Like so many of his counterparts, Kewsong Lee, a managing director at New York-based Warburg Pincus & Co., didn’t always intend on a career in private equity. But after close to a decade of experience in this market, the head of Warburg’s general industrial leverage effort says he wouldn’t have it any other way.
Lee’s meandering path to private equity began in Albany, N.Y., where he was born and raised. His father’s role as a college professor and involvement in the United Nations took Lee and his family to Singapore and Korea during his younger years before settling down again in the states during his teens. Lee attended a boarding school in Connecticut for high school, where he says his aspirations as a student were either to have a career in the field of engineering or medicine – definitely not business. “My father still wants me to become a professor,” Lee says with a chuckle.
As a freshman at Harvard University, Lee didn’t know the first thing about consulting or investment banking, let alone private equity. But the pull in other directions was too strong. “I was interested in a lot of different subjects, especially history. But I really liked math and economics, and so I tried to blend both,” Lee recalls. “I didn’t know I wanted to go into business until my sophomore year.”
Lee started his career at consulting firm McKinsey & Co. after receiving his M.B.A. from Harvard University. At McKinsey, he became involved in M&A activity in the media, financial services and communications industries. Lee says his experiences there exposed him to solving “high-level strategic and organizational issues.”
Lee also had a brief stint at Goldman Sachs & Co. in 1989, where he learned about corporate financing in the financial services, media and branded consumer products industries. “While I enjoyed both corporate financing and consulting, it struck me after returning to McKinsey from business school that I wanted to meld the best of both worlds, which meant thinking more creatively about industries and business opportunities,” he says.
Lee also wanted to become more involved in “actually creating value” in companies and “being more involved in the thick of things” as a principal, which is the reason private equity was so attractive to him.
So in 1992, Lee parted ways with the consulting firm and headed to international private equity powerhouse Warburg Pincus. Lee says the firm’s wide spectrum of investments in both venture capital and leveraged buyout opportunities has given him exposure to top-down thinking, analytical problem solving and working with management teams.
“Clearly, your role as a consultant is different from that of being principal and I like trying to have real impact on making things happen,” Lee says. “In this job, you’re on the firing line, so there was a bit of a transition there in that mindset.”
As a deal maker, Lee says he wasn’t inspired by any one firm or figure in the private equity industry. “It’s not like I wake up everyday and idolize certain players or characters. And here, that is the furthest from who we are as a firm, and that fits into the way I conduct myself,” he says.
Lee’s first investment as a Warburg Pincus principal was in a company called TAC Banc Shares, Inc., a consolidation play of bank thrifts in Florida, in 1992. After acquiring a few bank thrifts, Warburg Pincus along with other investors sold the company to Nations Banc for an approximate 30% internal rate of return. “I’m pleased to say it was a very successful transaction,” Lee says.
Other investments that he’s been involved in include the leveraged buyout of an office furniture manufacturer and funding a startup called Renaissance Reinsurance, which Lee says has become the premiere Bermuda-based property catastrophe reinsurance company in the world. Most recently, Lee was involved in a $238 million commitment in Dime Savings Bank.
Having a few deals under his belt has taught Lee some hard lessons in the private equity business. “Having good management teams is critical, execution is often more important than strategy and projections are rarely ever met because they’re either vastly exceeded or underperformed, and you have to be flexible enough to change with the business plans,” Lee says. “Things never really work out the way you imagine and you have to roll with the punches as you go along.”
So, what is the investment philosophy of a firm of this magnitude? It’s really quite simple, Lee explains. “We’re looking for talented management teams and good companies where the industry prospects are decent. What we love to do is partner with those management teams on a longer-term time horizon to help them build their companies and get them to the next level.”
The firm is currently looking at investment opportunities ranging from hardcore industrial manufacturing to construction, mining, consumer durables and non-durable manufacturing, Lee says. “One of the big advantages to Warburg Pincus is, we are, in fact, an institution with a large global footprint and we have tremendous deal flow on the international front, and that is where we’re also seeing some opportunities,” he adds.
As for Lee, he says he’s content with his role as a managing director within Warburg Pincus and unlike former Warburg partners like Dominic Shorthouse and Doug Karp, who reportedly left the firm over hierarchy issues has no intentions of forming his own venture. “Things are going great, and it’s fun and rewarding to help in building this firm,” he says. “We’re very low-key and, quite frankly, don’t like to be in the press. The greatest satisfaction for us is when our deals are doing well and people kind of know about us but we’re in the background staying out of the limelight and smiling all the way to the bank.”
If not for the allure of private equity, Lee says he could see himself in the classical music industry either composing or playing the piano or violin in an orchestra. But for now, the consultant-turned-private equity pro is content to make sweet music of his own in this market.
Fact Sheet
Kewsong Lee
managing director,
Warburg Pincus & Co.
Born: Aug. 12, 1965, Albany, N.Y.
Education: A.B. (applied mathematics in economics), Harvard University, 1986; M.B.A., Harvard Business School, 1990
Career Path: McKinsey & Co. 1986 – 1988; Goldman Sachs & Co. 1989;
McKinsey & Co. 1990 – 1992; Warburg Pincus 1992 – Present
Last Books Read: I Am Not Going to Get Up Today by Dr. Seuss
Longitude by Dava Sobel
Favorite Book: America in Search of Itself by Theodore White
Favorite Movie: The Matrix
Last Movie Seen: Crouching Tiger, Hidden Dragon
Favorite Food: Pasta Carbonara
Wheels: Toyota RAV 4 (“great for tight parking spaces at the train station”)
Favorite Travel Destinations: Paris
Favorite Sports Team: New York Yankees
Favorite Web site: My.Yahoo.com
Pet Peeve: Posturing
Most Admired Historical Figure: Wolfgang Amadeus Mozart
Favorite Quote: “It’s better to be lucky than to be good.” – Unknown
Investment Philosophy: “Partner with talented management teams to build companies, and then execute, execute, execute, execute!”
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