Sense on Cents

Theodore J. Forstmann, IMG Chairman and CEO

Ted Forstmann is a Wall Street legend.

Those on Wall Street know Ted for his dealmaking prowess. His deal to purchase IMG (International Management Group) in 2004 positioned him atop this sports, entertainment, and media enterprise. Forstmann is a world renowned philanthropist. What more can we learn about this entrepreneur? From the IMG website:

Ted Forstmann is Chairman and CEO of IMG and the senior founding partner of the pre-eminent leveraged buyout firm, Forstmann Little & Co.

Since acquiring IMG in 2004, Mr. Forstmann has established a world-class management team at IMG and leads the company’s growth by expanding its global footprint, acquiring new businesses and talent that complement its breadth of services, creating and owning content, and streamlining the organization and its cost structure. He has transitioned IMG from a company known primarily for its sports businesses to one that is now taking advantage of the strong synergies between sports, entertainment and media.

Forstmann Little & Co. has long been recognized as a pre-eminent acquirer and owner of businesses and has an unparalleled record of generating consistently superior returns for its investors. Under Mr. Forstmann’s leadership, the firm has made 31 acquisitions and significant investments and returned more than $15 billion of profits to his investors. In addition to IMG, some of their best-known investments include Gulfstream Aerospace, Dr. Pepper, The Topps Co., Community Health Systems, Ziff Davis, Yankee Candle, General Instrument Corporation, Citadel Broadcasting and 24 Hour Fitness.

Perhaps no individual is better positioned to comment on the industry known as Wall Street. I was struck by an exchange I read today between Forstmann and Charlie Gasparino, a financial commentator on CNBC and author of The Sellout.

“I told Teddy [Forstmann] that in my mind, The Sellout was all about Wall Street and the financial system having to ‘sell out’ to survive after its three-decade binge on risk and leverage, by being bailed out first with capital coming from foreign sovereign wealth funds…and then ultimately by the federal government. “In other words, not only had Wall Street literally had to sell out because it had embraced excessive risk taking, it had also sold out its principles: greed had become its business model, not all the factors that make Wall Street important to society, such as raising money for businesses and providing access to the stock markets to the middle class…

“Forstmann got a good chuckle out of that. ‘So what you’re saying is that somewhere along the line, Wall Street as an institution had some principles to sell out,’ he said with a laugh. ‘I am here to tell you Wall Street never had principles.”

Charles Gasparino, The Sellout (2009)

To say that the industry itself does not have principles is not to say that there aren’t many, if not most, individuals in the industry who are very principled. There are.

I believe Forstmann is directing his critique at those who truly run Wall Street. The senior management of these financial institutions are so driven to maximize returns that principles are always trumped by the pursuit of profit.

I am the ultimate free-market capitalist. As such, I believe the pursuit of profit drives our country. Profit, however, should never trump principle. That process is not free-market capitalism. That process is the abuse of free-market capitalism.

Regrettably, that has been our reality in America for far too long.

LD

This entry was posted on Tuesday, January 5th, 2010 at 2:36 PM and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.