Rob Small, Managing Director at Stockbridge / Berkshire Partners, details the fund's cornerstone investment in TransDigm Group.
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“And so when we started Stockbridge, that was the first company we looked at and we invested, it has become and been our largest position through most of our history.”
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More from Rob Small
Insight
Small: PE firms must build public market teams internally for effective collaboration
“Building it internally was important because the relationships of the people were a key to making it work. It wasn't just saying, Geez, Berkshire partners should have a public firm. Let's go hire a team to go do it. That would not get the collaboration that we…”
Rob SmallJul 22, 2024▶ 11:13Rob Small and Anil Seetharam - Public Equity Adjacent to Private Equity at Stockbridge (EP.397)
Opinion
Small: Short selling consumes too much time and rarely makes sense
“Very, very few people were good at it, and it took up most of your time. To get shorts. Plus you were in some ways leveraging your longs in order to justify your shorting. So it just seemed to us to make no sense to do that.”
Rob SmallJul 22, 2024▶ 12:03Rob Small and Anil Seetharam - Public Equity Adjacent to Private Equity at Stockbridge (EP.397)
Insight
Small: Sizing public equity positions purely on modeled IRR is suboptimal
“We were religious about keeping our five-year internal rate of return models up to date and trading off that. The higher the IRR, the bigger the position. We learned that wasn't the best way. We changed over time at that point to adding a conviction element”
Rob SmallJul 22, 2024▶ 32:07Rob Small and Anil Seetharam - Public Equity Adjacent to Private Equity at Stockbridge (EP.397)
Opinion
Small: Public markets exhibit far crazier mispricings than private equity
“We've seen crazier prices on both sides by far in the public markets than I think you tend to see in the private markets.”
Rob SmallJul 22, 2024▶ 47:34Rob Small and Anil Seetharam - Public Equity Adjacent to Private Equity at Stockbridge (EP.397)
Disclosure
Stockbridge requires unanimity among senior partners for new investments
“That's why we demand unanimity among the senior people to invest in something, because you're gonna get hit with a bump, and so when you get hit with a bump, you have to have enough information, enough belief to evaluate the new information, but be able to sti…”
Rob SmallJul 22, 2024▶ 58:32Rob Small and Anil Seetharam - Public Equity Adjacent to Private Equity at Stockbridge (EP.397)
AssertionPartly supported
Small: Private companies traded at higher multiples than publics in 2005-2007
“For the first time, we did comparable sheets with public companies, and we were seeing private companies go for more than public companies. So the control premium was higher than the liquidity premium.”
Rob SmallJul 22, 2024▶ 8:52Rob Small and Anil Seetharam - Public Equity Adjacent to Private Equity at Stockbridge (EP.397)
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