Episode summary
$23B Investor on Warren Buffett, Compounding & Playing the Long Game
How I Invest With David Weisburd
· · 53 min · Hosts: David Weisburd · Guests: Michael Fisch
Summary
Michael Fisch traces American Securities from a $71.4 million first fund in 1994 to $23 billion in AUM by staying focused on U.S. industrial and related services businesses. He argues that private equity works because managers think about cash flow, not just earnings per share, and that the firm’s edge has always come from disciplined underwriting rather than chasing every adjacent strategy.
He also says the industry expanded from a tiny institutional market in the 1980s into a multi-trillion-dollar field, but private equity still cannot scale like credit because deal volume is finite. That is why he prefers a large funnel of opportunities and a very narrow filter: see as many deals as possible, then invest only where the firm has a clear right to win.
A major part of that edge is people. Fisch says long-term success comes from hiring people who like the work and the people, triangulating recruiting decisions with tests and references, and building deep relationships with CEOs and capital partners. He frames American Securities’ resources group as a way to help portfolio companies win, and says more than 80% of CEOs stay through exit or beyond.
Key takeaways
- Fisch says American Securities grew by sticking to industrial and service businesses in the U.S. rather than expanding into private credit or other adjacent strategies.
- He argues private equity’s core advantage is cash flow analysis, not public-market-style EPS accretion math.
- American Securities sees roughly 400 to 500 potential investments a year and typically does only one to four, which Fisch sees as essential discipline.
- Fisch says more than 80% of CEOs who were in place at investment remain through exit or today, which he calls the firm’s CEO win rate.
- He expects retail capital to be a major new source of demand for private equity, but says it will favor the biggest brands and the middle market differently.
- Fisch says the firm’s edge comes as much from relationships, hiring, and portfolio support as from buying companies well.
Notable quotes
“I care about cash flow. And this, you call it a religious war if you want, just looking at it from a different perspective was interesting to me”
“we want to really like them and be excited that they're going to come work with us and make sure they're going to like the work”
“we try to triangulate and again early on in American securities we started doing like quick testing on what kind of person is this”
“I regret a few people we didn't hire that I thought were would be good hires, but we didn't have a consensus around them”
How the episode opens
Michael, you founded American Securities Capital Partners 1994 with a $71 million firsttime fund. Today you have $23 billion AUM. How has the market evolved over several decades?
A lot in every way. At the origins going into the 1980s, there was really no M&A market at all. Companies didn't get bought and sold unless they went bankrupt.
Investment banks had no M&A investment bankers. They one guy at a desk drawer might have been the selling department for corporate finance. When I came to Wall Street out of college in 1983, I was lucky enough to get hired by an investment bank in their mergers and acquisitions department.
It was Goldman Sachs. Very lucky to have been there. Terrific people I worked with and many of them are still my friends.
I saw then as a the most junior person in the 33 person mergers and acquisitions group because Wall Street was so much smaller then that there were these people then called bootstraps bootstrappers who were sometimes looking at smaller M&A deals and paying prices that were higher than anyone else so they would buy the company. And for the rest of our Goldman Sachs M&A activity, most of the clients and the buyers were public companies. And the complete focus of the financial analysis was is it accretive?
Which is to say, if we do the acquisition, will our earnings per share go up creative versus down dilutive? And if we had to pay such high price that it went down, how long would it be dilutive? And these other people weren't looking at that.
they were looking at cash flow. So, for example, if you had two chemical companies and they both had the same net income, but one chemical company had just built a brand new plant, brand spanking new, like you bought a new house and they had used their cash to do that.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private equity evolution
- fundraising and aum
- investment discipline
- hiring and judgment errors
- ai and financial research
Companies and tickers mentioned
- American Securities
Watch the episode
Watch “$23B Investor on Warren Buffett, Compounding & Playing the Long Game” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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