Cover image for The wealth creators : the rise of today's rich and super-rich
Title:
The wealth creators : the rise of today's rich and super-rich
Author:
Smith, Roy C., 1938-
Personal Author:
Edition:
First edition.
Publication Information:
New York : Truman Talley Books/St. Martin's Press, 2001.
Physical Description:
358 pages ; 25 cm
Language:
English
ISBN:
9780312272593
Format :
Book

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Central Library HC110.W4 S614 2001 Adult Non-Fiction Central Closed Stacks
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Summary

Summary

The Multi-Millionaires
How Much They Made.
How Each One Made It.

At the beginning of 2000, there were nearly three hundred billionaires and five million millionaires living in the United States. Total household wealth had reached $37 trillion, up from just over $8 trillion when Ronald Reagan became president. The stories of these super-rich men and women reflect the social and economic history of the last twenty years.

Roy C. Smith takes the reader into five core areas of opportunity today as well as the career turning points of key individuals in each:
- Entrepreneurs like Mike Bloomberg, Sam Walton, and Ted Turner,
- Dealmakers such as Kirk Kerkorian, Ron Perelman, and Larry Tisch,
- Investors like Warren Buffett and financiers like George Soros,
- Corporate executives such as Jack Welch, Sandy Weill, and Michael Eisner,
- And entertainers like Oprah Winfrey, Steven Spielberg, and Tiger Woods.


Author Notes

Roy C. Smith , a Goldman Sachs investment banker for twenty years, has been a professor of entrepreneurship and finance at New York University for the past twelve. He lives in Montclair, New Jersey.


Reviews 2

Booklist Review

Smith has been a professor at the Stern School of Entrepreneurship and Finance at New York University for the past 12 years, and he is the author of The Global Bankers (1988) and The Money Wars (1992). He uses the annual Forbes list of the 400 wealthiest persons in the U.S., which was first published in 1982, to document changes in who the wealthy are and how wealth is accumulated. In 17 years, the number of billionaires grew from 12 to 268. The number of "self-made" tycoons rose from 159 to 251, three of the four richest persons in the U.S. were officers at Microsoft, and the number of those who had inherited their wealth declined to 25 percent. Smith focuses on 75 individuals--none of whom might be called "the millionaire next door" --to distinguish five different categories of wealth creation. Superentrepreneurs, dealmakers, major investors, corporate tycoons, and world-class entertainers make up Smith's list of this new well-to-do. He concludes by considering the "culture of wealth" in the U.S. today. --David Rouse


Publisher's Weekly Review

Rather than focusing on the personalities of the rich or how they spend their fortunes, Smith zeroes in on how they made their money to begin with. In 75 thumbnail sketches of some well-known billionaires (and a few anonymous millionaires), he explains how they leveraged their capital, brand names or business innovations to create bulging bank accounts. Eschewing biographical details and psychological insights, Smith concentrates on financial mechanics. For example, readers don't just learn that Citigroup CEO Sanford Weill made most of his money from stock options, they are treated to a detailed discussion of the stock option-reload plan in his contract. The entry on Michael Jordan ignores his achievements on the basketball court and emphasizes a statistical argument that shows why his endorsement value has been so high. Subjects, including Michael Bloomberg, Oprah Winfrey, Ron Perelman and Tiger Woods are divided into five categories: entrepreneurs, deal makers, investors, tycoons and entertainers, prefaced by explanations about the economics of each field. Interlaced with the case studies is Smith's fact-filled argument that social forces of the late 1970s opened up the possibility of creating enormous wealth, and that the subjects of this book are just extreme examples within the broader trend. However, this larger argument isn't bold enough, nor are his profiles engrossing enough, to satisfy those hoping to learn secret paths to instant wealth or to discover titillating gossip about superrich celebrities. (Feb.) (c) Copyright PWxyz, LLC. All rights reserved


Excerpts

Excerpts

Chapter One The Entrepreneurs The 1999 Forbes 400 list includes 251 individuals whose source of wealth is described as "self-made." These include founders of businesses and others who have not relied upon a salary or inheritance to make their fortunes. Among them are the greatest creators of new wealth in the country, the most successful of our living businessmen. But most of the individuals on this most exclusive list of self-made entrepreneurs are not well known and their business activities are varied beyond belief. They include billionaires whose money comes from medical devices, computer software, railroads, testing laboratories, real estate, home building, stock market investments, trading stamps, oil and gas, computer assembly, direct sales organizations, retailing, health care, mobile phones, music and records, newspapers and media, insurance, cable TV, public storage, plastics, garbage recycling, video tape rentals, sunglasses, sports shoes, credit cards, movie special effects, car dealerships, entertainment, potatoes, and auto rentals. If you add those on the Forbes list worth less than a billion, the number and spread of businesses is much larger and more diverse. The self-made are inventors, manufacturers, financial investors, real estate guys, hole diggers, entertainers, and hundreds of other things.     They are what we think of today as entrepreneurs, though the word itself means little more than businessman or investor. In the parlance of the late 1990s, however, entrepreneurs are not just ordinary businessmen--hired hands and administrators--they are something more, something much more. They are, first of all, owners, who work for no one but themselves. They can be extreme risk-takers and colorful, self-confident persons of strong character and personality. Some get a lot of attention, and many have become celebrities and heroes in our complicated society, in which traditional hero types are in extremely short supply. Some are nerdish, some dull, some mischievous, and some roguish. Think of Bill Gates, Steve Jobs, Michael Dell, Richard Branson, Ted Turner, and Donald Trump. There are also many you never heard of. But stripped of all the hype, entrepreneurs are simply people who, as individuals or in small groups, have started or acquired businesses and attempted to grow and/or alter them to a point where they could cash in on the rewards. (Not all of them are successful, of course, but the image is projected by those who are.) They are founders of enterprises that have made it through the difficult years and been able to profit handsomely. Some are more akin to the dealmakers described in the next chapter. We have always had entrepreneurs, though the times have not always been good to them. Today, after two decades of good times, rising markets, and thousands of entrepreneurial success stories, everybody wants to be an entrepreneur.     Academics have been studying self-made businessmen for a few decades, looking for the keys to success and a methodology to teach to young, would-be entrepreneurs. The literature is rather thin, however, as there really are not a lot of data to study about privately held companies, and the field is endlessly diverse. Most of what we know is anecdotal, and serious scholars are unwilling to conclude much based on anecdotes. We have not yet found, of course, a simple, repeatable formula for turning small or substantially restructured businesses into gold mines. Indeed, many academics believe that great entrepreneurial success is usually a random event, influenced as much by luck as by skill, or by fortuitous (if unwise) risk-taking as by any other quality, in which case there is not much to write about. Accordingly, most of the academic and professional literature about entrepreneurship involves macroeconomic analyses of the role and importance of small businesses in the economy as a whole, or emphasizes the practical how-tos of small business: such things as how to develop a good business plan, how to prepare financial forecasts, how to attract venture capital, or how to go about an initial public offering of stock. These are useful, no doubt, to people who want to carry out these exercises but don't know how to, but for those seeking gold mines, well, they won't learn much.     But we haven't given up entirely. There is something to be learned from studying what the successful entrepreneurs actually did to become successful. As a result there is a steady supply of increasingly high-quality case studies and biographies of such individuals. There are some patterns that can be recognized when we study their careers, and by analyzing the patterns we can learn something about what seems to work or would seem to increase the probabilities of success. Or, to put it another way, we can look for the sine qua non of success--those things without which great success probably cannot happen. The Bloomberg The two best things that ever happened to him, Michael Bloomberg believes, were "getting hired by Salomon Brothers and getting fired by Salomon Brothers." Bloomberg, now in his late fifties and chairman of the Bloomberg Group, which he founded in 1981 after being fired, is one of the many self-made entrepreneurs among the Forbes 400 who, in 1999, made up more than half the list.     Bloomberg graduated from Harvard Business School in 1966 and joined Salomon Brothers as a trader. He became an equity block trader, and a partner of the firm in nearly record time. His boss was a colorful but highly controversial character named Jay Perry, who was removed from his position in 1973 following a fistfight with one of his partners. Bloomberg then became the head of all of the firm's equity businesses. But he, too, was (in his words) "pushed aside" six years later in another of Salomon's periodic palace coups. It was all very Wall Street, and Bloomberg was not especially upset by it. He found himself, however, pushed pretty far away from the trading desks he loved and which were the source of all power and fortune at Salomon. He was put in charge of the firm's backoffice computers, something he knew next to nothing about. It was clearly an undisputed transfer to oblivion. The computers were mainly used for operational purposes, to keep track of settlements of traded securities and of the firm's books. All the Wall Street firms used computers to speed up their backoffice activities, but nobody who was anybody at Salomon even knew where they were.     Bloomberg wondered why the computers couldn't be used to assist traders more than they were, to gather up and provide the information they really needed to do their jobs, particularly information about how one security with particular characteristics compared to another. If two essentially similar securities were trading at different prices, a clever trader could buy the cheap one and sell the expensive one and have a position free of market risk that would be profitable when the market recognized that the two securities were slightly mispriced.     About this time, however, he was fired. Salomon had agreed to be acquired by Phibro Corporation, a large commodities trading house. Salomon's partners would get cash for their capital in the firm and a new convertible debenture for an equal additional amount to reflect the intangible values of the firm's franchise. Seven partners, however, would not be asked to join the new company. Mike tells of how he was ushered into the office of Salomon's chairman, John Gutfreund, and bluntly told he was to be one of those not continuing on. Mike was surprised and hurt, but also he knew he was rich. His capital and premium were to be paid out to him in cash--$10 million--more money than he had ever imagined having. At Salomon all partners were required to retain their share of all earnings in the firm as a part of its ongoing capital. They were paid 5 percent interest on their money, and could make withdrawals for taxes and charitable contributions. But otherwise the only way a partner could actually get his hands on his own capital was to die, resign (and then be paid out over ten years), or to be fired. If what you wanted was to take your capital out of the firm, of the three options being fired was the best.     Mike immediately knew that he didn't want to recycle himself through another Wall Street firm and maybe get fired again. Besides, he now had too much money to go work for somebody else. He wanted to be on his own, and he had his own capital to back a business venture. So he set up a new firm in a small office on Madison Avenue and went to work trying to think through a business plan. He had been a trader and knew what traders needed. He had been a computer executive and knew what computers could do. Why not put together the ultimate desktop black box for traders, he figured, one that could provide live market data and could call up from a database all frequently traded public securities, letting the traders compare the various characteristics and prices. The only problem was, such a machine did not exist.     So he set out to design, manufacture, and sell one, and to do so in competition with all the major computer makers and software suppliers that serviced Wall Street plus the now burgeoning technology departments of the firms themselves. And, as he was convinced that the traders on the Street were warming up to what they needed quickly, it would only be a matter of time before someone came up with the black box that everyone would want. This window of opportunity, Bloomberg figured, would only be open to him for a couple of years. Mike hired some former Salomon colleagues and got to work. Before long he had a pretty good idea of what could be done and what couldn't. Then he went out to make some sales calls to Wall Street firms that he thought would be interested. The critical moment came when he went to pitch his yet-unbuilt machine to Merrill Lynch. He had done some consulting work for Merrill and was easily able to set up a meeting with the head of capital markets, who brought his information technology man with him. Mike delivered an impressive performance, solidly making a case for his machine (and inventing it as he went along) "We can give you a yield curve analysis updated throughout the day as markets change," he said, among other things. He pointed out that no one else had these capabilities on their desks, and it would be a big advantage for a leading trading house like Merrill to have it. The Merrill capital markets head then turned to the technology associate and asked what he thought. "I think we should build it for ourselves," said the technology man. "Well, when could it be ready?" asked the capital markets head. The computer guy, confronted as all Wall Street technologists were by a huge backlog of uncompleted work orders submitted by desperate operating departments, grimaced and said, "We could probably start working on it in about six months." Mike immediately saw his opportunity and went for it.     "Your traders will want this capability long before you can build the machine yourselves. If others have it and you don't, your guys will be at an expensive disadvantage in the market. And, if your technology people are at all like the ones at Salomon, you shouldn't take their promised get-started date at face value. They mean well, but they don't know what other demands, some legitimately urgent, will be put upon them over the next year. Every department of every firm on Wall Street wants to be upgraded to state-of-the-art computer capability as soon possible. The demands on your guys will be incredible and deadlines are going to get missed."     So, he said, he would make Merrill Lynch an offer it couldn't refuse. "I'll get it done in six months and if you don't like it, you don't have to pay for it." The capital markets man accepted on the spot.     The team at Bloomberg now had a problem--they had to meet their commitment or eat their costs and perhaps all their plans for the future too. But they also had an advantage. They could focus all their efforts on one thing without being distracted by other requests. They could also work around the clock if they had to--they had nothing more important to do--to accomplish their goal. But still they had to pull it off, and right up until the last minute it was not clear that they would be able to deliver a model that would work well enough. But they did, and "the rest," says Mike, "is history."     Merrill not only ordered a lot of machines, it offered to buy 30 percent of the company. Mike was ecstatic. In only three years he had invested over $4 million of his own money in this venture, and now he had gotten it back and more. Plus he had had the world's biggest securities firm as a confirmed customer. This relationship would help just about everyone else sitting on the fence decide to buy a machine as soon as they could.     Mike named the machine The Bloomberg , and soon traders everywhere had to have one. Just as he had predicted, the traders could not bear to be unequipped with something their rivals were using successfully. They didn't want a similar machine, they wanted the real thing-- The Bloomberg . So orders poured in.     His next breakthrough was to realize that he was not just supplying a trading machine with historical data on it to the securities market, but indeed providing all the real time information needed by traders and other businessmen operating in an environment that could not wait for tomorrow's newspaper. So he redirected his focus toward becoming the equivalent of CNN for all fast-moving business and financial news. He would supply the information--the blades, not just the razors. Thus the Bloomberg Group became a media business unconstrained by its history or vested interests. Bloomberg TV runs twenty-four hours a day and includes interviews with newsworthy company officers, ratings agencies, and Wall Street analysts to present investment information continuously. Bloomberg Radio is a twenty-four-hour news-only radio station. Bloomberg.com gives you all this information in extremely user-friendly form on the Internet. There are also the Bloomberg Forum, the Bloomberg News Magazine, and other forms of multimedia information delivery, all of which are available throughout the world. The business, though still heavily dependent on the cash flow from The Bloomberg , is self-financing. Mike has since bought back a third of the stock he originally sold to Merrill Lynch, leaving Merrill with 20 percent, and he still owns virtually all of the rest of the company himself. He has no desire to go public, he says, reflecting his continuing disinterest in working for other people (i.e., independent shareholders). In 1999, seventeen years after forming the company (and two years longer than he spent at Salomon Brothers), Forbes estimated his net worth at $2.5 billion. SELF-MADE MONEY For those who, against long odds, succeed as entrepreneurs in building a business that becomes highly valuable, there are special rewards: wealth, power, and (if you want it) fame and the right to be a bit eccentric.     To do this, though, first requires that you quit your day job, the one that has been providing you with a paycheck. When you do this, you start to appreciate the risks that entrepreneurs take from the first day, including the risk of not having any money to support yourself with. You may also have ruined an otherwise promising career by quitting it abruptly without any assurances of being able to return. And for years into the future, you must live with the knowledge that all that you have gained, or hope to gain, could amount to a lot less than what you walked away from, or could be lost tomorrow on a misstep or a sudden change in the market. No matter how else you measure entrepreneurial characteristics, this first, primordial requirement must be present--the willingness to step off into the void, risking most of what other people think of as security and well-being.     Entrepreneurs usually must beg, borrow, and scrape every barrel to collect enough money to get started, and then to meet payrolls and to continue to invest in expanding the enterprise. Years may have to go by before you can take anything out for yourself. The Business becomes an obsession; disproportionately important in your life--your main reason for being--and it extracts a heavy price from other, more normal relationships. Entrepreneurs worry a lot and maybe become a bit paranoid, but underneath there is a feeling that it's all worth it; a passion is being satisfied--the satisfaction of having done things your way, for having succeeded in the real world largely as a result of your own vision, follow-through, and leadership and organizational skills. Achieving entrepreneurial success may be the greatest challenge available to anyone in business. And being a founder of a successful business is certainly the best way to make the greatest amount of money, if all goes well, which, of course, often it does not. Indeed only a very small percentage of entrepreneurs are able to see their efforts culminate in big money.     Today's business entrepreneurs may have become the cultural replacement for the famous American rugged individualists of the last century, the ones who tamed the West and built great industries from nothing. Most of these entrepreneurs own and operate small businesses. According to the Small Business Administration, there were about 6.6 million corporations in the United States in 1996, the vast majority of which were small businesses. This total swells to about 23 million when sole-proprietorships and partnerships are included, 57 percent more than in 1982, the first year of the Reagan bull market. These small businesses are engaged in the most humdrum and mundane of all human commercial activities as well as the most exciting, such as the latest biomedical and computer software enterprises. Small businesses collectively accounted for 64 percent of all job growth in the country in the period 1990-1996. Because of this, and the large number of them, small businesses are popular with politicians and attract support from federal and state governments for financing and start-up assistance. In 1996 842,000 new small businesses were formed, but there were also 72,000 that failed. Most survive the many hazards of the first few years of existence but do not reach the point of becoming a publicly owned company, when significant wealth may first appear to be within reach.     Only the most promising of small businesses are able to effect initial public stock offerings, but in good stock markets there is a great deal of demand for them. In 1999, for example, the most recent record year for IPOs, there were 571 offerings, valued at $71.4 billion. In December 1999 there were approximately 9,000 publicly traded companies in the United States (5,100 on the NASDAQ, 3,100 on the NYSE, and 770 on the AMEX). Twenty years ago there were 4,900 publicly owned companies in the United States. Most of the new companies now traded in the market arrived there through an IPO (there have been about 9,500 IPOs valued at more than $500 billion since 1978) Of course the total number of companies has also been reduced by several thousand mergers and acquisitions and many bankruptcies during the twenty-year period.     In the last several years, since the development of the Internet and the vast interconnected world of electronics, telecommunications, entertainment, and other things, the cycle time of companies from birth to IPO has been shortened considerably. This has been partly due to a market eager to buy stock in small, promising companies in new industry areas, and partly because the companies have grown so quickly that many of them have reached the IPO stage sooner.     After an IPO, founders can sell some of their stock or borrow against it to create cash for other diversifying investments or money for some long deferred extravagance. Alternatively they can cash out entirely by selling the business to another company when they are ready to give up control of it. In 1999 alone there were about 4,000 sales of domestic companies that did not involve the reporting of a transaction price, usually meaning that the seller was not a publicly owned company.     Most small businesses do not go public. They lack either the profitability or the growth to do so, but nevertheless they can provide a generous cash flow to their owners. When the owner decides to retire, the business is either liquidated or sold (often through small business brokers). The new owner may run the business just as before or try to change it into something that could go public. Meanwhile other entrepreneurs are setting up new businesses. The organism regenerates itself, and, at least for the past twenty years, has been expanding, much to the benefit of the American economy as a whole and to the millions of individuals associated with the small business sector as owners, investors, or employees. Indeed the small business and entrepreneurial sector is responsible for most of the personal wealth in the country. This is the area of the American economy where most of the five million millionaires reside, where most of America's wealth is concentrated and has been growing most rapidly. HOW DO THEY DO IT? In this chapter, however, we are mainly interested in remarkably successful entrepreneurs; those who, like Bloomberg, have created something fantastic from nothing, making themselves and others quite rich in the process. Can we look at such a level of entrepreneurship as a profession, something that by training and application we can expect to duplicate? That is a question to which serious students of the subject do not feel quite ready to answer but are certainly inclined to study. What is it that sets the most successful apart from the rest? The Vision Thing When an entrepreneur decides to enter a business, an equilibrium already exists between those products and services that are in circulation and those that could be but aren't. Unless a new product or service can overcome the existing barriers to entry into the market, it has no chance. This is normal market economics at work--unless existing products and services can be priced and marketed in such a way as to create some level of competitive barrier to entry, too many new products will get in and destroy the profit opportunities.     The entrepreneur is looking for a way around this equilibrium by finding something new or different that will reset the equilibrium more advantageously. What is sought does not have to be an entirely new product or idea (like Edison's electric light, which took a long time to introduce and required expensive power plants and transmissions lines), but it has to be new enough to change the current configurations of the market. This is the central idea, or vision, of the business. Once it is identified and fixed in the entrepreneur's mind, the rest of the process is just making it happen by whatever means that seem to work.     Rockefeller did not invent the oil lamp, but after the Titusville discovery in 1859, he saw the opportunity of producing large quantities of kerosene from petroleum to be sold as a cheap, efficient fuel for illumination. Prior to kerosene, whale oil was the principal source of lamp illumination, but it was expensive and not available in the large quantities that surely were to be needed as the American economy expanded. He was not in the illuminants business before Titusville, but he saw an enormous potential for kerosene and decided to focus on refining and distributing it. The market was totally new at the time, and there were no barriers to entry, so a large number of small refiners and oil producers entered the business. They cut prices and conspired with or against each other to try to make progress, so business conditions in the industry became chaotic. As a result Rockefeller changed his central idea--instead of just refining crude oil, something for which he had no particular comparative advantage, he would focus on consolidating the refining, transportation, and marketing components into a new industry. This decision, a vision of opportunity and a wholly different way to develop it, played to all of Rockfeller's organizational and administrative strengths--his comparative advantages--that enabled him to become the success he was.     Sam Walton once worked for J. C. Penney. Walton didn't conceive the low-price, general merchandise chain store, or the more recent discount department store, but he did see the value in bringing these retailing ideas to places where they had never been introduced, the rural South. The population in this area was scattered and low-income, and the retail stores available to them were limited to relatively high-priced local shops and the occasional small variety store, or five-and-dime. In 1962 Walton opened his first store--Wal-Mart Discount City--in Rogers, Arkansas. His idea was that the bigger retailers avoided the rural areas because it was too expensive to ship goods to them, and the goods would take too long to sell. Walton designed a system of large central warehouses that could service daily a group of high-visibility stores circled around them. He purchased in bulk and passed on some of the savings to his customers, but what he really offered them was a much larger assortment of good-quality, low-priced goods for everyday use. In 1970 the company went public, and only ten years later, as a result of Wal-Mart's continuing success from its hub-and-spoke system of rural retailing, Sam Walton headed the Forbes 400 list as America's richest man. He died in 1992, leaving a fortune estimated at more than $22 billion.     Steve Jobs didn't invent the microprocessor, but he saw the potential for an easy to use desktop personal computer and made the Apple. It was an instant success and Steve Jobs became very rich. Bill Gates was not the first computer programmer, but he, too, saw the market for personal computers, so he dropped out of Harvard in 1980 to join his friend Paul Allen in developing software for them. Soon afterwards IBM called to ask for help in developing an operating system for its new personal computers, which were designed to compete with Apple's. Their operating system, called MS-DOS, rode the rising popularity of the IBM personal computers to become the dominant operating system for all PCs, which had to be IBM compatible to attract serious business buyers. The Apple computer, however, was not IBM compatible, and despite substantial consumer loyalty to the product, it fell behind the others that were and lost its way.     Ted Waitt (Gateway) and Michael Dell (Dell Computers) had the same big idea--to manufacture customized, fully assembled and operational personal computers that could be ordered by customers directly on the phone or the Internet. They could do this by establishing a central assembly location and shipping all orders from it. Their competition was established brand-name manufacturers who sold through independent retail stores and discount houses with negligible customer service or assistance. Before long they were assembling computers for customers all over the world.     Ralph Lauren captured a new (old money) look in men's fashion; he called it Polo , and it caught on. Philip Knight conceived of a new kind of sports-shoe company, and Nike was off and running. Backed by prodigious advertising campaigns, both companies quickly gained market share at the expense of their long-established competitors. And so on. There are lots of distinctive ideas among our entrepreneurial companies, and every successful entrepreneurial business is inspired by one, however simple the idea may seem in retrospect.     Starting a business with an idea that is not new at all, something that just presents another choice for the consumer, can be a very tough grind for the entrepreneur. Another bank branch on the corner, a new videotape recorder, or even another version of an IBM compatible personal computer may take forever to gain any kind of market share and could divide the total profits available in the market into increasingly smaller pieces. Something somewhat new , however, can capture the market's attention without having to completely reeducate it. It can quickly change market dynamics, increasing total demand for, say, tennis shoes because they are not tennis shoes any longer but performance enhancing footwear favored by professional athletes with a different shoe for every sport. In changing the dynamics of market demand, the relative market shares of the different competitors go up for grabs, giving you a shot at establishing a solid place for yourself relatively quickly. Of course your idea has to be strong enough to alter the dynamics, but it is clear that many of the most powerful new business ideas have not been all that new. Not that new, perhaps, but different enough.     In March 1998 Walt Minnick, then fifty-six years old, became a plant man. That is, he and some partners bought seven stores selling nursery products in Silicon Valley, California, from Woolworth, which was getting rid of them, and a larger store in Phoenix. Altogether the group of stores had sales in 1997 of about $20 million but barely broke even. Walt and his partners would have to raise $25 million to acquire the properties and make some necessary improvements in them. About half of this money would be in the form of equity, the rest in debt from a high-interest rate finance company lender. His plan was to put together a group of profitable, full-service, up-market retail home-and-garden centers into a large, category dominant company, and then take it public. He would do this by an aggressive acquisition strategy called a roll up. (Continues...)

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