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Paul Parmar: A man of the world
10/25/2008 - By by Tobi Drucker Tesoriero
Photography by Linda Rowe
A Man Of The World
Pegasus, the legendary mythical winged horse, fills our imaginations with images of power, excitement, and wonder. Whether transporting Zeus through the skies or shooting lighting bolts of energy down to earth, this grand creature has always painted an imagery of possibilities.
Paul Parmar, founder and chairman of Pegasus Blue Star Fund, embodies the spirit of this mythical icon. Like Pegasus, Parmar enjoys flying through the sky. A trained fighter pilot, he still flies planes and owns aviation companies. Also like Pegasus, he purposefully directs his energy like a lightning bolt into a myriad of companies in multitude of industries, ranging from media to health care to defense to high-end luxury products, hoping to bring them to greater heights of success. Parmar also travels all over the globe because of his involvement in international business and his personal interest in championing the safety of endangered animal species.
Parmar was gracious enough to speak about coming to America from India as a young man, as well as share information about his businesses with Living In Colts Neck.
LICN: Can you please describe, in general terms, what your company does?
PP: I run a New York based private equity firm called Pegasus Blue Star Fund. Prior to that I founded the management consulting firm Pegasus Consulting Group, which has helped some of the world’s best companies develop strategies and improve operations. At Pegasus Blue Star Fund we focus on acquiring small, privately held services – businesses in industries that are highly fragmented, highly regulated, or both. Healthcare, media, and private aviation and defense fit these criteria, and we see significant opportunities in these sectors to generate outsized returns that are uncorrelated with the broader economy. The underlying rationale to our investment thesis is that fragmented industries are populated by subscale businesses, which are often poorly capitalized and poorly managed. In many instances these firms are struggling to simply make payroll and stay afloat, and we are often able to acquire these businesses at very low purchase multiples. We especially make sure that they are struggling because of inefficiencies created by fragmentation and regulation; otherwise these are very successful businesses, liked by their clients. Fragmentation also implies that there are many players in the space, affording us the opportunity to analyze large numbers of potential targets before carefully selecting only those few that meet our exacting investment criteria. Moreover, complex regulatory environments are particularly difficult on small firms, but can create significant competitive advantages in the hands of savvy, professional operators. We also purchase small companies that are performing quite well if we see opportunities to increase their scale, and in so-doing, increase their value. In either instance, we will only acquire a business if we believe that it will perform better under our control; we never make an investment unless we can foresee secure and diverse exit opportunities.
LICN: So is it only private companies?
PP: Only privately held companies where we can take a majority controlling interest.
LICN: Do you take an active role in all of those companies?
PP: Yes. I work very actively along with my core team, operating each one of our portfolio companies. By definition, we are looking to make them highly optimized by using a combination of three tools: 1) process efficiency – I actively use my vast consulting company experience; 2) implementation of new technologies that help enable the new optimized processes; and 3) relocate to lower cost for process and technology where applicable. Once we have substantially optimized the operations we do rapid acquisitions to get geographic coverage and then scale leveraging the highly optimized operating engine that we created in the first place. So in short…yes. We actively work and operate in all the businesses we acquire. As an example, if the company is doing 5% EBITDA. [Editor’s note: EBITDA is a financial term referencing a company’s earnings before interest, taxes, depreciation, and amortization.] If I can take it to 40% EBITDA, obviously I would operate that company ’til it got to that level. I can give you an example. I bought a company last year – it was a physicians’ billing company. It was doing 5% EBITDA margins. We introduced our techniques, changed their processes around, implemented new technologies, [and] they are now doing over 40% EBITDA in less than a year. What I bought the company for…it will pay for itself in its own cash in less than 18 to 24 months.
LICN: Most impressive!
PP: So by that logic I become a very active manager of each of my businesses. Even if the company is doing very, very well I buy it if I feel that my network can scale it up. I tap into that network. In that way I get very involved.
LICN: To segue back, the name of the company is Pegasus Blue Star? Why did you choose that name? What is the significance?
PP: Pegasus was the horse used in mythical Greek times for the victory of good over evil. That has always stuck in my head. I have Pegasus around the house so I don’t forget where the money came from. I didn’t make it…Pegasus made it.
LICN: Is that part of the company’s mission?
PP: Victory of good over evil? Isn’t it everybody’s mission?
LICN: I would hope so, but don’t know if that is true.
PP: (Laughs) Well, hopefully it is.
LICN: In terms of your role, you mentioned [that] you take a hands-on approach in the different companies. Do you then sell these companies once you have optimized their performances?
PP: I have very rarely sold a company. I fall in love with the companies I buy. There are only one or two I have sold – equations where I do not have a controlling interest and if the existing management does not allow me to be successful. So there are cases where I would get out, but it has been very rare.
LICN: How did you become involved in this industry? Did you always have an interest in business?
PP: It is all just by chance. No, I am not from a business background.
LICN: What is your background?
PP: I am from a scientific background – computer science as it pertains to research, artificial intelligence. That is why when I speak to kids I tell them [that] math is very important, because math gets you to anywhere you want to be in the world. You can forget about everything else you are studying.
LICN: Is that what you studied in school?
LICN: Did you go to school in the U.S. or India?
PP: I went to school in India. It was a naval public school in Goa.
LICN: How old were you when you came to the United States?
PP: I was 21.
LICN: Did you come on your own or with your family?
PP: I came alone.
LICN: How did you approach that as a young man? Was it scary? An adventure?
PP: From the time I was young I was a traveler. If I was seeing you off at a train station, I might just get on the train and go off myself. I have done that way too many times (laughs)! So it doesn’t bother me.
LICN: Where else have you traveled?
PP: It would probably be a shorter list if I told you where I haven’t traveled.
LICN: When you first arrived here what was your first job?
PP: In 1991 I received the Young Scientist Award from the National Science Congress (in India). I was 19 then. A lot of companies out of the U.S., U.K., and Germany offered me jobs from that. I decided to take one person up on their offer in the U.S. I was to be an advisor on a strategic change for this financial services company. That started my career in the U.S. in New York.
LICN: Did you know anyone in New York?
PP: No, nobody.
LICN: In terms of childhood expectations did you ever dream this is where you would be?
PP: No, I always dreamt that I was going to be a fighter pilot.
LICN: Do you fly now?
PP: Yes, I fly a lot.
LICN: You mentioned that a lot of how you got to where you are now was by chance. Are there any moments you can identify that charted your path?
PP: The first thing is that I applied to be a fighter pilot with the Indian Air Force. I passed their test, I passed all the requirements, and I was about to start when they discovered I had flat feet and I was thrown out. That was a big disappointment. But if I became a fighter pilot I do not know where I would be now. Then the second thing was that out of all the business cards that I had, I picked “the” card and chased it to success. That is how I have always been. I have never said let me try these five things and see what happens, one of them will click. I only bet on one and give it a full shot 110% shot. So I picked one card and said this is who I am going to call and who I am going to work with. That guy turned out to be a huge mentor for me.
LICN: In terms of the mentorship do you see yourself providing mentorship for someone younger than you now?
PP: That happens all the time in business. There are people you interact with on a daily basis, and hopefully you provide the leadership, guidance, and knowledge that people are learning.
LICN: How do you apply the good versus evil philosophy in your business?
PP: It comes in, in many different ways, sometimes it has a huge conflict. I am very conservative when it comes to doing business but I am very big risk taker in my personal life. So I have very contrasting elements. The good versus evil part usually comes in being very conservative in business.
LICN: Can you explain further the risks you take in your personal life as opposed to your conservative business behavior?
PP: I sky dive, I ride bikes…everything my insurance company tells me not to do, I do it! I fly fighter jets. In my business we look at 300+ opportunities to decide one that we will bet on.
LICN: Are you involved in any other hobbies, causes, issues, or philanthropies?
PP: I am a big believer in finding a cure for cancer. I have a bunch of businesses involved in cancer – CTSI cancer centers. We have seven centers in the U.S., [we’re] building one in India and one in China, and exploring Malaysia and Australia right now. We are looking to open up centers in central New Jersey with Meridian, as they do not have a cancer strategy.
LICN: Are these primarily treatment or research centers?
PP: They would be treatment and research centers.
LICN: What would the research component focus on?
PP: The way research works in cancer, or any medicine, is it starts with a biotech or pharmaceutical forum looking for a cure. They then go through FDA regulated procedures. In phase three they are looking for real patients on which it can be tried. That is where treatment centers come in.
LICN: How does that work when you are working internationally?
PP: It is the same. You work with their regulatory bodies. Their procedures are usually more relaxed than the U.S., so if you are following the U.S. you are pretty safe. There are subtle nuances in how you report stuff.
LICN: What is the focus of the treatment and research?
PP: You start with cancer treatment. If you get enough volume you can gather the information for research. I think cancer is the most misunderstood disease. The average person would say a cancer cell looks like an alien cell…doesn’t even look like a human cell. Meanwhile, the fact is cancer cells look 99.9999999% like a normal cell. There is a minor defect that happens in its DNA that causes it to behavior irrationally, and the body is not able to detect it. Those are two very critical components of cancer. You see, 10 years back our understanding of cancer was so poor it did not matter what kind of cancer you had; we had basically three or four meds that we used. We would radiate you, operate, and it was pretty much a death sentence – maybe 2, 3, 4 years – but it was a death sentence. It is no longer that way as we understand different types of cancer. Breast cancer alone has 67 different medicines today.
LICN: Are there any specific areas of research where you think we will get more answers?
PP: I think preventative measures will be most effective. We look at questions like: How was your life style? What where your living conditions? What is it like where you live? Work? Then [we] try to find out what in those elements actually interacts with your DNA. There is no way to cure a missing link in your DNA. The only way to cure it is to keep you away from the damage. We are building a platform collecting data from around the world. We will track data that no one is even thinking of, try to match up what went wrong, and see why their DNA changes – that .001% it could be paint fumes, second-hand smoke. Every time you walk in the sun you are changing your cells by more than 1%, so .001% is nothing. The body can usually take care of the defective cells. The body is designed in a fail-proof way, which is why cancer is so interesting. The cell by itself should destroy itself if it is not correct. Each cell also checks its neighbor and kills it if it is not okay, so why doesn’t the cancer cell get killed? It is a pretty tricky disease.
LICN: Can you share information on other parts of your business?
PP: I am involved in movies. Before the Devil Knows You're Dead was directed by Sidney Lumet with Philip Seymour Hoffman, Ethan Hawke, and Marisa Tomei. It was a very dark movie. We had rave reviews; we had predictions that it would win an Oscar, but we decided not to broad release the movie.
LICN: Why was that?
PP: It was a marketing gimmick that paid off. We wanted people to say “where did that movie go?” It started in New York in two theaters. It grossed the highest in 16 weeks of any film. We took it to 400 theaters nationwide, enough that it had visibility but not enough that everyone had access to it. Our main goal was, without spending a marketing dollar, we wanted all the DVDs to get grabbed up. The day we announced the DVD release, Amazon and Blockbuster had over 22 million orders.
LICN: Do you see the DVD market as more important than theaters than for the film industry?
PP: Theaters used be a place to go see a movie, today it is to have an event. Today you say I feel like going to a theater; lets see what movie is playing. Years ago you wanted to see a movie so you went to the theater. The main platform for seeing a movie has shifted. Today theaters are used for advertisement of your DVD product.
LICN: So is this your entertainment division?
PP: It is part of my media strategy. It started with buying a movie sales company out of London, and then investing in a post-production company there. Fifteen years back, 95% of your revenue came from the United States. Today, 70% of the revenue comes from abroad.
LICN: How do you explain the change?
PP: More mature markets. In India alone you have over a billion and a half people. If everyone went and saw the movie with a dollar, you’d have a massive market (laughs). The studios have failed to see that; Wall Street has failed to see it.
LICN: Do you do Bollywood movies too?
PP: I do a lot of Bollywood. I am exploring some Russian movies as well. You need to focus on the international market.
LICN: Are there other industries that you do business in?
PP: Private aviation.
LICN: Can you define private aviation?
PP: Private aviation covers anything that is not commercial. Airplanes have less than 20 seats. We came out with an innovative concept. We have two companies; we are highly rated. There are 3,000 companies in that space; out of those, less than 50 companies have one or the other rating. We have both – Wyvern Wingman and ARG/US Platinum Rated Operation. Only 17 companies have both. One company manages aircraft, takes care of maintenance, permit filing, etc. Seagate Aviation does this. Pegasus Elite…we own a fleet of jets; we [also] started a concept of yellow taxi cabs. The planes are owned by us and you can arrange flights. We went from zero revenue in June of last year to 100 million dollars this year.
LICN: In terms of cost how does this plane rental compare to first class?
PP: Most people try to do that rationalization, but you can’t. It’s more convenient. You don’t have to deal with getting to the airport 2 hours earlier, dealing with the lines and airport staff; you don’t have to worry about getting bumped off a flight from overbooking. With private flying the plane waits for you for when you want to fly.
That market has expanded dramatically. People think of delays, bump offs, aggravation, and decide it is worth it. It is two different products.
LICN: Any other interests or divisions?
PP: There is a project in Texas. It stemmed from the need to provide a refuge for tigers that people had as pets in their houses, and then do not have means or space to care for them. The law now is so absurd, they don’t check if you have enough money to see if you can provide food for the tigers. I have seen tigers in tight boxes. I decided to buy a couple of hundred acres in Texas for a refuge.
LICN: What is you interest in tigers?
PP: Tigers are the most majestic cats. There are less than 5,000 in the world, for a species to survive you need 10,000 in neighboring geography. By that definition, the species is not going to survive. India has less than 2,000. Russia has killed nearly all its tigers, as has China. Malaysia has killed off its tigers.
LICN: Why the kill off?
PP: The tigers were killed because people believed eating certain body parts would make them more virile. The rhinos disappeared as well, because people want their horns, when it is actually just a hair. When I go to Africa you still hear of hunters killing rhinos. I am friends with a game warden. We trapped rhinos and cut their horns off to save them from hunters.
LICN: Well thank you so much for sharing so much information about your businesses, passions, and background!
PP: It’s been a pleasure.
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