Introducing A Word for Our Sponsors, a new podcast series brought to you by the sponsor solutions group at Ropes & Gray. The podcast spotlights private equity leaders and the issues that matter most to our sponsor clients. On this first episode, hosts Deb Lussier and Paul Van Houten, the co-leaders of the sponsor solutions practice, are joined by Kase Jubboori, deputy general counsel and co-head of tax at Bain Capital, for a wide-ranging conversation on how Kase approaches important internal issues at Bain, and what advice he's seeking from outside counsel in doing so.
Transcript:
Deb Lussier: Hi, everyone. I'm Deb Lussier, and we'd like to welcome you to our podcast, A Word for Our Sponsors, where we talk with industry experts about the issues that matter most to private equity sponsors. I'm here with my partner and the co-leader of the sponsor solutions practice at Ropes & Gray, Paul Van Houten. Today, Paul and I are joined by Kase Jubboori from Bain Capital. Before Kase joins, Paul, why don't we take a moment to explain to our listeners what sponsor solutions is. Do you want to take a crack at that?
Paul Van Houten: Sure, Deb. Sponsor solutions is a cross-practice team of seasoned Ropes & Gray lawyers focused on representing our sophisticated private equity clients in a holistic manner. We are relationship-driven rather than transaction-driven. Our goal is to build deep institutional knowledge of our clients' businesses and provide them with the benefit of collective judgment, knowledge and insights on their most important matters like carry and compensation arrangements, management company capital and liquidity transactions including GP-stakes transactions and complex hybrid transactions like GP-led secondaries.
Deb Lussier: Super. So, with that backdrop, let's bring in Kase who we are super excited to have with us today on our inaugural episode of our podcast. Kase is a partner at Bain Capital and serves as the firm's deputy general counsel and co-head of tax. He's also an alum at Ropes & Gray and a good friend of the firm. Welcome, Kase.
Deb Lussier: Paul and I have had the benefit of talking with you over the years since you've been at Bain on your focus on what I'll call "house issues," and the ways in which outside counsel can add value and support, and really be thought partners to in-house lawyers, C-suite professionals and sponsors more broadly. We're really excited for our listeners to hear your perspective on these issues on the podcast today. To start, Kase, can you give us a little color on Bain Capital and your role at the firm?
Kase Jubboori: Maybe just to set the scene, Bain Capital is one of the world's leading private investment firms. We have approximately $165 billion of assets under management spread across 13 investment advisory businesses—those are in 24 offices worldwide and over more than 1,600 team members in support of that business. I and my team are responsible for the legal and tax functions that support the management growth and integration of those businesses, the offices and the people (the issues that Deb referred to as the "house issues"). We work very closely with our colleagues who are focused on fundraising, compliance, and transactional matters, because all those things need to be done in a manner that's synergistic and working in a common direction.
Paul Van Houten: It sounds like you have a lot to keep track of. Could you expand upon that a little bit more? How do you keep track of everything and integrate all the areas that you're responsible for?
Kase Jubboori: This is a place where it's really a combination between our internal team—which, I have a team of 15 people—plus, a really large and talented group of external lawyers who support us across a variety of different expertise and specialization, of which the two of you are two of the people we rely on.
Paul Van Houten: It strikes me that there's a little bit of a challenge here in that I know a lot of outside law firms, including Ropes & Gray, have become more specialized over the years. You have private equity lawyers, like me, who focus mostly on deals, and then, there are fund lawyers who focus mostly on funds, and even within those specialties there are people who focus just on certain particular types of funds of particular types of deals. Has the increasing specialization in law firms created particular challenges for you as a consumer of those legal services?
Kase Jubboori: I don't think that the increasing specialization creates challenges for us, but there is an opportunity, I think, that's being lost in the external legal market today to provide the type of specialization that our industry needs today. When our business was founded 40 years ago, a private equity lawyer or a fund lawyer could capably serve as a part-time general counsel for an investment sponsor while specializing in fundraising of deal matters. However, the businesses and the rules that relate to our industry and the risks that we face have matured, and it's become much more difficult to find outside lawyers who have the breadth of experience and the specific types of expertise necessary to support the kind of broad-based legal questions that sponsors face on a day-to-day basis, particularly as those legal questions arise in the context of being a sponsor. I think that's one of the reasons you've seen a significant expansion in the growth of in-house counsel teams who had sponsors over the course of the past 15 to 20 years. The firms have been adding personnel to build the expertise internally that they are not finding externally at the law firms. I think the best outside lawyers that we see are the individuals like the two of you who, while having strong private equity and fund formation practices, have effectively worked as fractional GCs for your clients over the course of many years. We just don't see a lot of lawyers in the space at law firms who've had similar opportunities to build that type of expertise.
Paul Van Houten: Kase, if you had the chance to switch sides again and go back into private practice for a big law firm, what would you say to the partners of that firm about how they could better serve the private equity community?
Kase Jubboori: This will sound self-serving for this podcast, but I actually mean it: I think I would recommend that they do what you and Deb are doing and start a dedicated practice group that's focused exclusively on the sponsor side. I think a practice like that would provide an opportunity to consolidate the issues that I think law firms see, but they see it on a more diffuse basis across many teams. To pull that knowledge together into a centralizing hub so that you're able to build the same type of expertise at a law firm that, right now, is really only able to be developed, particularly for young associates who are developing into the future partners of tomorrow, can only really be developed in-house at the sponsors themselves, so to create effectively the in-house experience a bit more at the law firm.
Deb Lussier: Kase, can you talk for a minute about how outside counsel can support you and your team as you all are working on your house issues, so to speak?
Kase Jubboori: I think the key thing to emphasize is that when you're in-house, you try really hard to understand what's happening in the market, broadly, so that you can be both an expert about your own firm and what your own firm is contending with, but also what others in the industry are doing and how they're solving problems. It's very difficult when you're internal to have a full view of the field of what's happening, and you try and supplement that as much as possible by networking with your colleagues and understanding how they're dealing with things and having conversations about that. But there's really no substitute for external counsel who are deeply knowledgeable across the entire industry and have the opportunity to both hone that expertise through advising multiple sponsors, but also through the repetition that comes from being an expert that is getting calls every day from across the industry. Those are two different perspectives—one is an internal focus, and the other is a much broader market focus. I think any sponsor really needs those two perspectives as much as possible—the inward-focused specialization of an in-house team, plus the outward focus and broad-spectrum view that an outside law firm provides.
Deb Lussier: I think that's so interesting, Kase. As a partner at a law firm, and having not been in-house anywhere throughout my career, I sometimes forget that the breadth of what I'm seeing—for instance, on carrying compensation arrangements across a multitude of sponsors—is something that an in-house lawyer who is singularly focused on their business and understands completely how their own carry and compensation works, that the breadth of what I see is very valuable to an in-house person. Sometimes, I think folks like Paul and I make an assumption that the information is available to everyone. Of course it's not, and so, using outside counsel in a way that allows us to share that information, on an anonymized basis, but anchors you and your business in the wider market, I've found to be one way that firms can assist in-house folks as they think about their own arrangements.
Kase Jubboori: I completely agree with that. If you think about it just simply from the perspective of change, every organization at some point is presented with a question of: Should we do something differently than the way we're doing it today? It's very easy to advise about how the things that work today should work and continue to work. It can become quite difficult to advise on how a change may play out, particularly if you have no experience seeing how that change has played out elsewhere. And so, it's only through the integration of what you know about how things have worked at your own business, coupled with the knowledge of how your outside advisors have seen things work at other businesses that you're able to really form a full 360° view of whether or not that change that's being proposed will make sense in your own environment; whether or not there's risks that are associated with that change that need to be socialized and addressed; and whether or not there's opportunities that you might not have thought about that outside counsel are able to help illuminate for you and for your business that you might not have even thought about, because you just weren't exposed to that in your in-house environment.
Deb Lussier: Yes, it's a bit of a little bubble environment, again, where you understand everything within your bubble to a degree that no one else does, but it's a bubble, nonetheless.
Kase Jubboori: My wife and I talk a lot about the mental load at home, which there's 100% of things that you need to think about: Who's thinking about what, and how are you thinking about them? I think about that through the partnership between in-house counsel and outside counsel, that in-house counsel are uniquely positioned to think about certain parts of the problem set that sponsors face and are uniquely positioned to not only think about them, but to advise on them, and to act on that advice. But there's a part of the overall problem set that in-house counsel are not well-positioned to advise on, and they really need their outside lawyers to carry that part of the mental load for them. And it's tricky, if, as an in-house counsel, you are working with, call it 12 core advisors all in an area of specialization (that's partly transactional, partly fundraising, partly employment relations, partly tax), you've now split that mental load instead of between two partners to between 13, and it's not always clear, I think, from an internal perspective whether any one person on the outside counsel side views themself as responsible for carrying that external mental load on behalf of the organization. So, finding ways to consolidate that advisory set so there's someone who can see across all of those pieces of the external advisory space so that they can advise an in-house counsel is incredibly helpful to in-house counsels—it's leveraging, and it provides a single point of context for calibration. One thing that pops up often is that when you're getting advice from specialists in a variety of different practice areas, the synthesis of those pieces of advice is not always there, and so, that portion of the mental load ends up coming back internal to an organization. The GCs have to synthesize that, which they're ultimately going to have to do, but they have to do it sometimes without any partner on the external side, or if they have a partner, it's 12 different partners who are each uniquely viewing it through the prism of their own specialization, and that can be difficult. A tax lawyer may view the tax problem as the most important problem. A regulatory person might view the regulatory problem as the most important problem. You really need somebody on the outside who can see across a variety of situations and who can help you synthesize those issues, because that type of partnership is incredibly valuable but also incredibly rare.
Paul Van Houten: You mentioned synthesizing legal advice. As a recent client on a personal matter, I came across a situation where I was getting what was probably really sound technical legal advice, but it was framed in the traditional, "On the one hand this...on the other hand that," and left me with making the tough decision. It struck me that what really good lawyers do is take on what you refer to as the "mental load"—help you make those decisions, alleviate some of that burden, and actually be an active partner in the solutions. Oftentimes, I think, it's not one-off legal advice that you're seeking—it's there's a business problem that needs to be managed, and it needs to be managed over time. One area that I think we've talked about in the past is risk management. How do you view things like risk management, and how do you think outside law firms can be a true partner with you in helping you alleviate the burden of managing risk for a global organization like Bain Capital?
Kase Jubboori: I think what I would first respond to is the first observation that you made about the nature of advice. We do see out in the market two different types of lawyers from an external counsel. There are the types of lawyers who simply, effectively act as a very deep well of expertise, but there is no judgment applied to that. It's like asking these new generative AI programs, "What's the rule?" and then, you get the rule spit back to you but without any calibration of how that rule may play out over time, and you're left to your own devices to figure out, "How do I think about that?" Again, you're approaching that question from your own set of circumstances, but it would certainly be a much more robust analysis if you could synthesize your own experience with the experiences that other clients that you've seen have been affected by. Of the two types of lawyers, the second lawyer being the one who takes that advice and then goes the extra layer and actually gets into the trenches with you as a GC—and says, "Now, let's think about the risk and what's practical, how do we think that that risk is likely to materialize, and, if so, how would you react to it?" and plays out the entire issue set—that's certainly the type of lawyer that I think nearly universally every in-house GC would like to find and to partner with. I'd like to say that they're plentiful, but it is actually very difficult to find good, capable counsel who can provide that level of across-the-board deep judgment, expertise, experience-based advice that can partner with you on these types of questions. From a purchaser of legal services perspective, we certainly would like to see as much of the latter type of lawyers as possible, and we actively seek those out in the context of the lawyers that we at Bain Capital choose to work with. The entry for all of our lawyers is that they need to be willing to not just provide a technical answer, but also work with us towards a practical, technical, synthesized solution.
As you think about risk more broadly on the second part of your question, "risk" is a pretty broad word when you think about it from an in-house counsel perspective. It's a word that encapsulates reputational risk. It's a word that encapsulates the risk of crime, the risk of investor relations, the risk of employee retention. How do you think about your brand? How do you think about the reputation you have, not just with one group of counterparties but all of your counterparties? It's a very diverse set of things that you need to navigate, some of which are technically based in the law: You know the answer to this question because there's a code that says that, and you know what that code says. And some of it's based on how you've seen things play out in the past: How was this dispute resolved? How have that set of incentives worked over time? As an in-house counsel, you need to be knowledgeable about how that side of things can play out, both by the letter of the law in the book and also in practice, with real people, real facts, and real circumstances.
Deb Lussier: Can you give us an example of where outside counsel advice has been critical in one of the issues that you've dealt with?
Kase Jubboori: I can't really speak to anything that we've specifically dealt with, given the public nature of this podcast, but what I can talk about maybe more generally are issues that are pretty prevalent in the sponsor space. Particularly for sponsors as they mature and grow, one of the things that many mature sponsors face is questions of capital: How do you raise capital as a sponsor? How do you build balance sheets? How do you invest and co-invest? There's a myriad of ways that individuals and firms inside of our space have thought about that. Some firms have gone public. Other firms have done specific equity slices sold to investor groups. Others have done lines of credit. Others have decided to not take out any external fundraising. The list of issues that are involved with all of those things is plentiful.
Sponsors are operating businesses like any other operating business, but with a really unique business model, and they need to know both the things that large-scale operating businesses need to know around how to manage capital, their P&Ls, their personnel, their risks, their insurance, their IP, their compliance with local laws and the tax rules that exist in these different jurisdictions—they need to know all of that—but they need to do it with an extra layer of knowing how to do that in the context of also being a regulated investment advisor to a variety of different products. Some of those products, their personnel invest in to. Some of those products they're being compensated out of, either with incentive fees or carried interest. Some of those are established products. Some of those are new products. And different individuals in the firms may have different responsibilities to different versions of those products. Making all of that work on a holistic basis across a whole firm in a way that is consistent, is fair across personnel, that has fidelity to the risk management policies that the firm has established for itself, and for the reputational risks that the firm and reputational profile that the firm has for itself, is an incredibly complicated task that is broader than any one or even small group of people alone can manage without the support of outside counsel. Those outside counsel help you to be more knowledgeable about all the opportunities that exist that are out there, but also to identify potential problems that may exist down the road so that you can avoid them before they occur. At the end of the day, the fundamental job that our firms have is to focus on delivering excellent returns for our investors, consistent with the mandates that our investors give us. Anything that goes awry, be it legal, tax, or otherwise, is a distraction from the core mandate that our firms have, and so, the day-to-day job that we have collectively is to make sure that, as much as possible, the firms can focus exclusively on delivering those returns for our investors.
Paul Van Houten: You've talked about having to analyze issues on many different levels, not just the pure legal risks, but understanding how a particular outcome of a decision might affect multiple stakeholders in your business, everything from your investors to your investment professionals to the partners in the business and other third parties. Maybe you could talk a little bit about one area, like co-investment, and how making decisions about how co-investment capital is raised and deployed affects all of those different areas.
Kase Jubboori: Co-investment for Bain Capital is a really important piece of our identity. We are one of the largest investors in all of our funds—that and the private partnership nature of our firm, we think, are two of the keystones of alignment that we have with our limited partners. We make money when our limited partners make money, and we do that through performance incentives in our funds as well as through the co-invest that we have sitting inside of those funds. That co-invest, on the one hand, sounds like just investment, right? All the listeners who are probably listening to this have made investments and they think, "That should be relatively straightforward." But it's actually more complicated, because if you want to offer co-investment to a broad class of your employees—which, for us, is an important feature of being part of the firm—you need to think about: What are the structures that you can utilize to make that co-investment available? You need to think about: How is that co-investment equitably shared across your population? What happens if you have shortfalls and people don't make those commitments? How does that work if you have people who are situated in different jurisdictions? Are the rules the same in each of the jurisdictions around who can invest, how they can invest, and through what structures they can invest? Do the tax rules work the same in all those jurisdictions? That can become an incredibly important commercial issue for the firm to be able to navigate, and so, therefore, it's an important one to make sure you get right and that you have good advice around, but it's also a very complicated one, particularly as a firm expands and grows, and adds new businesses, new personnel, new locations, and new offices.
Being able to navigate the various types of rules that can exist around the world, it's a really good example that you focused on there, Paul, of the places where it would be very difficult for me as an in-house counsel to know all the different ways and all the different rules without the benefit of having outside support that I should be thinking about that program not just for the moment in time when a new expansion happens, but also making sure that we maintain compliance with all the rules that have informed the growth of the program up until the current date. All of us are sort of stewards for the programs that we come into at the moment in time that we come into them. And we're benefiting from, in our case, decades of prior advice as well as the new advice that we're layering on, like a new layer of sediment, into the process. And so, you just want to make sure you've got that knowledge set and the people who are looking out for those legal issues broadly diversified, not just across yourselves, but also with your outside advisors, so that everybody's looking out for the program and making sure that you are always maintaining full compliance, and also identifying the opportunities to make the program better in the future.
Paul Van Houten: That's a good point. It's actually a lot of why we're doing this, and particularly for me that, as I look at the next generation, I want them to be able to interact with people like you and be able to serve the broad needs of the Bain Capitals of the world and not just be a specialist in some little, esoteric issue—you obviously need that advice as well—but you need to be able to interact with people that have a more holistic view of what your business does and what your business and legal goals are.
Kase Jubboori: I think what you guys are trying to do here is really great—I think it's needed in the marketplace. For most of my experience at Bain Capital, Ropes & Gray has been that broad counsel for us that has been able to always be there as another sounding board for the issues that we're confronting and trying to navigate, and also a source of solutions and creativity for the problems that we face. One of the things that I think is really great about the practice that you are opening up at Ropes is that it really gives you an opportunity to organize what you've already been doing for many years in a very centralized way. As firms get bigger, it just gets much harder for the sets of issues that we see to make sure that they're coming into the same group of people over and over again. It's just much more efficient for us to be able to talk to a dedicated team that can also reach out to the various experts within Ropes & Gray and help to leverage and synthesize that information before it even comes to us. That also builds expertise with your associates and with the next generation of partners so that these interactions become much more smooth and easier than they might otherwise be in the future, where the specialties themselves are incredibly needed. We need everyone—we need people fully focused on transactional work, fully focused on fundraising work, and fully focused on supporting the sponsor. Historically, the complexity of the sponsor side may not have been such that broadly it was viewed as necessarily needing its own dedicated practice, but as a firm that's at scale and has that complexity, I can say that we've really benefited from dealing with a core team over the years at Ropes & Gray. I think it's really great that other sponsors are going to be able to similarly benefit as you guys build out this new practice group.
Paul Van Houten: Thanks very much for joining us and sharing your insights today—we really appreciate it.
Deb Lussier: Yes, thanks so much, Kase, for being here and being our first guest on our inaugural podcast—we really appreciate it.
Paul Van Houten: I'd also like to thank our audience for joining us today. For more information on the topics that we discuss, please visit our website at ropesgray.com. Of course, we can help you navigate any of the topics we discussed—please don't hesitate to get in touch. You can also subscribe and listen to this series wherever you regularly listen to podcasts, including on Apple, Google, and Spotify. Thanks again for joining us.
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