Deal Talk: Interviews with Private Equity Leaders

The episode contains substantive discussion of Klinsky's investment philosophy, particularly around defensive growth sectors, business building vs. financial engineering, and strategic positioning in uncertain markets. However, much of the content recycles well-known PE frameworks and lacks granular, novel operational insights. The conversation stays at the 30,000-foot level despite the host's attempts to drive specificity.

“We call those defensive growth industries. And then if you have a good safe company and a good safe industry and don't over lever it, if you have a problem, you can go in and fix it.”

“Risk doesn't create return, business building creates return.”

Klinsky articulates a coherent investment philosophy centered on defensive growth and business building rather than leverage arbitrage, which is contrarian within PE. However, the core frameworks - defensive industries, add-on acquisitions, operational value creation - are not novel by 2024 standards. The discussion of AI integration into existing platforms shows fresh thinking but remains relatively high-level and lacks proprietary methodologies.

“We add tech upside to the companies we buy and we're playing all these themes like we have the biggest force of fear in the data centers that grew about 50% organically last year.”

“It's like building your house on solid ground. You want to be in an industry that can do well whether times are good or bad.”

Steve Klinsky is an exceptionally credible guest: he co-founded GS's first buyout group in 1981, was a senior partner at Forstman Little (witnessed RJR Nabisco firsthand), and founded New Mountain Capital in 1999 with a track record of $112B in company value and 0.2% loss rate. He currently manages 380+ operating staff and controls 133,000 employees across portfolio companies. Few people in PE have this depth of demonstrated operator experience across multiple decades and deal cycles.

“Steve Klinsky co founded Goldman Sachs first ever buyout group in 1981 when the industry was still in its infancy. He went afterwards to become a senior partner at Forstman Little.”

“Since inception New mountain has generated 112 billion in company value with a loss rate of only 0.2%.”

The episode lacks concrete examples and quantified evidence to support major claims. While Klinsky mentions a few named companies (Qualys, Bounteous, Anthropic partnerships), deal sizes are given in ranges (500-600M typical size) rather than specifics. The discussion of infrastructure services, data centers, and hazmat tracking companies is illustrative but vague. Financial metrics are sometimes cited (50% organic growth, 12x EBITDA) but without sufficient context or timeline. The conversation would benefit from deeper case study examination.

“Our typical deal might be 500 or 600 million in size earning 50 or 60 million.”

“We have the biggest force of fear in the data centers that grew about 50% organically last year, uh, but has no capex needs and we own it for about 12 times EBITDA.”

The host (Pauls) asks reasonably intelligent open-ended questions and attempts to follow up on themes like AI impact, exit markets, and European investing. However, the conversation lacks sharp pushback or genuine disagreement. Follow-ups often validate Klinsky's points rather than challenge them. The host occasionally pivots to new topics instead of pressing deeper on contradictions or gaps. There's minimal evidence of the host having done deep homework that would enable edge-case questioning.

“What is your new mountain specific approach to value creation? And maybe also what sets you apart from, apart from others in the industry.”

“Do you think that poses um, a challenge to the private equity industry, uh, in terms of, you know, being competitive when it comes to how well the”