Voice of Experience: Lynn Tilton, CEO, Patriarch Partners

Image courtesy cnbc.com.

Over the course of her 28-year long career, Lynn Tilton has walked a winding road from Yale to her current position as CEO of Patriarch Partners, a $7 billion investment firm.

At the age of 25, Lynn Tilton was the single mother of a 2 year old, working 100 hours a week and putting herself through business school. An overachiever from a young age, Tilton played on the national tennis circuit while growing up and went on to play tennis for Yale. Her life turned upside down when her father died during her junior year. “Until that point, I was a golden girl, a nationally ranked tennis player and Yale student. That’s where my world all unraveled and started to change.”

She continued, “The number one loss is death of a working parent because it causes the family structure to change and the children to be left behind.”

Forced into an unfamiliar adult role, she married her high school sweetheart during her junior year in college. “I was looking to grow up, help take care of my family, including my younger brother.”

Launching Pad to a Career

When it came time to graduate Yale, she was still not sure what it was she wanted to do. “All I’d ever done was play and teach tennis. So I began to ask around about what people thought were the best jobs. Everybody kept telling me that investment banking was where the best paying jobs were. So I just started interviewing at Morgan Stanley, Goldman Sachs, and other investment banks.” She was the only person from Yale hired into Morgan Stanley’s analyst program that year, an event she calls “ the launching pad to [her] career.”

Still, she said, ““My early years were difficult, dark and bumpy. I remember little.” She gave birth to her daughter during her second year at Morgan Stanley. “I may have been the first professional woman to have a child at the firm. It was not easy.” In addition, her marriage was disintegrating. “I was working, going to business school, and taking care of my daughter. Survival was the noblest of my causes.”

Going from the frying pan into the fire, Tilton left Morgan Stanley in 1983 to start her own restaurant while still attending Columbia Business School. She laughed, “Owning your own restaurant will send you right back to Wall Street.” But her time in the restaurant business allowed her to identify both her strengths and weaknesses. “I realized there that the more natural side of me is the creative side. The methodical financial side is the one I had to develop.”

Upon graduation from business school, she went to work for Goldman Sachs’ corporate finance group, focusing on IPOs, then on to Merrill Lynch to work at the merchant bank concentrating on leveraged buyouts for another couple of years. “I tried not to show that I was single mother. There wasn’t going to be any sympathy for my plight anyway,” said Tilton. “At the firm, there was no flexibility, no understanding for going home early so I missed every parent-teacher interview, every play, and every event. When I had to make a choice between being home and leaving a project in the middle, I wouldn’t leave the project. I just couldn’t afford not to be working; I just needed to work as if I wasn’t a single mother with a child at home.”

Then, an epiphany: “I realized at that point that I’d been in investment banking for nine years and wanted to do something different. In the late 80s and early 90s, the industry started to see LBOs going bad and beginning to be restructured. There was too much leverage and projections rarely rooted in reality. I started to think for the first time—not merely follow others —and I became fascinated with the investment side of business.” Her understanding of the thought process behind the deals, led to a four-year stint at Kidder Peabody doing distressed debt research, sales and proprietary trading

Building a Powerhouse

Then, once again, she went looking for a change; this time, to allow her to spend more time with her daughter. Tilton and her daughter moved to Florida in 1990 and in 1993, she planned to take a year off and travel to Southeast Asia with her daughter. “But we got as far as Hawaii before I got a great offer to work from home for Amroc Investments, the first firm that traded private paper and bank loans.”

Five years later, a group of her accounts asked her to go out on her own to start her own broker dealer and bank loan research firm. When she did, it was on her terms: “Rather than copy other firms, I decided to build a firm around banks with distressed loans in their portfolios, not around the buyers. We traded one billion in paper in our first year.” That formed the basis for the powerhouse that Patriarch is today.

“My business is about proving that making money and making the world a better place are not mutually exclusive concepts Every year, each fund has demonstrated a minimum of 25% returns on an internal rate of return basis with certain funds returning in excess of 60% in some years… But in reality I want to be remembered for how many lives I have touched . For every company saved, those people’s lives are changed.” By taking companies that others would throw away and rebuilding them, Tilton actually adds value to the world. “Because we have restructured and acquired 150 companies, 250,000 jobs have been saved that that would otherwise have been lost. This is what we at Patriarch do each day, not because it is easiest way to make money, but because I want to contribute to and change the world.”

Work/Life Balance: Finding Freedom

Of the industry in general, Tilton thinks it is a “difficult place” for women. “It certainly wasn’t a gentle place for women and women tended not to nurture each other. I found what was woefully missing was a sense of camaraderie among women.” She added that women are also faced with the challenge of dealing with the competing concerns of work and life. “Women always make that choice between career and children. I have many strengths, but balance is not among them. It’s hard not to feel as though you’re always giving up something in both areas. But there is no shame in making the choice to leave behind a Yale education to take care of children because you are raising the next generation.”

Still, she cautioned, “Making that choice will make it difficult to be successful and ignoring that fact or pretending it doesn’t exist is wrong. I was sad every day I left my daughter but that was the choice I made for financial reasons. When I came back to Wall Street to create Patriarch, I was already free of any financial burden. I could have retired. I had a high school-aged daughter, which gave me the freedom at that moment to be me. I built the business around that freedom, working over 20 hours a day.”

Tilton stresses that women can, and will, be successful, especially if they pay attention to the natural talents that women do have. “Part of the reason that women are sometimes not successful is that women act like men in a man’s world. In fact, as women, we are creators. When we ignore those instincts, our chances of success diminish.”

But that doesn’t mean it will be easy. Said Tilton, “The path is winding, and destiny is destiny. It is important to understand that for all people who have achieved success, it is how they reacted to their failures or dark periods in their lives that have shaped who they are. In good times we ride the wave but in bad times we have to take a good look at ourselves and make changes… I always say, the truth is cold and hard but it is also the starting point of hope and salvation. No one travels a straight path to the top.”

Making Money and Making the World a Better Place

Of the current economic crisis and what she thinks should be done about it, Tilton said, “I’ve taken a very active voice and have been using my tactical understanding to try to convince others about what needs to be done.. What I have proven over the years is that if you do provide capital with strategic and operational support it will sustain and create employment. One year ago, I took full page ads in the New York Times and Washington Post. It was a clarion call to rebuild America. I look at the US economy simply: Our biggest problem is unemployment –because the small and mid-sized companies are liquidating. So, if we want to get somewhere quickly, we need to get those companies working capital loans immediately to stem the tide of liquidations.”

Tilton has now put her money where her mouth is as well. “I’ve taken an alternative path. I have put my own money aside and hope buy assets from the FDIC where I can begin to make a difference across many companies. I’m using $200 million of my own personal money to save companies. It has become my personal mission to end joblessness in America. We need to put people to work.”

Her ongoing mission is to “make a difference from a business leadership point of view, to set an example by validating t that we can make money and make the world a better place simultaneously.” She added, “My work and who I am is one and the same; it is a reflection of who I am personally. And I’ve given up everything to commit to this personal journey.”

“In the end,” she said, “it is people standing shoulder to shoulder walking in the same direction that creates a force of nature. We can’t change things until we all start thinking about the pain and plight of others.”