What It Takes: Lessons in the Pursuit of Excellence

by Stephen A. Schwarzman

The good news was that after the Gibson IPO, LBOs had Lehman’s attention. Pete, then CEO, was all in. Before his next trip to Chicago, he asked me to come up with a list of possible acquisitions. I settled on Stewart-Warner, a maker of dashboard instrument panels and the scoreboards at sports stadiums. Pete, of course, happened to know the chairman, Bennett Archambault. We met him at his men’s club, an old-school place with wood paneling and moose heads all over the walls. Pete suggested he take his company private. I walked Archambault through the process: how we could raise money to buy the stock, how we could pay the interest, enhance the value, make the company work better, what it would mean over time. “I think you can make a lot of money personally,” Pete said to him. “And your shareholders can do well. Everyone can profit.” Archambault got it. The existing shareholders would be paid a premium for their stake. As the head of a private company, he could improve it over the long term instead of worrying about quarterly earnings to placate the stock market. And he would end up owning a lot more of the company. “There don’t seem a lot of reasons not to do it,” he said. Back at Lehman, I rushed into action. I staffed the deal and asked Dick Beattie at the Simpson Thacher law firm to start designing a fund for Lehman to do LBOs. Dick had been counsel in the Carter administration and had since become an expert on the legal intricacies of LBOs. We were confident we could rai...

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