Going Private

BusinessWeek

FEBRUARY 27, 2006

COVER STORY

Hotshot managers are fleeing public companies for the money, freedom, and glamour of private equity

Ask J. Crew Group Inc. chairman and chief executive Millard S. "Mickey" Drexler what it's like to run a public company, and he curls his fingers into the shape of a pistol. "You have a gun to your head," he says. Drexler knows of what he speaks. He spent four years running AnnTaylor Stores Corp. (ANN ) and seven years as CEO of Gap Inc. (GPS ), where he gained his reputation as a turnaround artist before being ousted in 2002.

Drexler, 61, could be enjoying an uncommonly comfortable retirement right now. Instead he's working harder than ever, trying to revitalize the fashionable clothier. He loves the challenge of transforming companies, and retailing is in his blood. But the best part about the new gig is that he doesn't have to answer to public shareholders every step of the way. Drexler works for Texas Pacific Group, a $22 billion Fort Worth private-equity firm. It hired Drexler in 2003 and supported him through a long overhaul that included chucking a year's worth of J. Crew skirts, pants, and sweaters. Now, he says, he has "an ownership that truly cares about long-term shareholder value," in stark contrast to public investors who obsess over quarterly earnings.

Luminaries like Drexler are bolting in droves for private equity, the freewheeling world where investors buy slumping companies and try to turn them around to sell or take public, risking billions of dollars in the process. Former General Electric (GE ) CEO Jack F. Welch now evaluates investments at Clayton, Dubilier & Rice Inc., a $6 billion New York firm. (Welch and his wife, Suzy, write a column for BusinessWeek.) Onetime IBM (IBM ) chief Louis V. Gerstner Jr., who has alternated between private and public companies for two decades, is back in the private sphere as chairman of the Carlyle Group, a Washington (D.C.) firm with $35 billion in committed capital. Former Ford Motor Co. (F ) CEO Jacques Nasser is a partner at the $5 billion One Equity Partners, an affiliate of JPMorgan Chase & Co. (JPM )Former Continental Airlines Inc.

President Greg Brenneman fixed up Burger King for private-equity firms and is about to take it public. Viacom Inc.'s (VIA ) former chief financial officer, Richard J. Bressler, works for Thomas H. Lee Partners LP, a Boston fund with $12 billion of committed capital. Gerald Storch, former vice-chairman of Target Corp. (TGT ), has been tapped to run Toys 'R' Us for private-equity owners Bain Capital ($27 billion) of Boston and Kohlberg Kravis Roberts & Co. ($11.5 billion) of New York (along with Vornado Realty Trust). And on and on.

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