And while there is no way that the aforementioned activities can all be attributed to one person, some very impressive accomplishments of the New York-based firm, including the $15 billion acquisition of Hertz Corp. and the substantial growth of water treatment company Culligan International, lead back to one particular name: David Wasserman. One of CD&R’s financial partners, Wasserman takes on front-end responsibilities for the firm, which include transaction sourcing, due diligence, deal negotiations and structuring the financial components of acquisitions and growth strategies.
But Wasserman, a 39-year-old team player who hails his non-PE related experience from, among other things, four years of Division III basketball at Amherst College, would not admit to his MVP status when it comes to the aforementioned accomplishments. “I have young kids at home and coach their basketball teams, and one thing I consistently repeat to them is something Michael Jordan once said: ‘Talent wins games, but teamwork wins championships,’” Wasserman says. “We live by that motto here at CD&R.”
Team work aside, the fact remains that Wasserman did score some vital points for CD&R last year that not only bolstered the firm’s reputation but—in the case of the Hertz deal—helped change opinions of what private equity firms are capable of accomplishing.
For all intents and purposes, Wasserman was the firm’s first man on the ground when it came to its search for an investment in the car rental space. In late 2001 Wasserman began surveying the sector, focusing in on three of the industry’s major players—Alamo National, Budget Rent A Car, and Hertz (then owned by Ford Motor Co.)—quickly identifying Hertz as the most attractive.
“The next three years were spent trying to convince Ford of three things,” Wasserman says. “One, that it made sense to sell the business. Two, that CD&R was truly the best buyer for the business. And three, that it was possible to do an LBO of the company, which was not self-apparent at the time because the financing was so complicated.”
To finance the acquisition, Wasserman led a group that put together more than $12 billion in debt in a multi-layered structure. It included two separate multibillion-dollar asset-backed loans to cover Hertz’s U.S. rental car and equipment rental businesses; a more customary (albeit large) bond deal—both senior and subordinated notes—as well as traditional bank debt. On top of that, Wasserman put in place a bank-led ADS-like structure in Europe to finance Hertz’s European car fleet. ADS is a loan issued under an agreement in the U.S. that represents a share of a foreign asset that trades in the U.S.
“This was one of the most complicated financings ever undertaken in private equity,” says Wasserman. “The weekly calls we’d have on this transaction alone probably had 100-plus people on the phone,” between the deal pros from CD&R, Merrill Lynch Global Private Equity and The Carlyle Group, financial advisors, lenders and lawyers involved in the transaction.
“When the deal closed [in December 2005] there was a sigh of relief for about a day,” Wasserman says. “Then you go back at it and you realize you now own one of the great businesses of the world, and that in order to really be successful you’ve got to be sure it becomes even better—that’s our challenge now.”
But given Wasserman’s past performances, he is likely up to the challenge. Shortly after joining CD&R from Goldman Sachs & Co. in 1998, Wasserman took over CD&R President & CEO Don Gogel’s role as lead financial partner in the Kinko’s investment, where he spearheaded growth and cost-cutting initiatives alongside CD&R Operating Partner George Tamke that ultimately netted the firm about $1 billion in profit from the copy center’s $2.4 billion sale to Fed-Ex in early 2004.
Aiming for a repeat performance, throughout 2005 Wasserman was busy strengthening CD&R’s investment in Culligan International, a troubled water treatment company the firm acquired for $610 million in September 2004. Similar to his role with Hertz, Wasserman initiated and led due diligence, negotiations and financing for that deal, too.
Today, Culligan is a far cry from its pre-CD&R days when, among other problems, it was an operational nightmare that had gone through 10 CEOs in 13 years, had a broken channel strategy, high-cost manufacturing, a poor pricing strategy, and a franchise network that was suing the company, Wasserman said.
As of the close of 2005, Culligan’s EBITDA was up north of 20%, and CD&R had generated $80 million of cash against its $200 million equity investment. Additionally, Wasserman formed a new management team for the company, replacing nine of the top 12 executives, and negotiated a brand-new franchise agreement, which received 93% acceptance from independent Culligan dealers. “Against our original investment case, we are beyond year three now,” Wasserman says.
“[Wasserman] has a very broad view of the requirements for success within a portfolio company,” says Culligan CEO Mark Seals. “For instance, in addition to the obvious financial performance metrics, he concerns himself with the organizational culture and team chemistry.”