John Childs: the other rich Mass. guy charged in the Fla. ‘day spa’ sweep
We all know Bob Kraft. But how about the other ultra-rich Massachusetts businessman who was charged last week with soliciting prostitution in South Florida?
That would be John Childs, a private equity investor who keeps a low profile, even by the secretive standards of the private investment world.
“My theory has generally been: Don’t talk to people and they won’t write about you,” he told Globe columnist Steve Bailey in 1995, when Childs was just starting his own firm, J.W. Childs Associates. Childs was coming off of eight years as a top deal-maker for the Boston buyout pioneer Thomas H. Lee, where he engineered the purchase of the beverage company Snapple for $130 million, and then its sale a few years later for $1.7 billion.
Childs still isn’t talking much, but he’s getting written about because, well, it’s not every day that two highly respected septuagenarian business moguls get accused of patronizing a sleazy “day spa” as part of a crackdown on human trafficking. Childs, like Kraft, has not been detained and has denied breaking the law; Childs’s attorney also called the allegations against him false.
Investment firms live or die by their reputations. Will the allegations against Childs damage the one he labored to create? Probably not much, and here’s why.
Childs, 77, was not working full time at the firm before he ran afoul of police in Vero Beach, Fla; his role at J.W. Childs had diminished over the past decade, and he owns only a minority stake in the firm, according to a person familiar with the situation. He is not a “key man” in the firm’s current fund, meaning he is not considered crucial to its investments, this person said.
On Monday evening, J.W. Childs said its founder had retired as chairman and as a director of KeyImpact, a company owned by its fourth buyout fund.
“As it has been over the past decade, the firm will continue to be led by Adam Suttin, managing partner, and David Fiorentino, Jeff Teschke, and Bill Watts, partners,” the company said in a statement.
If J.W. Childs seems insulated from Childs’s personal problems at this point, it is also in the dark about his situation. “We do not have any information about the allegations involving John Childs beyond what we have seen in the media,” said a person speaking for the firm.
I didn’t know anything about the firm or Childs — a graduate of Yale University and Columbia University’s business school who worked in investments at Prudential Financial for 17 years before joining Tom Lee — when the news hit. That’s partly because of their preference to fly below the radar, and partly because the Waltham firm is a niche player, compared with much bigger and better known Boston buyout shops like Bain Capital, HabourVest Partners, and Thomas H. Lee Partners. (Lee himself is no longer there.)
(Private equity firms use a combination of investor money and a lot of loans to buy companies, with the aim of making them more valuable by improving operations and strategy — and sometimes slashing jobs or sending them overseas. They then seek to sell the companies at a profit, either through an initial public offering or to another buyer.)
The basics I learned are these:
■ J.W. Childs has invested $3.7 billion in equity over its 24 years of buying companies, according to its website; some firms do that in a year. The deals it does are relatively small, valuing the acquired businesses at an average of $260 million.
■ The firm’s focus is on consumer products and specialty retailers. Some of the companies it has invested in over the years include Joseph Abboud, Meow Mix, and Mattress Firm.
■ In addition to Childs, who is chairman, the firm has eight partners and operating partners; they are all men. Of the five remaining senior investment and operational professionals, one is a woman — the chief financial officer. Two of three junior people are women.
I know what you’re thinking (because I thought it, too): One woman among 14 senior professionals? Just 7 percent — that’s below average in the private equity business.
According to a 2017 report by PricewaterhouseCoopers, women accounted for 9.4 percent of senior private equity professionals. The average for venture capital firms, whose diversity shortcomings are well documented, is 11.5 percent. It’s 11.2 percent at hedge funds, the “bro” bastion of Wall Street.
J.W. Childs shouldn’t be tarnished by the alleged misdeeds of its founder. But along with much of the rest of the investment business, it should be embarrassed by its lack of true gender diversity. Fixing it would be one small step in creating a culture where no man would think it was OK to go to a day spa like the ones in South Florida.