George W.'s L.A. Pointman.

Influential in Republican circles and a friend to President Bush, investment banker Bradford Freeman says current investment climate provides great opportunities for buyout firms

FARGO the city, has a reputation for being quite cold. Fargo, the investment banker, has a reputation for heating up Republican campaign coffers.

Bradford M. Freeman, the co-founder of investment banking firm Freeman, Spogli & Co., was dubbed "Fargo" as a freshman at Stanford University in the 1960s. A star athlete from Fargo High School in North Dakota, Freeman arrived in the Bay Area with a four-year football scholarship but spent most of his time riding the bench.

"I'd gone from outstanding offensive player of the year in Fargo and the biggest man on the team at 180 pounds to competing with guys who were 6-4 and 250 pounds," he says. "They were tougher, stronger, faster and meaner."

Ultimately, the onetime economics major and athlete went on to raise millions of dollars for the campaign and inauguration of his close friend George W. Bush, whom he had met back in 1979, when Ron Spogli, a classmate of Bush's at Harvard Business School, introduced the two on a trip to Midland, Texas.

Four years later, Freeman and Spogli founded the investment banking firm Freeman, Spogli & Co., which has offices in Los Angeles and New York and a current fund of $900 million. Ironically, one of the partners in the firm is Democratic fundraiser Bill Wardlaw.

In March 1999, Freeman started raising money for Bush in California, a state all but conceded to the Democrats. He helped bring in an estimated $10 million for the campaign and another $25 million for the Republican National Committee.

Then Freeman agreed to become finance chairman for the Presidential Inaugural Committee, which meant coming up with another $35 million. He'd be the first to concede that he's a lot better at raising money than he ever was at playing football.

Question: After the work you did for the Bush campaign, did you expect to get an appointment to a federal post?

Answer: No. I'd be terrible at it. I have a short attention span, and it's not as easy to get things done as in business.

Q: Why do you think President Bush did so poorly in California despite his last-minute advertising push?

A: The Democrats have a 13 percent lead in registered voters in California. I think Democrats also had more of a ground game than we thought, and there was an initiative (Proposition 38) that got the teachers to the polls, who tend to be more liberal, so they had a higher turnout than we expected. Also during the last eight years Gore made 75 visits to California, so he had some core relationships. Having said that, surprisingly, Bush made some fantastic inroads in Silicon Valley. Frankly, the party organization could have been better, which we think is being changed.

Q: What's it like to be an active Republican in a business partnership with Bill Wardlaw, a personal friend of Bill Clinton who works hard on behalf of Democrats and was a key player in helping bring the Democratic Convention to L.A.?

A: It's fun. We can kid each other, and one's own political beliefs should not make any difference. I think it would be sort of boring in the office if everyone had the same beliefs. Wardlaw's not the only Democrat in this office. He's also a big Notre Dame fan, which is fun. It helps that I get a different perspective on things. Bill was Mayor Riordan's right-hand man for five or six years, and the mayor's a Republican. I've also had close friends who are very conservative marry very liberal wives, and it's worked out.

Q: Who are you supporting for mayor of Los Angeles?

A: I haven't decided. I just spent so much time on the presidential race and the stress of the 35 days after that and being finance chairman of the inaugural, I've gotten a little burned out. I'm taking a sabbatical.

Q: So let's shift the discussion from politics to business. How would you describe Freeman Spogil?

A: We are a limited partnership made up of large institutions resulting in a $900 million fund. It's only drawn down as needed. Our charge is to source, execute, monitor and exit investments. We have been very helpful to companies in the monitoring stage and pushing them to make acquisitions. Leverage buyout firms in the old days would buy companies under book value and liquidate the company and end up with a profit. We buy existing, well-run companies, set management properly and grow the companies properly, which is the opposite of the stereotype LBO that gave it a bad name. We, in fact, push our companies to make good acquisitions.

Q: How long do you stay invested in your portfolio companies?

A: Four to seven years is our typical holding period. Some companies that aren't doing as well take a lot more of our time than the ones doing very well.

Q: The company's portfolio contains a wide variety of companies - from Asbury Automotive Group to Vibe/Spin Ventures. Is there an underlying investment strategy?

A: There are some recurring themes in our portfolio. Retail, which we define as not just stores, but also includes restaurants, service-oriented businesses and catalog direct-marketing businesses. We do only friendly transactions and we are very active managers. Typically, we invest for control of a particular company.

Q: Asbury Automotive Group was a deal that eventually brought the firm into the online sale of automobiles through its connection with Greenlight.com, which has since merged with CarsDirect.com. What is the future of selling cars over the Internet?

A: There is no question that there will be a role for e-commerce in selling automobiles. A lot of consumers are going online to shop for the price of a car, but there is no question that people still want to come out to the dealership and see the car, meet the people and know who is going to be servicing their car. As for Greenlight.com, it was a joint venture to do e-retailing in connection with our company. We still have a tiny portion of the company after its merger with CarsDirect.

Q: The firm also had a stake in MVP.com, which, despite support from John Elway, Michael Jordan and Wayne Gretzky, was another high-profile dot-com failure.

A: There was always the question whether we would start our own online strategy or do it in connection with someone else. We decided to do it with someone else. It was an exciting venture because of the people involved. We got a lot of free advertising in the beginning. But with a number of e-retailers the problem is, when the markets crashed for funding these companies, they just weren't economically viable.

Q: Are there any investment opportunities that Freeman Spogli stays away from?

A: We absolutely don't do heavy manufacturing or turnaround situations.

Q: What's on the horizon for the firm, especially in a slowing economy?

A: Our basic charge - to invest in companies with good management, attractive growth situations and at an attractive price - won't change. The financing market is a disaster right now. Although, ironically, the junk bond market has been strong the last couple of months. There are some great opportunities out them - not unlike it was when this business got going 20 years ago. At that time, companies were selling at three to four times earnings, malting it possible to buy a position and then try to acquire the company .The cycles come and go, and you just have to move ahead.

Q: To what extent have you found the decline of the dot-com sector has affected the economy, and technology firms in particular?

A: They will have a harder time raising money, (but) with valuations way down, it should help them to be able to buy things at a much more attractive price. Having said that, valuations should have gone down commensurate with the markets, and they haven't. There is still a lot-of money around, and the money (investors) are putting in to start a company is smaller relative to what the perceived exit price should be.

Bradford M. Freeman

Title: Founding Partner

Organization: Freeman, Spogli & Co.

Born: Fargo, N.D., 1942

Education: B.A., Stanford; MBA, Harvard

Career Turning Point: Leaving Dean Witter to form the firm Riordan, Freeman & Spogli

Most Admired Person: President George W. Bush

Hobbies: Golf, bridge and hunting

Personal: Divorced; one child