LBO

How Did Tycoon Meshulam Riklis Make His Fortune?

Money is to look at, not to use. – Meshulam Riklis

One of the questions that I get asked on a regular basis is about the possibility of following the tycoon growth strategy without employing debt. The answer is that it is possible to do so. Over the years I have participated on the buy-side in a number of deals with debt averse buyers. One Russian transportation company comes to mind. The management team had basically been given the company for free by the Russian government shortly after the collapse of the USSR in 1991. The managers then threw themselves fully into growing the company internationally, including in the USA. However, their steadfast rule remained “no debt.” Every acquisition had to be financed with internally generated cash.

The downside to avoiding debt is that it will take longer to get started and, thereafter, growth will be slower. However, some people just prefer to avoid the use of debt. In the Playbook we focus on those who utilize well-managed debt to grow because it’s easier to start that way and the growth rate is far higher. If you are starting out without a large war chest, it’s imperative to be creative about financing. If you wait for the heavens to drop your grubstake into your lap, you will be waiting forever. The lesson is start small and fast, then build momentum.

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Tom Gore of Platinum Equity is one of the best examples of someone taking the tycoon playbook strategy to its fullest limits. He’s just one third of an impressive trio of brothers who all came from pretty humble beginnings. Older brother Alec is in the same line of business running The Gores Group. Sam Gores is a former butcher turned high-powered Hollywood agent and founder of the Paradigm Talent Agency.

Here’s an interview with Tom.

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