DAMON BUFFINI:
Young, gifted and black
Permira boss Damon Buffini is not on our City Rich List, but he soon will be. By Peter Koenig
WHEN her son Damon was still a little boy 30 years ago, Maureen Buffini moved her family from a decrepit council flat at 38 Somers Road into a two-up, two-down near the Victoria Park campus of Leicester University.
She took a steady job in Leicester’s Grand Hotel, the residence of choice for travelling businessmen, and focused her talents and energies on her son and moving him up in the world.
Damon got into Gateway, a Leicester boys’ grammar school specialising in engineering and industrial drawing. He did well and the school did too. Under the Labour government of James Callaghan, Gateway adopted a more academic curriculum and started a sixth-form college.
Damon’s father was a black American serviceman who was never part of the family. This made the boy stand out, said Steve Martin, his economics tutor. But it did nothing to hold him back. “Damon was a popular boy,” said Martin, who is now Gateway’s deputy head. “He was an excellent athlete — very quick.”
Buffini shone in the classroom as well as on the sports field. “He was the kind of character who would spark things off,” said Martin. “What’s this Keynesian theory stuff? It doesn’t work (he would say). He was always ready to test things out.”
He got As in A-level English and history and an A-star in economics, and his mum was there to see that he did. Maureen Buffini was a tall, elegant woman in striking clothes, Martin recalled. “If we said Damon was doing well, she would ask how he could do better,” he said.
Martin took Gateway’s football team to play Fitzwilliam College, Cambridge. “The boys saw what they could aspire to,” he said.
A quarter-century on, Damon Buffini, now 43, is managing partner of Permira, the London-based private-equity firm that buys companies such as Homebase and the Automobile Association with cash and borrowed funds, changes the way they do business and then sells them on at a profit.
Under his leadership Permira has established itself as a leader among the 4,000 private-equity firms worldwide. Alongside Apax and CVC, it is one of London’s Big Three.
As one of perhaps 100 men who most influence how capital gets allocated in the City, Buffini vies with Britain’s ambassador to South Africa — Paul Boateng, the former Labour MP — for the position of Britain’s most powerful black man.
He is also the future of the City rich list. His net worth today is estimated at £18m, based on average annual earnings over the past four years of £3.5m, plus his share of the 20% cut Permira has taken on some $300m (£173m) in profits distributed to investors since 1991.
In three or four years when future bonuses kick in, peers say, he will cross the £40m threshold necessary to make the list, and rise from there.
Commuting from his home off London’s Wandsworth Common, which he shares with his ethnic Chinese solicitor wife, Deborah, jetting to America for golf between meetings with investors, running a restaurant business on the side with his wife and sister, Tara, he also illustrates the paradox of what it takes to become a City figure.
His success is infinitely complex. But it can also be summed up in a sentence: the man and the moment matched.
BUFFINI ignores City traditions. He is to the future of the City what David Mayhew of Cazenove is to the City of old. Mayhew drinks gin and tonic and enquires “how are you, my dear chap”. Buffini prefers lager and greets acquaintances with “hello mate”.
More importantly, he short-circuits traditional, elaborate City protocols. “There's none of the dance before the getting down to business,” said a banker.
He is part of a supercharged “Friends generation”, sticking with his circle in the same way the characters in the American television sit-com do, but in the ruthless environment of the global capital market.
“I’ve seen Damon be exceptionally kind and gentle to friends,” said Iain Evans, co-founder of the London-based management consultancy LEK and a former employer. “But when he goes to work he is in a no-bullshit mode.”
Moving from Gateway to St John’s College, Cambridge, in 1981 to study law, Buffini set his sights on neither the legal profession nor the civil service.
“We were the first generation of Thatcher’s children,” said Toby Wyles, who was at Cambridge with Buffini and is now with the private-equity firm Bowmark.
“Even people only three years older seemed from another time,” he added. “In pubs we talked about all the usual student things. But when we talked about what we wanted out of life, we said ‘business’, even though we didn't have a clue what business was about.”
Graduating in 1984, Buffini became a management consultant. His mother moved to Devon to keep a pub. He moved to London to go to work for LEK.
LEK’s Evans said of his firm’s early days: “We went to Harvard and couldn’t recruit. So we went to Oxbridge and got the 15 smartest 21-year-olds we could find — kids hungry for success, who knew the world didn’t owe them a living and wanted to change things.”
Evans gave Buffini a £1,000 signing bonus and plonked him down in front of a first-generation desktop for 70-hour weeks. “Damon and another guy were known as the huskies,” said Wyles.
In 1986 Buffini used an LEK scholarship to enrol at Harvard Business School. In Boston he absorbed American-style capitalism. In October 1987 the stock market crashed and soon leveraged buyouts hit the headlines.
Dating back to the 1960s — when they were called bootstrap deals — leveraged buyouts owed a lot to the kind of dealmaking Lord Hanson made famous in the 1970s.
An entrepreneur bought a company with cash and debt. He obtained loans by pledging his target company’s assets in the event of a default. He repaid the debt with the cashflows of his acquisition and by selling unwanted bits and pieces. Often he sold the company on again at a profit.
In contrast to the controversy stirred up by Hanson in the UK, leveraged buyouts were acclaimed in the US. They shook up lethargic management. They helped reinvigorate corporate America in its battle against rising Japan.
Then, as Buffini graduated from Harvard, the situation changed. In 1988 James White, a trucker for the American food chain Safeway, marked the first anniversary of his redundancy as a result of Safeway’s leveraged buyout by locking himself in his bathroom and shooting himself with his hunting rifle.
The Wall Street Journal’s Pulitzer prize-winning account of the Safeway LBO and its aftermath, along with Barbarians at the Gate, a bestselling account of KKR’s takeover of Nabisco, left a taint from which private-equity firms have never fully recovered.
Returning home, Buffini took a job at Schroder Ventures. Schroder was one of the first firms to promote leveraged buyouts to shake off what was then known as eurosclerosis, a hardening of the continent’s corporate arteries as a result of government red tape and union restrictive practices.
Buffini rose as a client man — the firm’s clients being pension managers and other investors in funds raised to provide the equity capital for deals.
When, in 2001, the investment banking parent of Schroder Ventures decided to concentrate its businesses, it sold its private- equity operation to a management group led by Buffini.
Renamed Permira, the firm soon attracted attention. In March 2001 it bought the do-it-yourself chain Homebase from Sainsbury for £745m. Eighteen months later it sold Homebase to GUS for £900m, earning a 600% return on the equity it had invested.
Permira has built on this success over the past four years, buying and selling stakes in such companies as Travelodge and Little Chef, travel agent Hogg Robinson, retailer New Look and fitness chain Holmes Place.
Permira executives such as Charles Sherwood have kept a brake on the company, while Buffini is an accelerator, according to an investor.
“Damon is intensely competitive,” said the investor. “When I beat him in a round of golf, he was a gentleman, but you could tell he really, really didn’t like it.”
ON June 15 Permira celebrated the firm’s 20th anniversary by sailing 400 guests from London’s Westminster Pier to the Old Royal Naval College in Greenwich. After dinner Buffini poked fun at Sherwood for writing off James Dyson’s bagless vacuum cleaner as a no-hoper when Dyson showed up at Permira looking for financial backing.
The celebration also marked the end of a phase in Buffini’s career. From 1962 to 1984 he prepared. From 1995 to 2005 he climbed the greasy pole. From now until 2020, when he will only be 58, he is likely to become one of the most substantial City figures, part of a rising new generation.
Permira will probably continue to do well. Although the firm is private and does not disclose results, SVG Capital, an investment trust that is a leading investor in Permira funds, reported that 2004 was a record year for the firm and 2005 has begun even better.
Presiding over partners’ meetings internally, schmoozing clients in his trademark natty suits externally, Buffini can look forward to all the perks of a top City figure.
What is less predictable is the environment in which he will operate. Buyout specialists see a rosy horizon with private- equity firms gaining credit for improving European economic performance.
“Public-equity markets are not doing a good job valuing companies,” said Wyles. “Private-equity firms are.”
But private-equity firms are politically vulnerable. In Britain they employ nearly a fifth of the private-sector workforce. If companies owned by them hit financial trouble and have to lay off workers, the taint buyouts and their backers acquired in the 1980s could come back to haunt private-equity firms. On the fringe this is already happening. In February, workers at an Ohio plant owned by the German chemical company Cognis, partly owned in turn by Permira, went on strike to safeguard their futures when they learnt that the plant was up for sale. In April, Cognis workers picketed Permira’s American headquarters in New York, and the dispute remains unresolved. In May, the GMB union demonstrated outside an Automobile Association call centre in Cheadle, Cheshire, to protest at job cuts after the company’s new owners, Permira and a partner, took it over last year. Buffini has avoided comment on the political dimension to buyouts. He has in fact avoided media exposure of all kinds and declined to be interviewed for this article. “He sees no upside,” said a colleague. Still, his background exempts him from charges of not understanding the workers whom private-equity firms are putting under pressure. His growing prominence in the City makes him a candidate to put the case of private-equity firms if that becomes necessary. One way or another, his low-profile days appear at an end. “When the next chapter in the history of private equity is written,” said LEK’s Evans, “Damon will be its author.”
http://business.timesonline.co.uk/tol/business/article542274.ece
My heart just took a different direction when it came to building weatlh through investing.
