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A Genteel Style of Buyouts

Most private equity outfits didn't get to the top by being nice guys or good sports. But the partners at Madison Dearborn are proving that gentlemen can win at this game, too

The 30 partners at Madison Dearborn negotiate leveraged buyouts as smart as anyone's. They're just so much nicer about it. Chicago's Madison Dearborn Partners—among the nation's largest private equity firms—has delivered average returns of 22% to investors over its 15-year run. Sure, its portfolio companies, like any taken private in a leveraged buyout, are laden with boatloads of debt. But at Madison Dearborn, the deals usually are bloodless; the partnership invests only in companies where it can keep incumbent management. It rarely extracts special dividends and has even cut fees to investors when the partners determined performance was lagging.

Named for its headquarters address at the northwest corner of Madison and Dearborn Streets, the firm is a bastion of Midwest sensibility. Offices in its 38th-floor suite are understated, save for a giant, red fiberglass bull purchased at auction for $28,000 by co-founder and Chairman John A. Canning Jr. after the city's "Cows on Parade" street art exhibit in 1999. Ties are mandatory, and there are two spares at the reception desk lest anyone forget. Why? "This is serious business," says co-CEO Paul J. Finnegan.