Would you believe New York-based Brown Brothers Harriman actually kind of owes the birth of its mezzanine activities to Partner Bob Gould‘s wife? At least that’s the story he tells.
Back in the mid-’80s, Gould was in his late twenties and had already been employed at Brown Brothers for four years, first as a commercial banking trainee and then as a middle-market lender.
Impressed with his intelligence and drive, the senior partners at the firm decided to put some stock young Gould’s future and sent him to earn his M.B.A. from New York University. Gould, in fact, was the first Brown Brothers employee to get sponsorship for graduate school and he pulled it off by attending classes on Friday nights and Saturday mornings for three years.
As if that wasn’t enough to keep Gould busy, he was smitten with a Kleinwort Benson banker based out of Chicago (a British ex-patriot whose lakeside apartment could fit two of Gould’s New York home). As love makes us do crazy things, after class on Saturdays Gould would hop on a People’s Express jet for $49 and fly to Chicago to see his girlfriend. But free time was scarce for the two of them and Sundays were usually spent at the Kleinwort Benson office because there was work to be done. Kleinwort Benson was not a stranger to doing senior lending to leveraged transactions and was also one of the earlier firms to set up a mezzanine fund. So Gould, during breaks from doing his own work and studying, got pretty good at doing the financial modeling on the computer for leveraged transactions at which his wife’s firm was looking.
“It was through that that I first started to get the idea to create mezzanine capability at Brown Brothers,” Gould says. “That actually planted the seed in my mind that I would someday like to do just that.”
Moving on Up
With an M.B.A. under his belt, Gould, who started with Brown Brothers straight out of Yale in 1981, successfully convinced his partners to join the corporate finance side of the business in 1987. That’s where he stayed, concentrating on mergers and acquisitions advisory work, until 1995. In the meantime, Brown Brothers launched its private equity platform in 1989 by creating an equity fund, getting the ball rolling for Gould’s then-unannounced plan to take the firm into mezzanine.
He wrote a memo-style letter to the senior partners of the firm in 1995, recommending that Brown Brothers raise a mezzanine fund, and that’s just what happened. Gould and co-founder Joe Donlan, a managing director, teamed to raise the firm’s debut 1818 Mezzanine Fund, which began investing its $250 million on the first business day of 1997.
While Gould was confident that the Brown Brothers partners would like the idea of a mezzanine fund, he says he certainly felt like writing that memo was somewhat of a risk – there was the chance that they would say no, of course.
But Gould’s determination to get the fund started was multiplied by two, because not only did he recognize the opportunities that a mezzanine fund would open up to his firm, but he also wanted to be made a Brown Brothers partner.
“I wanted to be a partner of the firm, and I felt the chances of doing that were greater if I helped to create a business,” he says.
Evidently, the existing partners were pleased and Gould was admitted as a general partner in 1997.
Donlan, who still heads the mezzanine activities with Gould, says Gould has been instrumental in making Brown Brothers a successful and competitive private equity player.
“He had the credibility and the foresight to see an interesting opportunity that has now become a core business for us,” Donlan says. “Bob is direct and candid with people, which in this business is very helpful. He’s intelligent and has extraordinary energy, not to mention the fact that he’s a good golfer.”
With the original $250 million of mezzanine already invested, Brown Brothers last week closed its second 1818 Mezzanine Fund on $365 million. And Gould gets as big of a kick out of his job today as he did when it was new. While 10% of that job is the responsibility of overseeing the development of new alternative asset products, the majority of his time is spent running the mezzanine funds, Gould says.
Gould’s personality seems to mesh well with the role he takes at the firm and with his portfolio companies. His favorite part of the job is meeting and being associated with people at “what is often one of the most optimistic and exciting moments of their lives,” since that’s the point a mezzanine investor is introduced to an entrepreneur – when he or she is looking to do an acquisition or a recapitalization, for example.
“I get to partner with these people and go on this voyage with them,” Gould says. “I’m their confidant and sometimes even their rabbi. The biggest turn-on is to be able to make a contribution to that process and to see it work out for the people involved is incredibly satisfying.”
The downside of the job goes hand-in-hand with Gould’s favorite part, however. By getting closely involved with the people with which he works, Gould is that much more disappointed when an investment is unsuccessful.
“It’s not fun to be tough on people that you like,” he says. “But I have a fiduciary duty to my investors and I have to check myself every once in a while to make sure I’m not too personally involved.”
Gould says it’s not always easy to be a director of a company, a lender to a company and a significant equity holder in a company all at the same time, which is often the position of a mezzanine lender.
“When things are going well, you speak at the board as an equity participant, thinking about the upside and helping to drive that as best you can,” Gould says. “When things aren’t going well, you have to start to represent yourself as a creditor, and that requires change in the relationship.”
No Engineer Here
Gould graduated from Yale with a B.S. in mechanical engineering in 1981. He says he went to Yale because “he got in” and was glad he did because Yale has become an important part of his life.
Coming from a family of engineers, Gould was aware that engineers have a useful way of thinking, and being one taught him to identify relevant information and solve problems with it. Although he really never had any intentions of becoming a professional engineer, he conceded to the fact that having the degree left some opportunities open down the line, especially since his father runs an engineering-type company in their hometown of Suffern, N.Y.
Today, Gould is a long way from ever moving back to Suffern. While he was not born there, but in New York City, Gould attended school in the small town just over the Tappan Zee Bridge up until boarding school began in ninth grade. While which sports teams to play on were once a worry of the child Gould, the adult Gould is now faced with more serious pressures, such as finding time to balance work and family. He and his wife, yes, the former Kleinwort Benson banker, moved to New Jersey in 1992 and are raising their three young daughters there. Gould gets frustrated with his commute and curses the state of the U.S. airline industry, which takes a toll on everybody in the private equity business “unless you’re doing the private jet routine, which we’re not,” he says.
Only one regret weighs on the mind of the otherwise satisfied Bob Gould. While learning to balance his “two dimensional life” (work and family) – he doesn’t have time to pursue involvement in politics. Calling himself a political junky, Gould says his favorite television show is “Meet the Press” with Tim Russert.
In fact, Gould has made it one of his longer-term goals to eventually engage himself in the political system without necessarily running for office. When the time comes, Gould wants to start by helping to run local campaigns, much like his parents did when he was growing up.
“Our house was the local political universe for Republicans in Rockland County,” he says. “I was often allowed to sit in on the smoke-filled meetings, or was sent out to rip down opponents’ campaign posters.”
But for now, Brown Brothers Harriman is where Gould will stay. With his 20-year anniversary at the firm rapidly approaching, he has experienced three completely different careers (for a total of five different jobs), all with Brown Brothers.
He has a philosophy on how to run a private equity program and says it’s the experience at Brown Brothers that helped him develop his “keys to success.”
“Your success is going to be a function of, did you establish a criteria that was intelligent, and then did you establish a process that enabled you to stay within that criteria in a disciplined way?” Gould says. “And lastly, did you surround yourself with bright people that can help execute it all?”
It’s that last part that seems to get Gould right in the craw. It has taken a while for him to realize he can’t do it all himself.
“I’m now making sure I’ve done a good job establishing the process, and I’m reaching out to other resources to help,” he says.
Brown Brothers Harriman
Born: June 3, 1959, New York, N.Y.
Education: B.S. in engineering, Yale University, 1981; M.B.A., NYU Stern School of Business, 1987
Career Path: Brown Brothers Harriman 1981 – Present (admitted as general partner in 1997)
Last Book Read: Hop on Pop by Dr. Seuss
Favorite Book: The Last Lion by William Mancester
Favorite Movie: Casablanca
Last Movie Seen: Traffic
Favorite Food: Pecan pie
Favorite Sports Team: NY Giants
Favorite Web Site: Amazon.com (“I will never visit a mall again.”)
Wheels: Audi A6
Favorite Travel Destination: Hong Kong
Pet Peeve: Cancelled flights
Most Admired Historical Figures: Winston Churchill, (the elder) George Bush, Robert F. Kennedy
Favorite Quote: “What part of no is it that you don’t understand?”
Hobbies: Tennis, hockey, politics
Investment Philosophy: “Don’t take equity risk without getting paid for it.”