GE’s Jack Welch Joins Clayton, Dubilier & Rice
Jack Welch, former chairman of General Electric Co., joined Clayton, Dubilier & Rice Inc. after a yearlong courtship, giving the 23-year-old leveraged buyout firm more clout.
The New York-based firm, which manages $6.6 billion of capital, said Welch, 65, will help it assess new investments and expand overseas as well as court clients. Welch, who retired from the world’s biggest company last month, won’t be actively involved in companies.
“He will share in the equity but not the operating responsibilities of a partner,” said Donald Gogel, the firm’s chief executive.
Buyout firms such as Clayton Dubilier typically buy undervalued companies, seeking to sell them for a profit after turning them around.
Clayton Dubilier’s holdings include Kinko’s Inc., which it built into a single copy-shop outfit from 126 independent entities. The firm also bought and then sold IBM Corp.’s printer division, renamed Lexmark International Inc.
“If you were going to go to central casting and try to find a guy who would have a big impact on operating companies, you’d pick Jack Welch,” said Rick Rickertsen, chief operating officer of Washington-based buyout firm Thayer Capital Partners. “That’s a home run.”
Welch stepped down as head of GE on Sept. 7, after 20 years. He contributed to 26 consecutive years of quarterly profit growth and increased General Electric’s market capitalization to more than $400 billion from less than $15 billion, earning investors an average annual return of about 24%.
Clayton Dubilier has returned an average of 3.5 times cash invested to partners, an annual average of 37% since its founding in 1978, Gogel said. During the last 20 years, buyout firms averaged annual returns of 19%, according to Venture Economics, which tracks private equity businesses.
Welch’s memoir, “Jack: Straight From the Gut,” was No. 1 on the New York Times bestseller list this week. He’s on a book tour and unavailable for comment, Gogel said.
The firm’s partners include former GE executives James Rogers and Chuck Pieper. Rogers, a 26-year veteran of GE, joined the firm in 1998, conceding he was out of the running to succeed Welch.
Pieper and Rogers set up a meeting with Welch in early 2001, after he announced his retirement date. The two partners were joined by Gogel, firm founder and Chairman Joseph Rice, and two other partners: former Emerson Electric Co. CEO George Tamke and former IBM Corp. sales chief Ned Lautenbach.
Clayton Dubilier, which mainly eschewed hostile takeovers in the 1980s, has hired other former corporate chiefs as partners. Former PepsiCo Inc. President Andrall Pearson was a partner before being named chief of Tricon Global Restaurants Inc., the beverage maker’s 1997 spinoff.
Current partners include Charles Ames, former CEO of Reliance Electric Co., Acme Cleveland Corp. and Uniroyal Goodrich Tire Co.
Pieper, who worked at GE for 16 years, serves as chairman of Clayton Dubilier-owned Fairchild Dornier, which makes regional jets.
Its $6.6 billion in managed capital ranks it 17th among buyout firms, according to Asset Alternatives, publishers of the Private Equity Analyst newsletter. Kohlberg Kravis Roberts & Co. is No. 1 with $24 billion.
