Orlando Bravo is one of the most gifted Wall Street negotiators today. Back on the journey of a man who was not destined for private equity in his youth.
In 1985, then aged 15, he left his hometown of Mayagüez (Puerto Rico) and settled in Bradenton (Florida) to join the most demanding tennis school, that of Nick Bollettieri. His daily life was not very restful: he woke up at dawn, attended lessons at St. Stephen’s Episcopal School and then went to the tennis courts from noon. He faces other students like André Agassi and Jim Courrier under the scorching Florida sun. At sunset, after an hour’s break from washing and eating, he began studying, then went back to bed in his little apartment where four students per room stayed, just like in the army. Six days a week, the routine starts all over, for an entire year. For his former roommate Courier: “It was His majesty flies, tennis version “.
This extremely competitive environment will allow Orlando Bravo to rank 40e junior in the United States. He remembers, “It was a real humbling lesson. I did a lot of hard work and it was there that I realized that I could be effective under pressure and in pain. ”
It is thanks to this courage and perseverance that Orlando Bravo was able to reach the top of private equity. If his name is not familiar to you, he is the driving force behind the most successful company on Wall Street, with $ 39 billion in assets, Thoma Bravo.
Last February, HEC Paris and Dow Jones named Thoma Bravo as the best performing business buyout investor in the world, after studying 898 funds raised between 2005 and 2014. According to public data analyzed by Forbes, Thoma Bravo funds had a net return of 30% a year, far more than similar companies such as KKR, Blackstone and Apollo Global Management. The figures are even higher than its IT competitor, Vista Equity Partners, its main competitor. Since 2015, Orlando Bravo has sold or side 25 investments for a total value of $ 20 billion, four times their original cost. His secret? It only invests in reputable IT companies.
Orlando Bravo himself explains with a soft Puerto Rican accent: “The profitability of the software was really important. It had nothing to do with the other areas I had inquired about. It was obvious ”.
Since 2003, Thoma Bravo has completed 230 software transactions for more than $ 68 billion. Today, she oversees a portfolio of 38 software companies, which generate annual sales of nearly $ 12 billion and employ 40,000 people. Forbes estimates the value of the company, which is wholly owned by Orlando Bravo and a few associates, at $ 7 billion. Given his stake in the business and the cash he holds in his funds, Orlando Bravo has a fortune of $ 3 billion. This makes him the first billionaire of Puerto Rican origin, but it is also enough to bring him to the 287e ranking place Forbes 400 of the richest Americans in 2019.
As a tennis player who works tirelessly on the courts, Orlando Bravo made private equity a simple discipline. Almost 20 years ago, he understood that software and private equity go hand in hand. Since then, he has never invested elsewhere, refining his strategy and technique over the course of his contracts. He’s looking for companies that offer innovative software, like Veracode (a Massachusetts-based coder security manufacturer) or Ellie Mae (the default system for California-based online mortgage lenders), which his company has obtained for $ 3.7 billion last April. Among its investments, about $ 150 million is actually sales from regular customers, too specialized to attract the interest of giants like Microsoft and Google. Orlando Bravo seeks to do better than them with better operations, and its acquisition or turnaround strategy has already been developed.
The potential for transactions is always more numerous. In public markets, there are now more than 75 subscription software companies, valued at an estimated $ 1 trillion, all of which are in Orlando Bravo’s viewfinder. A decade ago, there were far fewer of these companies on the market, with around 20 of them. Investors all over the world were crying out for access to corporate funds, and loan companies are willing to take out the checkbook to fund his next big contract. The businessman says, “The opportunities that arise today are the best I have ever seen. This sector is booming and is undergoing deep structural transformations. ”
But Orlando Bravo didn’t come out of the blue. In Puerto Rico, he grew up in a privileged family settled in the Spanish colonial city of Mayagüez, which for years supplied tuna to the local canneries Starkist, Neptune and Bumble Bee. Her grandfather and father led Bravo Shipping in 1945, a lucrative business that broke through the huge tuna fishing vessels arriving at the port of Mayagüez. With his brothers, Orlando attends a private school in the hills of the city and spends his free time aboard the family’s motorboat.
He started playing tennis at the age of 8, and trained on the courts of the local university and the city’s Hilton hotel. His family later agreed to take him to San Juan on weekends, two hours away, to train at a better level. He remembers, “What I loved in tennis was the opportunity. I came from Mayagüez, and I was going to the capital to succeed. I was the outsider! “
Orlando Bravo quickly became one of Puerto Rico’s best players, allowing him to land at Nick Bollettieri’s Tennis Academy and then join the tennis team at Brown University. He quickly found his mark there and obtained in 1992 a diploma in economic and political science. His journey opened the doors to the American bank Morgan Stanley, which he joined as an analyst in the mergers and acquisitions department, where he worked 100 hours a week under the aegis of the famous negotiator Joseph Perella.
Thanks to his command of Spanish, Orlando Bravo finds himself in front of clients, while the other analysts are busy behind the scenes. In 1993, he worked for Gustavo Cisneros, a Venezuelan billionaire who acquired the Puerto Rican supermarket chain Pueblo Xtra International, and who opened his eyes to the world of business acquisitions. He also claims that this experience allowed him to know that he was not made to be a banker.
Orlando Bravo turns to Stanford University, where he insists on attending both law school and business school. He worked for a summer at Seaver Kent, a California-based joint venture, with David Bonderman’s Texas Pacific Group, which specializes in middle market transactions. After graduating in 1998, success was not immediate for Orlando Bravo, who remained unemployed for several months. After a hundred applications, his CV attracts the attention of Carl Thoma, one of the founding partners of GTCR, a Chicago-based private investment company. Carl Thoma, now 71 and presumed to be a billionaire, says: “The biggest mistake Texas Pacific has made is not to have offered it a job.”
Carl Thoma then sends the young Puerto Rican to San Francisco to find new investments and strengthen the company’s presence in the region. But his first contracts, concluded when he was not yet 30 years old, were catastrophic. He supports two web design start-ups, NerveWire and Eclipse Networks, just when the internet bubble bursts. The two companies then lose a large part of the $ 100 million invested by Orlando Bravo. He says, “I learned that I never wanted to invest in risky things again. It was too painful to live. ” The investment company faces other challenges, with underperforming investments in oil, gas and telecommunications. It was even one of the poorest performers in the sector at the time.
But the repeated failures will eventually give a fruitful lesson to Orlando Bravo and his associates. The young man realizes that he made the mistake of supporting start-up entrepreneurs, a fundamentally risky decision when he could buy already established companies for the same price, offering niche software to a loyal customer base. With the agreement of Carl Thoma, he therefore specializes in the sector. The market is teeming with bankrupt companies opened during the internet bubble and in want of interested buyers. Orlando Bravo got to work and in 2002 bought Prophet 21, a software supplier for distributors in the health and manufacturing sectors, his first master stroke.
Rather than wiping the slate on the team, Orlando Bravo is working with Chuck Boyle, CEO of Prophet 21, to increase profits by eliminating competition. When Chuck Boyle decides to buy Faspac, the young investor flies to San Diego to work in the Faspac owner’s garage for five days and analyze his contracts to determine the potential gains from the transaction. The CEO of Prophet 21 remembers: “Orlando did not just help us at the highest level in terms of strategy, but also when we had to get our hands dirty.” After seven acquisitions, Bravo sells the company for $ 215 million, five times its original value.
Software is quickly becoming the industry of choice for Orlando Bravo, while GTCR is enjoying great success. In 2005, the two men recruited three employees (Scott Crabill, Holden Spaht and Seth Boro) responsible for studying software applications, cybersecurity and web infrastructures. All of them are still managing partners of the firm today.
The real bargain of Orlando Bravo comes in the middle of a financial crisis, when Carl Thoma has just separated from his partner Bryan Cressey and includes the young investor in the name of the new company: Thoma Bravo. From then on, they specialized in software investment, with Orlando Bravo at the helm.
A series of takeovers of up to $ 1 billion follows: Blue Coat (network security company based in California), Digital Insight (financial software publisher also based in California) and Deltek (software provider project management based in Virgine), whose value has more than doubled under the leadership of our young investment prodigy. In 2009, the company’s first fund, consisting entirely of software, posted a net annualized return of 44% at the time of the sale of its investments, allowing investors to multiply their income by four and prove the potential of the sector. Orlando prides himself: “Whenever we were interested in a contract that did not concern software, they always seemed much less attractive than software transactions”.
After two decades of studying software, Orlando Bravo is now able to recognize clear patterns. He explains for example that when a company leads the way on a product, its sales explode then inevitably slow down as competition appears. A CEO will often use this signal to turn to new markets or spend a lot to increase sales. To remedy this, Orlando Bravo and his ten associates work alongside 22 executives and former executives from the software industry, who act as consultants. They monitor the income statements for each product line and seek contracts for undervalued products.
We must not forget the layoffs, which can represent up to 10% of the workforce, which Bravo is not sorry. He explains: “To turn the company around and prepare it for strong growth, you must first take a step back. It’s like boxing. “
Under the aegis of Thoma Bravo, companies have on average seen their cash flow increase, with margins up to 35% since 2018, almost triple the margins of average public software companies. The investor continues, “It’s like training for the Olympics. You have a specific objective to achieve and you define it very clearly ”. The booming market is now making the Thoma Bravo strategy more powerful. Loan companies are rushing to software debts and the market numbers are exploding.
With a new reserve of $ 12.6 billion for its 13e Fund raised in 2018, Orlando Bravo is considering more than $ 10 billion in deals and plans to start buying entire divisions from current tech giants. But competition is tougher today than it has been. Heavyweights like Blackstone and KKR are increasingly interested in software transactions, not to mention Thoma Bravo’s longtime rival, Vista Equity. Even the company of the Puerto Rican investor is not immune to error. The 2015 acquisition of Riverbed Technology, a digital network tracker based in San Francisco, for $ 3.6 billion, is currently experiencing difficulties due to the slowdown in sales and the excessive indebtedness of the l company concerned. But Orlando Bravo is not worried: “There are bigger and more interesting companies to turn around today compared to ten years ago.”
His greatest challenge to date is certainly found on his native island, Puerto Rico. Orlando Bravo announced last May that it will contribute $ 100 million to the Bravo Family Foundation, which will help promote entrepreneurship and economic development in the country.
The foundation was created within hours of Hurricane Maria, which devastated the island two years ago. Orlando Bravo was then in Japan for a fundraiser and immediately contacted his parents in San Juan to inquire. Fortunately, they were not affected, but the island was not spared. Five days after the event, his business jet loaded with 450 kg of provisions (water, cookies, meal kits, satellite phones, diapers, intravenous tubes, etc.) landed in Aguadilla, not far from Mayagüez. Orlando Bravo says he will never forget the fear on the face of the airport worker who opened the door of the plane: “All I could say was apologize for what had happened to them. “
He returned two weeks later on a larger plane, this time with 3 tonnes of supplies. It will even end up chartering two container ships, loaded with 270 tonnes of equipment. About collecting donations, he remembers, “It was like canvassing to get a contract.” In the first 30 days of Hurricane Maria alone, he had already donated $ 3 million, for final aid totaling $ 10 million.
With its donations as a weapon, the Bravo Family Foundation seeks to support entrepreneurs in the field of technology, even transporting them to the offices of Thoma Bravo for training. Orlando Bravo admits to being tired of the Puerto Rican status debate and sticks his tongue out about President Trump’s response to Hurricane Maria. He says, “My passion, which is the same as with business, is to go beyond long-term strategic pontification and take operational and tactical measures that will get things done. Economies are collapsing, businesses are losing revenue, trade is slowing and people are leaving. Do you have an idea to solve all these problems? Some people are stuck … and others love putting the pieces together. I feel like all of the operational issues can be resolved. There is always a solution “.