Bear Growth Capital Partners’ Paul Lattanzio finds gold in hidden places — and isn’t afraid to hold onto it

Until he was 15, Paul Lattanzio weighed less than 100 pounds. Smaller than most kids in his Valley Stream, New York, neighborhood, Lattanzio says he “learned how to compromise and rely on a good sense of humor to get me out of trouble.” Those skills now drive his deal prowess, as he persuades entrepreneurs to sell their firms to Bear Growth Capital Partners, one of Bear Stearns’s top private-equity groups.

Lattanzio has been on a fast track since his time at the University of Pennsylvania’s Wharton School; his undergraduate degree was enough to land him a job as an M&A analyst at Bankers Trust, where he worked from 1984 to 1997.

Rotating assignments, he found private equity the most challenging business because “it combined corporate finance, strategic thinking and capital markets. Private equity involved learning how to be an entrepreneur and running a business.”

In 1992, he became managing director of BT Capital Partners, which was investing $250 million annually by the time he departed five years later.

After a stint at NationsBanc Montgomery Securities, where he co-managed a $600 million private-equity fund, Lattanzio helped launch Bear Growth Capital Partners in 2003. Since its inception, the fund has raised $375 million and put $120 million to work in 14 deals; it typically likes to invest $10 million to $30 million in companies with revenues between $50 million and $250 million.

To find these midsize gems, he and his team of eight professionals network constantly, getting their names out “among the right people who are going to see the deal, including lawyers, estate planners, brokers and accountants.” When they hit, deals this size pay well. One of BGCP’s better moves was acquiring half of clinical trial company Clintrak Pharmaceutical Services in 2003.

Fischer Scientific bought Clintrak three years later for $125 million, yielding Lattanzio’s group several multiples on its investment. (On a personal note, Lattanzio has also grown several multiples; he’s now a solid 170 pounds.)

How can others reap similar success? Lattanzio reveals three of his guiding precepts.

1. A great management team trumps a great business.

Ten years ago, if a private-equity firm bought a solid company, the business remained strong five years later. Now businesses change so rapidly that “you need a great management team to figure how to make money in a changing environment,” Lattanzio says. Thus management is just as important as the balance sheet.

2. Go beyond due diligence.

BGCP doesn’t just study financial statements — it calls a company’s big customers. “We ask what the company is doing well, what it could do better and what other products it would like to buy from them,” Lattanzio says. The answers can help write a growth plan.

3. Consider holding oNto the recently acquired company.

Most buyout shops, true to their name, buy and quickly sell. But sometimes holding onto a company makes the best business sense, Lattanzio says: “If we’re making 25 percent a year and the business is humming, why sell it?”

Scorecard

Paul Lattanzio

Age: 43
City: New York
Firm: Bear Stearns
Position: Head of Bear Growth Capital Partners

Education: B.S. in economics from the University of Pennsylvania’s Wharton School of Business

Career Arc: Started at Bankers Trust in 1984 and advanced to managing director of BT Capital Partners, departing in 1997. Served as a managing director of NationsBanc Montgomery Securities, a private-equity fund, from 1998 to 1999. Joined Bear Stearns in 2003.

Really Big Deal: Last year, Lattanzio led the $50 million acquisition of Everything but Water, America’s largest women’s-swimsuit retailer, then rolled up its two main rivals to create a 72-store powerhouse.

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