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Barry Ritholtz

Thomas H. Lee's Sperling Sees 'Frothy' Deal Prices

Much has changed in the world of private equity over the past 40 years.

Private equity as an investment asset class has grown dramatically over the past 40 years. The deal that arguably put PE on the map was the purchase of iced tea maker Snapple by Thomas H. Lee Partners in 1992. THL took Snapple public just eight months after buying it, and sold it to Quaker Oats for $1.7 billion two years after that. Scott Sperling, the co-Chief Executive Officer of THL, discusses that and other important deals as the latest guest on the Masters in Business podcast.

Snapple became a model for PE deals because THL identified a company whose growth could be accelerated, redeploying assets in a way that created positive returns and then allowing the market to revalue the company. Sperling explains how PE has changed over time, starting from when he oversaw alternative investing for the Harvard University endowment. When he began there in 1984, there were almost no alternative investments in the endowment, but by the time he left 11 years later, they made up about 20% of holdings. Sperling says pricing in private markets currently ranges from “fair to frothy.”