May 19, 2022 · 49m · capital-allocators
John Barber – The Art of Co-Investing at Cohesive Capital (Manager Meetings, EP.31)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Manager Meetings, host Ted Seides interviews John Barber, founder and managing partner of Cohesive Capital, exploring his Wall Street background, the mechanics of executing direct co-investments without fund commitments or carried interest, and disciplined lower-middle-market underwriting.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 17% of the talking time here. How this is scored →
Ted as informed peer 4.2 Guest teaching 3.3 Guest disagreement 1.2 Ted pushing back 1.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:20 Rejecting negative selection assumption
John firmly pushes back against the industry perception that co-investors without LP commitments only receive adversely selected deal flow.
Hardest push from Ted ▶ 21:04 Challenging no-carry and non-LP modelTed directly challenges John on whether doing one-off deals without paying carry or committing to funds relegates Cohesive to lower-tier sponsor status.
Biggest teaching moment ▶ 38:24 Critiquing institutional co-investment sizing errorsJohn educates allocators on the structural error of disproportionately sizing single-company co-investments relative to their fund-level underlying risk exposures.
Ted holds their own ▶ 18:53 Probing non-LP co-investment mechanicsTed sharply articulates the conventional wisdom among institutional allocators to press John on how Cohesive accesses quality deal flow without fund commitments.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Early Career and Learning the Syndicate Business | 4 | 3 | 1 | 1 | Ted opens with broad biographical questions about John's early career at Wertheim and Drexel Burnham. John provides detailed historical context on the evolution of syndicate desks on Wall Street. | |
| Navigating Wall Street Culture and Firm Closures | 4 | 2 | 1 | 1 | Ted prompts John on the distinct institutional cultures and collapses of Drexel and Kidder Peabody. John shares firsthand reflections on survival, leverage, and maintaining an underdog mentality. | |
| The Genesis of Cohesive Capital | 4 | 3 | 1 | 1 | Ted asks about the founding catalyst for Cohesive Capital. John explains how he built Citigroup's co-investment practice with dedicated direct-deal professionals and carried that model over to Cohesive. | |
| Co-Investing Without Fund Commitments or Carry | 5 | 4 | 2 | 3 | Ted raises common industry skepticism regarding whether non-LP co-investors suffer from adverse selection and poor sponsor standing. John directly rejects the negative selection thesis, explaining why lead sponsors need extra check capacity for larger or complex transactions. | |
| Sourcing Funnel and Relationship Dynamics | 4 | 3 | 1 | 1 | Ted asks how John maintains long-term sponsor relationships when rejecting the vast majority of opportunities. John explains the value of fast, polite rejections that preserve rapport. | |
| Ridgeline Sponsor Message | 4 | 3 | 1 | 1 | Following a sponsor message, Ted asks about Cohesive's filtering process across stages and sectors. John details their focus on lower-middle-market LBOs with defensive moats and cash flow. | |
| Execution Risk, Buy-and-Builds, and Free Cash Flow | 4 | 3 | 1 | 1 | Ted inquires about preferences between buy-and-build platforms and organic growth. John notes that execution risk increases dramatically when companies with no prior acquisition history attempt roll-ups in competitive markets. | |
| Team Culture and Democratic Investment Process | 4 | 3 | 1 | 1 | Ted explores Cohesive's internal decision-making structure. John emphasizes his non-hierarchical, consensus-driven committee approach and acting as an orchestra conductor rather than a dictator. | |
| Best Practices and Common Traps for Co-Investors | 5 | 5 | 2 | 2 | Ted asks what institutional fund investors should learn to improve their co-investing. John cautions against solely investing to reduce headline fees and warns against portfolio distortion from improper check sizing. | |
| Macroeconomic Landscape and the Private Credit Boom | 4 | 4 | 1 | 1 | Ted asks about the forward macroeconomic landscape. John analyzes how private credit has stepped into large LBO financing and where valuation excesses may unwind. |
Statements from this episode (14)
Barber: Wall Street leaders in 1970s and 1980s rose through syndicate desks
“And if you go back in time, John Goodfriend, the legendary CEO of Solomon brothers had been the syndicate manager of Solomon brothers, Ralph D'Annunzio, the legendary CEO of Kidder Peabody had been the syndicate manager. Tommy Saunders, a very legendary Morgan…”
Barber: Every Drexel Burnham lender and equity holder recovered all their money
“And one of the things most people don't know is not only did every lender to Drexel Burnham get all their money back. We, as equity holders got all our money back at the end of the day, it was a short term downturn in the high yield market with too much concen…”
Barber: Quick rejections in co-investing are almost as valuable as commitments
“Quick no's I've learned are almost as good as yes's. And people often just say, wow, that's just so awesome. You're telling us no, like this quickly without, you know, drawing it out.”
Barber: Co-investments are not adversely selected but driven by check sizes
“Some people believe that co-investment in its own right is negatively selected. I don't, patently don't believe that because almost every single deal we do is because somebody needs more money. Never because like, oh, our normal equity check is a hundred, but …”
Barber: When passing on deals, frame rejections around internal constraints
“We try when we say no more often than not to make it about us, not about them. We don't want to tell them their baby's ugly.”
Barber: Cohesive Capital acquired airport snow melter Dijana doing $25M EBITDA
“We bought a company from a seventy-seven-year-old man in Port Washington, Long Island, called Dijana, now called Outworks. And his company plowed the snow and then melted that snow with proprietary melters at seven of the nine snowiest airports in America. And…”
Barber: Sub-$1B non-tech businesses cannot go public in modern markets
“Unless you are a super growth, super techie company, you can't get public these days. And that's part of the boom of the private equity industry. Like the companies I took public as a 28 year old could not go public today. They can only be owned by private equ…”
Barber: Commodity-oriented cyclical businesses do not work well in private equity
“I think we've decided that very commodity oriented cyclical businesses don't work in a private equity setting very well. It doesn't help that everybody also just hates oil and gas and you're better off in more nimble vehicles where you can get in at the right …”
Barber: Requiring unanimous investment committee votes discourages honest dissent
“Well, if you have everybody unanimous, then no one wants to be negative during the process. And nobody wants to say, I don't like it, okay, I'm good. So let somebody say they don't like it and say no. And I really thought that was genius.”
Barber: Co-Investment Check Sizes Shouldn't Exceed Fund Look-Through Allocations
“You shouldn't have all your positions from your funds as two and a half million dollar positions and a bunch of your co-investment positions as five, seven halves and tens.”
Barber: Leverage limits impact LBO returns far more than interest rate hikes
“You run an LBO model. And you take rates from six percent to eight percent. It does not matter. If you all of a sudden can only borrow four times versus five times, that changes the math.”
Barber: Thoma Bravo's $11B Anaplan buyout was funded entirely by private debt
“There was an eleven billion dollar LBO done recently called Anaplan by, I think, Toma Bravo. Interesting, that deal was financed by, I think it was four or five private debt firms. No bank involved.”
Barber: Venture bubble from 2019 to 2022 will produce real carnage
“I think there's going to be some real carnage that's come out of the most recent two, three years. In some of the, what I'll just call overall venture bubble, cause it's not just tech, et cetera.”
Barber: Weaknesses are strengths boiled over, requiring careful modulation
“I have a saying that I talk to people about, which is that people's weaknesses are their strengths boiled over, and I think if you think about most people, you'll say, yeah, and some of the most successful people just know how to keep the heat exactly right, a…”