Businessweek Extra - David Mussafer

world's leading but maybe lesser known private equity executives. And one of the reasons I got to know him was he's the lead director, was the chairman of Lulu Lemon, an investment that his firm went into twice. He understands the world so well. Check it out. Well, David, let me start by asking you, first of all, how are you like? What's it like for you personally, family wise, just sort of as a human being here. Well, I mean, firstly, that's the first question that we share with every body,

which is firstly, just how are you doing? Because this, the physical element of this is unlike anything we've ever dealt with before, and so thank you for asking. Personally, I'm I'm doing well, and actually I'm I'm quarantined here in outside of Boston. So we're in the suburbs in Boston, and I've got uh four tunity twenty year old kids, and three of them are actually here with us. So, um, it's been in the face of some really difficult times,

some unique elements of being with your family. And how how is it uh feeling and looking there on the ground in Boston. I mean, I know you're outside the city, but I know you're in touch with a lot of people. You're very active from a civic perspective. You know. I feel like different cities and different parts of the country are at a different moment here, and you know, we're recording on March thirty one, and it's a it's changing daily. But what does it feel like in and around Boston

right now? Well, I mean, I think it's probably equivalent to the major metro areas if you think about obviously New York, which is so such the epicenter right now, ben Boston is behalf of stuff behind and right there, So there's a lot of fear and concern that I think exists here in London, in Paris, certainly Madrid, and you know, so many of our major metropolitan areas today and Boston. You know, we have terrific medical care here

in the city. But I think everybody is certainly mindful of the time and where we sit today at near the you know, the peak of this crisis. And so let's talk about the firm and your portfolio companies. And I guess I'd start with the firm. How do you everybody started learning these lessons? We are certainly day to day. How do you run the firmative time like this remotely? This is such a people intensive business in many ways

relationship intensive. Well, I mean, Jason, the one thing, you know, we have offices in UH, Shanghai and Hong Kong, so badly we we had a little preview of of how we were going to need to manage remotely, and so we were prepared and and UH set up for remote access once, you know, we got to that point. And I think one of the lessons we actually distributed this

the very first day of our um. You know that when we went to remote work worldwide, we shared a lessons learned memo that we had asked our team in Asia to prepare, and it was both you know, pointers serious points, light hearted elements, but the key theme that we heard loud and clear was the need to over communicate the need for video because as humans, we take so much of our cues from facial expressions that you actually can can't get over the phone like we're doing

right now. And so, you know, those were some elements that we realized early on, we're going to be really important to make sure that we were prepared to do that. And so is that a situation, David, where I mean you sort of have to invest in some infrastructure that maybe you would normally have or does all of this

does all of that already exists for you? Well, I think the you know, the critical infrastructure that allows you to have access to all of your uh, you know, your data as well as to have systems that you can use remotely were the access points. But I think, like everybody, you know, they're spending much more time in the video conversations and so literally you know, just using WebEx and Zoom and a host of other resources like that have become the critical lengths. And we had a

really incredible Milestone last variety. So, um, like a lot of groups, we held a global town hall. We did it at ten in the morning, so that was you know, near midnight in some places of the world, in you know, in Europe, and we connected all fifteen of our offices worldwide and all five hundred people and we actually put all five hundred on a zoom and it was incredible, you know, doing the whole uh sort of Brady Bunch type of visual with your entire office infrastructure and it

actually worked. And so you know, we're really finding there's just so many incredible ways to stay connected and that's the most important thing today. Well, and I do wonder, you know, as you're looking beyond the firm, I mean you're obviously talking to a lot of different c e o s, you know, CEOs that you have invested in that you're you know, you own partner or most of the company, um, but also presumably excuse me, perspective investments as well. What are you hearing from c e o

s that you work with closely? Well, I'll tell you I've been incredibly impressed with the CEOs that I've spoken to, and I've spoken to a lot, so we have about eighty portfolio companies globally at Advent and obviously, the you know, the pressure and challenges that these these companies face is enormous.

And you know, to a man or woman that are leading our portfolio companies, they have a clarity, focus and a resolution that just gives them, gives everyone the competence that we've got the tools, we're gonna get through this, and you know, and really trying to think about how do you think of creative ideas to help the company in the interim as well as long term solutions that are going to help the company be even stronger when

we get on the other side of this. So, you know, c e O s are right in the midst of their most challenging times, and so they're not spending a lot of time philosophizing about broader issues. They're thinking about the here and now. What can they do to protect their people, what can they do to make sure that we keep everyone safe, and what can they do to stay connected with their customers even if they're forced to

disconnect in certain ways? And so financially, I know that there's been a lot of talk among your peers in the private equity space of you know, managers telling their portfolio companies draw down your lines, you know, make sure you have a financial cushion. How much of that did you do or did you feel like you needed to do well? I mean, I think that we recognized early on this is so different than any other crisis we've faced.

And so we've had different times in all of our business careers when we've seen a downturn, a recession, a deep great recession. We've never had an interruption in global uh commerce like we're experiencing today, and so I think the need for liquidity we recognized that early on. We didn't do it across the board, but went case by case with our companies and tried to make sure that we maximize the liquidity and the tools that they would

have as they went into this. So I feel like, you know, we've done the best we can with our teams and working closely with them to to to give them the tools that um that they need today. So I want to ask you a question that we're asking all of the top leaders and investors that we're talking to these days, which is what's the most important and in your view, maybe underappreciated way that the world or at least sort of the investment world in in your case,

will be different. On the other side of this, I mean, Jason, it will be different. And you know, we we don't know exactly. But I've spent a lot of my time asking talking to so many different people because you know, to all too often I think we rely on our

own personal experience. If you think to this crisis. We knew we had this problem in Asia as late as early February, and yet because we hadn't visualized this type of global scenario in our lifetime, it was really hard for so many people to visualize, and so trying to think about how will things be different? I think, you know, inevitably, um, you know, things will and so I think we're trying

to think about that very question. Uh, there's a prospect that you know, it could be a long recovery and you could see, you know, entirely different approaches that people take given that they've they've spent more time working from home. So you know, I don't think we have a hard and fast idea to say you're going to see this change. Partly what's going to happen is that it depends on the severity of um you know, how we come out of this this crisis period, and so I think making

sure that you're preparing for some pretty difficult times. But then there's an optimist in all of us, and in so many ways, I think you're always surprised by the power and creativity of all of the people that you're connected with globally. And I think that's another way that we will be surprised that today we're at the peak of the concern and and being so nervous about what

stands ahead of us. But what I think will also surprise you is that people will come up with incredibly powerful new ways that will shine optimism on you know, the future going forward. Well, and to that end, I mean, as a private equity investor, you are investing for the long term. Your job, quite literally on on behalf of your investors is to look around the corner. So through you know, your existing portfolio companies, through your teams who

presumably are still working hard analyzing opportunities. Are there any themes that are emerging at this point? Well, I mean in terms of themes um you know, clearly the frontline businesses are the ones that are facing the enormous pressure today.

So you know, literally with mandated shutdowns, and so our restaurants, our hotels, our businesses that are basically consumer facing are all thinking about how do they develop and fine tune their business model so that they can lean into whether if it's restaurants into curbside delivery take out, or if there other consumer facing businesses thinking about ways that they

connect directly more specifically with their customer. And then longer term, inevitably, I think to your previous question, you know, people will, uh, there will be some changes. So there was a massive wave towards you know, urbanization, and maybe you may see you know, some some people say, uh, you know that that distance that they had was something that they were happy to live with a little bit more So, I don't think we know all of the impacts that we're

going to see coming out of this. I think that clearly, you know, we were at the peace of the economic cycle, and this abrupt stop is something that is something we've never experienced before. And so I think, you know, the hope that and when I talked to so many of our CEOs, their first concern is the safety and the care of their employees and their broader teams and so

given you know, the pressure that everyone's under today. That's a big part of what people are worried about, just making sure that that we can do the best job we can to help everyone. Yeah, I mean I do wonder and this this sort of gets to some things you and I have talked about over the years, David, especially through your investment with Lulu Lemon, which I want

to talk about in a minute. But you know, at times like this, it does feel like human beings change, and human beings you know, can't help but change in some ways. And I feel like you know you and maybe it's because you and I are fellow Southerner as we think about these things a little bit differently, um maybe maybe than others. But you know, this notion of our relationships with people and and sort of the changing nature of them, but but also you know, the strong

reminder of our own humanity. I do wonder how that works through you know, the investment world and public markets and private markets and businesses to some extent. Well, I mean I think you see it going on right now. So you know, we put together, we uh a little something to share some of these stories with all of our c c o s because each of our companies are taking on initiatives and they aren't doing it for any reason other than it's just the right thing to

do to try to help people anyway they can. And so almost all of our companies are taking on public health initiatives. Of create are shifting production if they can to create UM protective gear. They're shifting to alleviate pressure in hospitals by creating other forms, the other avenues to

to deal with non emergency treatment they're dealing with. You know, I think Bloomberg, you guys had an article yesterday where you shared about what we're doing with ain Bridge UM where we're actually taking our hotels that we manage and working with post responders and healthcare providers to provide housing and a safe distance so these healthcare providers can stay healthy while they're doing the front line work that's so

critical right this minute. And so you also, I mean this is also a time for philanthropy in in many ways, and I know that you and the partners have come together to fund some of that. You and I side note have worked together on our Brackets for a Cause charity effort at Bloomberg which it took a pivot thanks to you and and others, you know, to sort of direct some of the money that normally folks would be betting uh gamely on the n C Double A tournament.

But but you did something of an even larger magnitude with with the firm. Tell me about that. I mean, Jason, I think that that um. You know, for us, it was just a question of what can we do right now to try to help in any way. And so in the scheme of the problem worldwide, you know, the need is ammens. But we had Advent came together as the partners individually to begin a fund that hopefully will be matched or uh multiplied as we begin to distribute

these funds. And we're channeling this effort towards uh, you know, today's equivalent of the first responders, people that are in the healthcare profession and people that are in frontline positions and really trying to support them their families, UM with any way we can. And so this is something we created, uh and we're the Advent Relief Fund. We funded it with twenty million dollars and we're gonna work to get this out as soon as we possibly can to as many people as we can to try to help them

through this time period. It includes you know, our portfolio companies as well and some of their employees. But this is a broader effort on behalf of you know, Advent to just try to to help anyway that we that we can. Quite frankly interesting. Well, tell me a little

bit about Lulu Lemon. You're the executive chairman there. You understand that business, uh innately and for those of you who need more information about this is a great story I think that we did and then interview that I did with you, uh and Calvin McDonald back in December feels like a hundred years ago. We were sitting in a store together. Those stories now all closed for at least a few more days or weeks. Tell me the view of this through Lulu. Well, Um, at first I

want to correct you. I'm now lead director, so incredible chairman Glenn Murphy. But um, I'm still you know, very active. That's right. I knew that. I apologize. Well, we'll clean that up. And in terms of Lulu, Um, you know, Lululemon is an incredible business and we're really really proud of our involvement. You know, in particular that business, um,

you know remains incredibly strong. We invested in that business near over five years ago and today it's still debt free with nearly a billion dollars in cash, and so they're able to do a lot of things that you know, I think again, we're really proud of the leadership that they're able to take. So they've committed to um, you know, covering all of their store employees for as as long as they can, and um they're also doing some amazing

things to support their ambassadors. So this is these are people that are largely part of the gig economy and so again they're part of the Lulu world. They are Lulu is stepping up in other ways and you'll hear more from Calvin and the team directly very soon. But they've got a host of initiatives that they're unleashing to try to be a supportive citizen. In terms of the business itself, the stores are closed and so um you know are the stores that are ironically open at Lulu

or in China. So and our worldwide stores are are closed otherwise and so clearly the businesses is shifted to online and uh E com And so you know, I think that that again Lulu is in a very fortunate position, given that people are thinking more about their own personal health and wellness in In any event, you know, we're confident that that that the company's very well positioned to continue to do well when we come out of this well.

I was thinking as we were preparing for this interview, I have gone full ath leisure in my my current work arrangement. I don't think I put on a colored shirt. I know you make colored shirts too, but I don't think I put on a colored shirt. Uh. And in the last three weeks, So I mean it is to

be slightly more serious. I mean, I know that we talked about this late last year, this notion that the e commerce side was something you guys invested heavily in over the past few years, right, I mean that was

that was almost a redo in many ways. Well, it was part of a broader effort to really lean in, uh from a data and analytics and technology standpoint, and so Lulu had an incredible connection with their customers, but they really just hadn't invested heavily to be able to to to to work directly in the way that they

needed to. And so we invested significant dollars in our eCOM capability so that um, the experience was better for customers, the sortment, the ability to create ideas and offer product.

But you know, today I think that you know, everybody is clearly just trying to think about, you know, how do you stay healthy and get on the other side of this, and so, um, you know, we're certainly there for for people today and uh, you know, please that we made some of those investments in the past, but you know, I think that that we see so much more that we can do, uh to work directly with customers, and you know, you're seeing more of what we're offering.

I think we're offering a host of digital classes and other things too, you know, people that are that are connected with the company, so that you know, again we can just try to connect directly and help out, uh, you know during this this incredible time period and retail clothes for this foreseeable future. What's the update there? Well, I mean I think that that um, you know, the need to to really create social distancing and be as firm as we can is really paramount to get to

the other side of this. So short of a therapeutic or something that really gets released, we've got to make sure that you know, the country um stays healthy and you've seen uh, you know the impact of this terrible virus isn't uniform. And so seeing the incredible um, you know, pain and suffering that its inflicted on places like Spain and Italy or certainly something that I think gives everyone pause to say, we really need to make sure that we do everything we can as a community to stop that.

And so you know, the commerce and business is a secondary, you know, affair until we get on the other side of this pandemic. Alright, So, uh, as we wrap up, David musta for any any predictions from an investment perspective, you know, how do you look at this through that lens having invested through recessions, through great recessions, through downturns, through uh, you know, international crises, what does this look like on the other side for an investor? Well, I

think what you're you're seeing the impacts all ready. So businesses that were weak are certainly going to suffer tremendously in this. And so what I think you're going to see is strong businesses get even stronger. And you know, those are part of the type of investment opportunities that we're seeing a lot more today. So certainly they're going to be restructuring related opportunities where their businesses that are suffering, and you know, maybe you're looking at an opportunity to

buy the debt at a discount. I think what we're thinking about an advent is more of the opportunity to invest in great businesses and to really try to help them, like we did with Lulu Limit and so you know, that's really I think where we've excelled. We've done probably a dozen carve out deals where we bought incredible divisions, and I know that that you guys saw that we're buying Dissan Craft elevators, which which we announced just as

this pandemic is really beginning to take hold. And so leaning in to buy some incredible businesses and really investing heavily to help them be even stronger and more impactful on the other side of the crisis is the way that I think, you know, we'll see and when we look back at a time period if you if you think back to the oh nine ten crisis, uh during the last recession, we were one of the most active investors in the world for that two year period in

private Equity and we bought some amazing companies like TransUnion, World, pay Vantive and um. You know, I think that given the connection and the stewardship that hopefully, you know, we're able to bring, that that's gonna continue to be an opportunity for us. And as we you know, get into, uh, the other help parts of this cycle. And that was David Mustfer. He's the chairman, managing partner of Advent International, also the lead director at Lulu Lemon and a fun,

wide ranging conversation. I have to say, Carol, here's a guy who is running a global firm making investments, but also keeping an eye on existing investments and figuring out how to run a bunch of companies in an unprecedented time. You've been listening to Bloomberg Business Week Extra, and be sure to tune into Bloomberg Business Week Radio Live Monday through Friday at two pm Wall Street Time on Bloomberg Radio. I'm Jason Kelly and I'm Carol Masser. This is Bloomberg