Alumni Profile: Bon French '76

Private equity pioneer sees global expansion

By Ed Finkel

Bon French '76 says he's not on a soapbox, but he's passionate about the prospects for private equity investing and probably wouldn't mind winning over a few more converts.

"The future is hard to see, but private equity's scope continues to expand globally, and we are a participant in that expansion," says French, CEO of Adams Street Partners, which manages $15 billion in private equity investments out of offices in Chicago, London, Singapore and Menlo Park, Calif. The firm has 175 managers in 27 countries and 100 employees overall.

French says some entrepreneurs want to work in venture-backed startups or privately held growth equity companies for the opportunities these offer. "Large companies don't provide the stability they used to, and people get excited about the fact that [in start-up situations] they can have more of a say about what they do in the workplace."

He sees other advantages in his field, including the ability to capitalize on technological advances and the rise of entrepreneurship. "It's all gotten more institutionalized. You don't have quarterly earnings pressures like a public company, and we haven't had the scandals that existed in the public setting. It seems that private equity is a better governance model."

Stakeholder interests align more naturally, French believes, because private equity incentivizes management with stock as opposed to cash salaries. "That allows people to do product development, geographic expansions, things that might be risky short-term, but people don't have to worry about [quarterly pressures]."

That doesn't mean private equity offers easy success, warns French, also a Northwestern University trustee. "There's no simple formula," he says. "It takes hard work, a lot of smart people and prudent, terrific managers."

French has been in the investment sector for more than 30 years. He began his career in the mid- 1970s doing private placement bond investments at Connecticut General Insurance Company in Hartford, then returned to Chicago in 1980 to work in First Chicago Bank's trust department.

"There was a lot to learn. I enjoyed the investment world," says the Kellogg graduate, who has also remained close to the school, serving on its advisory council and returning to share his knowledge with students. "Forecasting the economy, forecasting interest rates, forecasting Fed activity was something I found very interesting. I enjoyed going on plant tours, seeing manufacturing operations, understanding what made the business work. You'd get your hands into the details and then structure the financing."

French moved into First Chicago's venture capital department in 1983, when the markets exploded with excitement about biotechnology and personal computing, coupled with strong overall economic growth.

French and his colleagues expanded the boundaries of private equity in other ways, buying so-called secondary interest for the first time in the mid-1980s, investing in buyouts soon after and distressed debt in the early 1990s. "We've kept innovating and expanding, along with the market," he says.

First Chicago and subsequently Brinson Partners, the firm that bought out the bank's institutional asset management activities in 1989, developed valuation guidelines for venture capital and benchmarks for private equity that led French and his colleagues to be inducted into the Private Equity Hall of Fame in 2000. Around that time, Adams Street Partners spun out of UBS, which in 1998 had merged with Swiss Bank, the institution that had bought Brinson three years earlier.

"It's a relationship business," French says. "We have tremendous relationships with our general partners, portfolio companies and clients. These relationships bring us investments, deal flow and new clients. We've actually turned away some money for nine years in a row. We stay disciplined and get results by not getting too big." Those results include a 23.8 percent compounded return since 1979 and 39.4 percent over the past decade.

"This is all we do," French adds. "We don't do hedge funds. We're not investors in timber or other things. We're very focused."