Raymond Svider, the chairman of the private equity company B.C. Partners remember the immense pressure he felt during the weeks leading up to Christmas in the year 2017. The most significant investment of his company in the pet food brick-and-mortar retailer PetSmart was shaky. The outdated technology needed some overhaul, and costs were soaring. Svider was dividing his time between B.C.’s office in Madison Avenue in Manhattan and PetSmart’s Phoenix headquarters, where he served as interim CEO. PetSmart’s bonds traded just over 60 cents per dollar.
The CEO arrived at Phoenix to hear the PetSmart CIO that the heavily leveraged retailer had implemented an overall hiring freeze to save money which forced the company to use expensive contractors.
“I didn’t know there were a hiring freeze,” recalls Svider, who was able to cancel it immediately and let his CIO make 35 new hires. “You have to be agile and flexible. Sometimes, strict rules make people commit a mistake since they’re simply following rules.”
In the year 2014, Svider was bucking almost every investment and business convention. A leveraged buyout artist who was raised in Paris with an advanced degree in electrical engineering at one of the French ” Grande Ecoles” and an MBA from the University of Chicago, Svider aged 59 was doing double duty: two days a week as the steward of an investment of 40 billion (assets) P.E. firm, three days working at the 1,650-store PetSmart in which B.C. paid $8.7 billion in 2014.
With $6 billion of debt owed to the LBO as well as $180 million in dividends Svider had sucked away, PetSmart was hurtling toward an overhaul as pet owners spend on the web. The usual plan of action called for drastic cost reductions to find the money to pay the lenders. Svider did the opposite and doubled down.
The retailer found a place in its credit agreements, which allowed him to take out even more money, causing anger to creditors and allowing him to purchase a non-profit online pet food store Chewy. For outsiders, this was the 21st-century version of the famous dot-com firestorm Pets.com. However, Svider knew that Chewy’s multimillionaire CEO, Ryan Cohen, surpassed every financial target Cohen had set earlier in the year when they first got together. While it wasn’t making money, Chewy wasn’t burning cash because it was increasing. In addition, it was ahead of Amazon in its market. It was the perfect opportunity to consider a splash on his gamble on PetSmart.
Beginning by offering $1 billion in cash, Svider wound up paying $3 billion money for Chewy beating Petco, a rival Petco, in April 2017. The skeptics roared, the bonds fell, and lawsuits were filed. However, four years and the pandemic-driven pet boom has transformed Svider’s wildly innovative plan into one of the most significant private equity wins ever.
Chewy, which is now listed on the stock exchange, has a market value of around $31 billion in addition to its revenue has soared more than tenfold, reaching the tune of $9 billion in 2021. PetSmart is also cutting back on its debt and has refinanced the company’s buyout loan in January. Overall, investors of Svider have a $30 billion profit.
“You need to be ruthless and very quick to consider because, in any business, the world is changing every day in many ways you can’t anticipate,” Svider says using a French accent in his Hamptons mansion in which he is working remotely with his wife, three kids and two cats named Cashmere Pearl and Cashmere. Pearl. “Conviction is fundamental.”
An investor who learned by himself, Svider got his start in the 1980s following the renaissance of the leveraged buyout boom. The year 1989 was when he was scouted from graduate school by famous investors Bruce Wasserstein and Joe Perella. After three years, Perella relocated into his current position at the Paris headquarters for Baring Capital Investors, a small buyout company part of the London-based Barings Bank.
In 1995 an untruthful trader at Barings, Nick Leeson, suffered losses of more than $1 billion and rendered Barings, a bank founded in the year 300, insolvent. A rival ING acquired barings for dollars for pennies. It was an opportunity for Svider, who was working with the division’s co-founder. Baring Capital was spun off and changed its name to B.C. Partners.
In the 2000s, Svider moved to London to negotiate telecom contracts as markets became more liberalized, and in 2007, as B.C. Partners expanded into North America, Svider took control of the business.
The company’s first major acquisition to the U.S. that year was the $16 billion acquisition of the satellite operator indebted Intelsat that quickly was in trouble and filed to file for protection against bankruptcy in 2020. The successes of Svider, however, are far more than his missed opportunities.
There is nothing more indicative of his successes than the willingness to place risky bets. One notable example for him is GFL Environmental, a Toronto-based waste management rollup founded by Canadian businessman Patrick Dovigi. In the year 2018, B.C. Partners recapitalized the company with a value of $2 billion, acquired 40% of the company, and aimed to grow it into Canada and the U.S. with acquisitions.
The coronavirus outbreak hit, GFL was working on the idea of an IPO, and Svider suggested to D0vigi that they go ahead despite the market’s volatility. GFL set its IPO price at $19, which is lower than the prior pandemic range of between $20 and $21 — one of only five listings that will be available in March 2020. The public listing, Svider believed, would aid in helping GFL profit from the upcoming market turmoil. After the first plunge to $13, GFL’s share has nearly tripled since it bought assets from
Houston’s Waste Management and other competitors. B.C. Partners’ GFL holdings are worth more than $5 billion, three times the amount it invested in its initial venture. “Raymond has a unique ability to cut via the B.S. and focus on the big picture,” Dovigi states.
Despite private equity’s tradition of generating profits as fast as it is possible, Svider seems to have no desire to sell Chewy even though, since mid-August, Chewy’s shares are down from $96 to $75, which has wiped out $7 billion in gains, as the pandemic’s impact on pet spending has slowed.
B.C. Partners and co-investors have an ownership stake of 76% in the stock which is currently worth close to $25 billion.
There could be a successful move to be made in Svider’s pet industry strategy. The IPO of PetSmart could be able to fetch an estimated $10 billion. The once-distressed retailer’s revenues increased by 17% in the second quarter, to $2.3 billion. In the first quarter, it earned $342 million in cash flow. PetSmart’s previously distressed bonds trade at a premium to par.
Svider insists that the market for pet products, which emphasizes health care — is under-appreciated. Are they looking to build on his gains by accelerating departure? He says no, but: “We don’t feel that we’re in a particular rush.”