Carl Thoma, Thoma Bravo

The February issue of Buyouts will feature a rare interview with one of the founding fathers of private equity: Carl Thoma, co-founder and managing partner of Thoma Bravo.

Thoma’s career runs nearly 50 years. He was present at the industry’s birth in the 1970s, taking his first job at First Chicago Equity Group. In 1980, he joined Stanley Golder in forming buyout shop Golder Thoma, the predecessor of GTCR.

Thoma is recognized as a pioneer of buy-and-build investing, a strategy that decades later is part of the toolkit of almost every PE firm. In 2008, he and Orlando Bravo married that approach with software buyouts in the launch of Thoma Bravo and helped grow the brand to become one of the market’s largest.

Last year, Thoma Bravo secured more than $32.4 billion in fresh capital, including $24.3 billion for a 15th flagship vehicle.

Buyouts interview found Thoma thoughtful and frank on a wide range of topics, including the future of private equity fees and carried interest. Taxing carry, of course, was front and center in 2022, when Senate Democrats promised to close the “loophole.” They failed, thanks to opposition from Arizona’s senior senator.

In 2020, Thoma said the industry’s two-and-20 fee structure could not survive the next 10 years and the tax treatment of carried interest would be gone in four. Asked about this, he told Buyouts: “So far, thank goodness, I’ve been wrong in my predictions.”

Thoma, however, does not believe that efforts in Washington to tax carry were put to rest last year.

“It’s already gotten beat up some, meaning now you’ve got to hold an investment for at least three years,” he said. “We’re kind of skating on thin ice, but probably with the Republicans controlling the House, nothing will happen for the next two years. But it’s under attack every day. I think it’ll eventually happen.”

Thoma had a slightly different take on the status of the fee structure. Nothing yet has happened, he said, because “performance has been so strong, and the shift of money into private equity has been so strong, that there hasn’t been as much pressure on fees as I would have anticipated.”

“We’re safe as long as our numbers allow us to get the higher fee,” he added.

Over his long career, Thoma’s most rewarding moments have been working hand in glove with the management teams of portfolio companies and “achieving results,” he said. Seen from this perspective, lucrative financial incentives may matter a little less.

“Any successful private equity professional is not in this for the fee income,” Thoma said. “If they are, they probably won’t be very successful. So, if our carry goes down, our fees go down and our taxes go up, we’ll still get up every morning and enjoy what we’re doing.”

“A professional football player is going to play just as hard whether he makes $25 million a year or $5 million or $200,000,” he said. “He’s in it for the love of the sport.”