Tim Geithner Could Easily Become A Billionaire If He Plays His Cards Right
This weekend private equity firm Warburg Pincus announced that Geithner would be joining to the company to help it make connections, do deals, and generally become an every day part of its operations.
Since then journalists, like Andrew Ross Sorkin over at Dealbook, have been right to point out that Geithner isn't necessarily doing the old 'leave-the-public-sector-to-join-the-dark side' move with this new job.
Warburg Pincus is no Goldman Sachs, with 'tentacles' in every transaction on the face of the planet.
It's no Blackstone either (which is more comparable as a private equity firm). Blackstone is a public company, Warburg is private. As of December 2012, Blackstone had $202 billion in assets under management, which dwarfs Warburg's $35 billion.
But that could all change with an aggressive push in the right direction. By hiring Geithner, Warburg Pincus has shown that it wants to expand its network through his Rolodex. Totally fine.
The firm also just did the biggest deal in its history this fall, flipping Bausch & Lomb Holdings Inc for $8.7 billion. Warburg bought it in 2007 for $4.5 billion.
Not bad.
So the ambition necessary to make Geithner fabulously wealthy could be there on the firm's part. And it just so happens that in private equity, there's a bit of a playbook for turning the C-level executives into billionaires. It's an IPO.
Oaktree Capital and The Carlyle Group did it in 2012 - not the best timing but Oaktree's Hoawrd Marks, and David M. Rubenstein and his co-founders over at Carlyle still got to be billionaires.
KKR did it in 2010 with $55 billion under management - they had a better showing, and of course co-founders Henry Kravis and George Roberts got to join the billionaires club as well.
The master of this play though, has to be Blackstone Group. The firm went public in 2007, and at the time it was one of the largest IPOs in the U.S. in five years. Current CEO Steve Schwarzman got even richer than he already was - rich enough to throw lavish birthday BLOWOUTS with celebs for the rest of his life.
And so did Schwarzman's co-founder, former public servant Pete Peterson. He made $1.8 billion off the IPO, retiring shortly after. Before that Peterson worked in Nixon the administration as Secretary of Commerce.
So guys, there's hope for Geithner yet.