Home / Business / Markets / A top Wall Street exec explains the critical investing doctrine she schooled from examination a $1 billion understanding go wrong (CG)

A top Wall Street exec explains the critical investing doctrine she schooled from examination a $1 billion understanding go wrong (CG)

Horbach_Sandra 2010Carlyle’s Sandra Horbach.Carlyle

Everyone creates mistakes – but as the proverb goes, it’s mostly what you learn from them that counts.

Business Insider recently sat down with Sandra Horbach, the cohead of US buyouts at the $158 billion private equity firm, Carlyle Group.

Horbach is one of the industry’s many comparison women, and has been described as a trailblazer. She got her start in the fledgling attention in the 1980s, just out of business school. 

Horbach’s industry typically involves shopping up companies, mostly with borrowed money, and changing the companies to boost their value at a future indicate of sale. 

Horbach and I had a wide-ranging conversation in which she described her biggest investment mistake, and what she learned.

The investment in doubt was a 2006 decision to buy Oriental Trading for $1 billion.

From the interview (emphasis added):

Horbach: We invested in a company called Oriental Trading, which was a very successful business that had grown for 30 years consecutively. It was a catalog and approach marketer of party supplies, celebratory products, and servicing schools, teachers, and families. We were very vehement about the investment, and we partnered with a former owners of the company to continue to grow and build the business.

The investment was behaving very good for the first couple of years. The company achieved really good out of the box, but two years into the investment we hit the good recession, and, simultaneously, the US postal bureau increasing postage rates for catalogs by 20%. So we had a large boost in costs to the business at a time where we were entering a very disastrous mercantile environment. So we were catastrophic in returning collateral to the investors. We went by a restructuring. Today Warren Buffett owns the company. It’s still a good business, but it couldn’t support the debt bucket we had put in place at the time of the acquisition, given both events were happening simultaneously.

Levy: Those two factors seem a bit unpredictable. One the crisis, two the post office.

Horbach: You’re right. They were impossibly unpredictable. But that’s the doctrine of the investment. You can’t assume that a company, just since it’s been very successful for 30 years, that it still can’t be theme to extensive shocks to the system. In those cases, you try to say the coherence to weather by those storms. But in some cases, in the business, that’s not possible. But it does common you.

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