Swing for the Fences 
BUSINESS • Thomas O. Hicks
He’s an invesment whiz who has made a fortune gobbling up other comapanies.
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But there’s a catch. If one partner finds a potential acquisition, the other eight must unanimously agree to pursue it. “Each partner has the capability of checkmating the other,” says Hicks, “and that someone can checkmate me as well.” Such a strategy means a partner had better know his potential acquisitions inside and out. “You can’t walk into that meeting and pitch an idea by saying, ‘Hey, I’ve found an opportunity. What do the rest of you think about it?’” explains Deniger. “Your idea will get thrown right out of the room. If a partner is not excited and animated about a deal—practically evangelical about it—then you probably know it’s not that good of a deal to begin with.”
Deniger cannot remember a time when Hicks used his authority to stop a project that the other partners were committed to doing. As a result, the Hicks, Muse portfolio is a medley of projects. The firm has invested in companies that manufacture everything from beer to milk substitutes, from cowboy hats to welding helmets, from seafood to spaghetti. Another Hicks rule is that all nine partners must invest a certain percentage of their own money in every Hicks, Muse fund. (In the $5 billion-plus fund currently being raised, the nine partners have invested about $150 million.)
Born in Dallas, Hicks spent his teenage years in Port Arthur, where he worked as a weekend disc jockey at a radio station his father, a Dallas advertising salesman, had bought. Hicks went on to the University of Texas at Austin, then received an MBA from the University of Southern California. During his college years, he read The Carpetbaggers, a popular novel loosely based on the life of Howard Hughes. Out of such trashy literature came the inspiration for a grand career. Hicks decided to make his own mark by acquiring companies. He worked in the venture capital business on Wall Street (with J. P. Morgan), returned to Texas at 27 to run the venture capital subsidiary of a Dallas bank, and quit in 1977 to try his first leveraged buyout. With a partner, he purchased a small aluminum-window-and-door-manufacturing company for $4 million; after bringing in a new management team, he quadrupled his money in seven years.
Although Hicks does not like to talk about it, he nearly went broke in the early eighties, when his energy investments fell apart with the collapse of oil prices. Other Dallas businessmen remember him as just one more tall Texan in a nice suit, knocking on doors, looking to “do a deal.” He hooked up with Bobby Haas, a bearded venture capitalist from Cleveland, and they somehow persuaded a bank to loan them nearly $100 million to purchase the local Dr Pepper bottling operation. The two streamlined it and went on to buy A&W Root Beer. They then bought the Dr Pepper parent company and later 7-Up. To some in the soft-drink industry, Hicks and Haas were typical slash-and-burn corporate raiders. Leveraged to the hilt, they merged all the soft-drink operations and let go of almost all of the three hundred employees who worked at the 7-Up corporate offices. But they made plenty of money. According to one report, Hicks and Haas turned $88 million in investors’ money into $1.3 billion.
After the two split up in 1989, Hicks changed his focus. He recruited several partners and put together one large capital acquisition fund so that he would not have to rely on junk bonds to buy new companies. (In the standard leveraged buyout, the firm has to break up the company it just bought to retire some of the junk bond debt it took on to buy the company in the first place.) Hicks said he would never break up a company and went so far as to stop referring to Hicks, Muse as a leveraged buyout firm. It was now a “private equity” firm. Hicks devised a game plan he called “buy and build”: Buy a capably managed company and look for other closely related companies to integrate with it. He used the strategy when he purchased the Dallas Stars and then the Texas Rangers, with plans to package Rangers and Stars games as part of a regional television sports network spanning the Southwest. Another recent move was to put a number of the firm’s television and radio stations under Chancellor Media, the media company that already controls billboard giant Martin Media, in the hope of providing easy one-stop shopping for advertisers looking to saturate major markets. In the New York area, for example, Chancellor Media owns ten radio stations, each one reaching a different audience.
Hicks, Muse’s media strategy seems to be working. Already its television and radio stations bring in an estimated $2 billion. Like other media magnates, Hicks is looking overseas as well. His biggest impact could be in Latin America, where he is slowly building a network of media properties. His number two partner, John Muse, has sojourned to London to pursue more European investments (the firm has other offices in New York City, St. Louis, Buenos Aires, and Mexico City).
Hicks says he is trying to cut back on his famously hectic schedule, but he admits that he is still too busy and can return only half of his phone calls. He has six children, four from his first marriage and two from his second, to Cinda Cree Hicks, a former New York art dealer. He sits on twelve boards of directors and serves on the University of Texas Board of Regents, where he appears to have become one of the more influential voices in deciding whom the next UT coaches will be. His purchases of the Rangers and the Stars have taken large amounts of his time; for example, in January he found himself in the middle of an intense civic fight over a proposal that the City of Dallas help pay for a new arena for the hockey and basketball teams.
Still, Hicks says he is determined to create bigger investment funds and look for even more companies to buy. When he is asked what drives him to make his company bigger, a perplexed look crosses his face.
“What do you mean?” he asks, genuinely curious.
“Well,” comes the response, “it’s not like you need the money anymore.”
Hicks chuckles. “This isn’t about money. It’s about having fun. And after all I’ve been through, I don’t want to stop having fun.”
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