed- more his style. He doesn’t want big government. He experience prior to that with Bain Capital, being gov- eral budget. Both sides agree. There definitely has to be $1 trillion of entitlement cuts. The “Grand Com- promise” will happen in the first quarter of next year. The Democrat and Republican senators that we have met in Washington both agree nothing is going to happen this year. Something is going to be mandated, but it’s going to be next year. You have a whole landscape of uncertainty that the Roundtable Participants Fifth Street Finance Corp. (sponsor) Chief Deputy County Attorney, Westchester County (R-N.Y.) State Senator (D-Conn.) TSG Consumer Partners LLC Rutan & Tucker LLP (sponsor) Sentinel Capital Partners Huron Capital Partners Audax Group Fifth Street Finance Corp. (sponsor) Roundtable Photographs by JohnCalabresePhotography.com by Photographs Roundtable October 2012 MERGERS & ACQUISITIONS 31 031_MAJOct12 3 9/7/2012 7:07:58 PM Roundtable ernor of Massachusetts and a variety of other public- going in one direction or another: statism versus capi- to happen. So, we’re all going to say we support the service undertakings—will serve him well if he gets talism and socialism versus free markets. In Europe, Simpson-Bowles Commission, and, theoretically, I elected in November. I’ve never met a more capable they’re making the choice for statism, and it’s become do. I think that it sounds like a decent compromise. person in my lifetime. He has a tremendous intellec- much more statist in the last three or four years. The It’s a good mix. We know there needs to be some rev tual capacity. He has an enormous energy level. He’s question is: will this country follow that path, or will enue. There needs to be some cuts, but let’s try to find very good at bringing people together and inspiring it return to the path we were on in the late ‘80s, ‘90s a way forward on doing that. One way or another and the first part of this century? is not going to work. There needs to be a combina tion of things. I believe the markets would respond I believe the Flynn: What’s the perspective of the much better if Congress would take a vote on Simp economic“ Democrats? son-Bowles rather than saying, nothing is going to get done. We don’t know what’s going to happen until problems that State Senator Bob Duff (D-Conn.): If next year. We’re not sure what’s going to happen with the country you look back four years ago, the whole the Bush tax cuts. We’re not sure what’s going to hap issue from our government’s standpoint pen with Defense. faces are was trying to prevent us from falling off As a real-world example, in my district, we have solvable. a cliff and prevent us from going into a subsidiary of Northrop Grumman called Norden We have the a depression. We know we had tough Systems, which has been there for over 50 or 60 years, economic times, not just in the federal since World War II. Now they have pulled out, and fundamentals government, but in state governments as we’ve lost 300 jobs. And the reason, in my opinion, for a well. We went from record surpluses to is because of the deficit-ceiling compromise that was terrific economy record deficits. So, everybody was hurt- made that talked about the trillion dollars’ worth of ing, and unemployment was high. cuts in Defense. So, we’re living that right now. And in this country. I think this election really is about that’s the uncertainty that’s out there.