Golden Gate Capital’s David Dominik: Buyout Pro Of 2001 –

In a year in which every small victory was a huge accomplishment, David Dominik was able to put together a nice winning streak, enough to catapult the Golden Gate Capital co-founder to Buyout Pro of the Year for 2001.

At a time when the buyouts industry was rocky for startups, Dominik launched his own firm. He also managed to raise an oversubscribed inaugural fund with a technology-related focus, and then led his firm to close five deals, a huge feat as many investors sat on the sidelines.

After spending 10 years as a managing director at Bain Capital, which included the task of opening its California office, Dominik moved on in early 2000, despite the deepening economic malaise.

When Dominik left in March, there was a fair amount of transition at Bain Capital. . Also, the firm was playing into a trend occurring among some buyout funds – those that could were becoming larger. “In my mind what Bain was doing represented getting into a different space, and I was motivated to keep doing the same things I had been doing,” he says of why he left the prestigious firm.

Dominik was right about Bain Capital’s future. The fund that Bain closed after Dominik’s departure raised $2.5 billion – $1.4 billion more than its previous fund.

Although Dominik says Golden Gate’s success can be attributed to a little luck, good timing and good planning by Jesse Rogers, Prescott Ashe, Ken Diekroeger and Dominik (all former Bain Capital employees), the effort clearly took vision, ambition and guts, especially in light of the 2001 buyout industry.

“We took on a different strategy from the prevailing view 18 to 24 months ago, where the trend was towards bigger and bigger funds. We felt a moderately sized fund had significantly greater degrees of freedom to make higher return investments,” says Dominik.

After deciding Golden Gate would focus on “change-intensive, higher-growth investing,” Dominik and his team hit the fund-raising trail. Hoping to raise $500 million, Golden Gate wound up oversubscribed with $700 million.

“Because it was a moderate amount of capital, it was appealing to investors. Plus, our strategy was familiar to a lot of investors. So although we were a first-time fund, there was a degree of comfort,” explains Dominik. “We don’t think of ourselves as doing traditional LBOs, which 80% of the marketplace does. The things we are looking at tend to be higher growth and more dynamic.”

Bain & Co. and Sutter Hill Partners are two of Golden Gate’s limited partners.

While Dominik was shy about taking credit for the success of Golden Gate Capital’s fund, Len Baker, a managing director at Sutter Hill, describes Dominik as a versatile person who gets the job done.

“I would say that Sutter Hill invested in Golden Gate [the firm], but David is the reason we got interested. He’s a guy who ends up as a leader wherever he is because he is so smart,” says Baker, citing Dominik’s ability to do financial and industry analysis as a huge advantage. “You might be surprised, but very few people can do both.”

Proof of Dominik’s versatility can be found in the investments that he has closed thus far. The five transactions, two in the electronic manufacturing sector, two in established software companies and one in a reinsurance scale company formed after the tragedies of Sept 11, were not easy.

However, one of the portfolio company’s chief executives describes Dominik as a man who targets the problems and aims to solve them. “He really gets into it,” says the source.

Out of the five transactions last year, Golden Gate closed on three back-to-back buyout deals. In August, the firm took its first control stake when it acquired Micro Focus, a software development tools company, from Merant, a U.K.-based software company. The transaction was valued at $62.5 million. Golden Gate put $36 million of equity into the deal.

Later that month, the firm bought Nu Visions, an EMS company, from Nu Horizons Electronics Corp. The firm put in $12.5 million of equity in the $31.5 million transaction.

Later, Golden Gate acquired DataDirect Technologies, a third-party provider of data-based drivers. The 80% stake was worth $30 million, with Golden Gate contributing $20 million in equity.

Prior to those deals, Golden Gate made its first minority stakes investments, committing $10 million to Music Vision, an Internet media company; and $12 million to Celetron Inc., an international provider of electronic and optical manufacturing services.

Ever so humble, Dominik downplays his role. “Even 10 years from now I will be the same way as I am now because I really enjoy the process of building companies,” he says.

Danielle Fugazy can be contacted at: