The Business Builder: New Mountain Capital's Steve Klinsky

10:03Alison Mass:After having forced Little, where the fight over was there a comma or not became a feud point for 15 years. I was there between horsemen a little. So anyways, I didn't want to have that sort of culture. And so the original idea in my head was to call it mountain as kind of a symbolist idea of permanence and upwardness. And so it's not about mountain climbing or hanging on a cliff. It's about the idea of the mountain. I got my first pledge as the name mountain, and there was a little squib in a newsletter and Fuji Bank's legal department read it and called me up and said, very sorry, we own the mountain name for our money fund of 2001.

10:39Alison Mass:So I said, oh no, I have no money, no team. I don't even have a name. And I went through months of every Greek God, every Nords God, every type of oak tree. And eventually it was January of 2000, new century, new firm, new mountain. And the lawyer said, okay, we'll let you through with new mountain. And what's funny now is there are other firms that are called mountain or old mountain or of it looks like we spun out of them, but we were the, I think the first mountain name anybody had used. And now there's other versions that people use.

11:09Steve Klinsky:I never knew that story. That was an interesting story. So you've said that you're more interested in building businesses than in just financing them. And there was a Harvard Business Review article written about one of your companies that encapsulates that approach. Can you tell us about that?

11:22Alison Mass:Yeah. So I wrote it a couple of years ago about a company of ours called Blue Yonder. I've been the chair of the private equity industry. There's something called the American Investment Council that represents all 5 ,000 firms, and I had been the chair. And I keep trying to explain to people that private equity properly done is just best in quality business building, not some financial trick. So I used a case study. Blue Yonder was a business that we had bought when it was$600 million in value called Red Prairie, very sleepy little supply chain software company. company, we built it up in all sorts of ways into the world's leading supply chain software company with AI and other things, and it sold it for over$8 billion of value.

12:05Alison Mass:So$600 million to over$8 billion.

12:07Steve Klinsky:That's spectacular.

12:08Alison Mass:And I was just trying to explain that we didn't have some special invention. It wasn't some special trick. It's just there's 20 or 24 ways we try to build businesses and just try to go through a case study. But there's other case studies as well. But the skeptics still think it's a trick or a theft or something, which I keep trying to fight against.

12:28Steve Klinsky:So talk a little bit about how you build value and build those businesses.

12:33Alison Mass:Yeah. So as we buy businesses, first of all, we're dealing in sectors that we've been spending years in building advantages. As we buy the company, we've developed effectively a five-year plan with a specific value creation things that we plan to do. And the plans are frankly getting better and better over time as my team gets bigger and more operational as the years go on. And we actually even write a thesis letter to our investors as we're buying the business. This is why it's a good industry. This is why it's a safe company. These are the five areas of growth we're really going to focus on.

13:06Alison Mass:We call our shots pretty clearly. There's no single tool that we use. It's not like we have one trick that we always do. There's 20 or 24 different ways to build businesses. It's the pricing. It's the sales force. It's add-on acquisitions. It's international expansion. It's getting better management. So we work on all of those, and then we're constantly monitoring how the team is doing and what adjustments we should make as situations change. But it's a very thoughtful plan, and it's actually getting, I think, stronger for us as we have managers we trust who can really be more specific about exactly how to improve things.

13:42Steve Klinsky:So I want to talk a little bit about how you identify a good CEO. And how do you know when a company is well-led and when it needs a change at the top? Like, what are those criteria you're looking for?

13:56Alison Mass:Yeah, it's a really tough question. It's a high-value question to make the decision on the right CEO. So we're very hands-on. The way we're set up as an organization is we start by saying, what industries do we want to be in? I mean, there are some industries that melt underneath you and there's nothing you can do no matter how good the CO is. And there are other industries that have the wind at their back. So we look for the right industry. We now have 12 sectors staffed up with 25 subsectors. We look at 1 ,000 companies a year to buy eight. So we're very deep in those sectors meeting all the management.

14:28Alison Mass:And we've had a lot of good management work with us. When we buy a company, if there's a great management team there, we love it. We'd love to just back a great management team. Very often, though, we're buying a division that's been orphaned or the founder's retiring and wants someone else to build it. So you do have to go out and get a new CO. And there's a skill to it. We've made mistakes along the way. You know, what I most look for is who succeeded in the past. Somehow or other, when someone has good luck or bad luck, it turns out if they have good luck all the time, you know, you're not quite sure every little thing they did that led to the right answer, if they had bad luck.

15:04Alison Mass:every little thing they did wrong that led to a bad answer. But past success means a lot. You know, having worked with people that you know, people that have been pulled along by their former bosses to their next job. There's a lot, and it's a gut judgment, but we do our best at it.

15:20Steve Klinsky:So you talked about sectors that have strong, stable growth ahead, and picking the right sector is important. So what sectors are you heavily invested in now? And how has that landscape shifted in recent years at your investment committee?

15:34Alison Mass:Yeah. So again, we go through a formal process every year where the whole firm suggests sectors and we nominate and vote and discuss and we slowly shape the list. So there are sectors we made a fortune in 25 years ago that we won't touch anymore.

15:48Steve Klinsky:Like?

15:49Alison Mass:Like our first transaction was in post-secondary education for working adults. So in 2001, we bought a company called Strayer, which was a very high quality university system went from 400 to a billion six of market value as the first internet was crashing. And we got out of it in 05. We've never gone back into another post-secondary. The tuition gets higher, higher, higher. And I now run the biggest charity for free college in the country with 800 ,000 users. So we've never invested again. I think we still know the most about this space. So that's the sort of sector we're not doing anymore. The sort of places we've been having some very good success at in recent years are things like infrastructure services.

16:30Alison Mass:So we're not spending a trillion building the data centers, but we just bought a company that's the leading force of technicians maintaining data centers. It grew 50 % organically last year, has no CapEx, would still be needed. If data center construction stopped, you'd still need the technicians for the centers that exist. Very high free cash flow. So, or we have companies that are building in infrastructure, building the power grid design, building the water grid. So we've been very good in that area. We bought the first accounting firm anybody bought, a firm called Citrin Cooperman that we bought and sold.

17:07Alison Mass:And now we own Grant Thornton, which is one of the seven largest accounting firms. We've done great in insurance services and healthcare tech and life science supplies. We do like software, but we only went at a value price. We were very skeptical about just high multiples in general. We're kind of growth at a value price shop. So it's those type of sectors.

17:27Steve Klinsky:So we can't talk about investing in 2026 without talking about AI. So how are you thinking about AI opportunities and also which of your portfolio companies or investments it could disrupt? And how are you approaching that the same or different than your peers?

17:45Alison Mass:So AI is a very important development. You know, in my career, because I've been doing this a long time, I saw personal computers come in. When I used to be at Goldman in 1981 and we were doing an LBO model, I used to have to fill out a questionnaire and hand it to a computer operator who would sit at a big terminal and do one run and it would take like a day to get it back. So that's where I came in. So personal computers, the internet, the cloud, other things now AI. AI is very important. Before Gen AI, we used AI, for example, at Blue Yonder, that company I just mentioned. It was named Blue Yonder because we bought a little company in Germany with 72 PhDs called Blue Yonder and changed the name of the whole business.

18:27Alison Mass:So we were using AI before Gen AI. But since ChatGPT and Gen AI came out, we've had a major, major task force project on it. And the way we're using it is effectively at every business that we own, which are usually technology-enabled services businesses, we're just trying to go business function by business function. And what can we improve with AI, either to raise the margin or you can do business that was too hard to do with humans that you can look at smaller bills than you used to analyze. You can do better audits than you used to do that sort of thing. So we're using it very intensively, both to take the companies we have and make them the best in their space and to try to make sure no one gets in front of us by being better than us.

19:11Alison Mass:And we also, like I say, have the infra companies that are wiring the data centers, servicing them, working about the whole infra buildup.

19:20Steve Klinsky:So let's talk about the macro for a moment. What do you see as the biggest headwinds to the private equity environment right now? and how are you managing those potential downside risks?

19:31Alison Mass:So I continue to think private equity is a great space. Let me speak about my own firm and then the industry more generally. We've had a good run of it. Our cash back has been very strong. Our deployment has been very steady. So we raised our last fund a couple of years ago and we're oversubscribed. So we've had a very good run of it. In general, the biggest headwinds to private equity as a class have been a slowdown in deal volume, less cash back to the investors. And also, there was so much optimism and so much kind of faith in unicorns in 21 that some people bought companies that were overvalued in 21 that they're still stuck with.

20:09Alison Mass:So those are the headwinds for the private equity space. That being said, I think the tailwinds or the advantages outweigh those, which is we've been the highest asset class for institutions for decade after decade.

20:24Steve Klinsky:I mean, highest performing.

20:24Alison Mass:Highest performing in returns, much lower volatility and drawdown. So the public markets and private equity are the two highest compared to infrastructure or government bonds or something like that. In the last year or two, private equity has fallen behind because you can't beat NVIDIA when it's on a run. But on the other hand, even if we're second highest, we're still above kind of any other class. And I think we'll get up to number one again. And it gives diversification. You can as an institutional manager for your own 401k to have all your money basically in seven stocks is pretty difficult.

20:59Alison Mass:There are more private companies than public. You can add more value to them. So I think it's just an inherently good asset class. But to me, within private equity, with 5 ,000 firms, it's like when they say, well, how does private equity do? It's like, well, what does restaurant food taste like? There's 5 ,000 restaurants. And it's up to the chef. So it's firm by firm. But I think if you are a business builder, and we have a team of 300 people at New Mountain, it's not me as the business builder. It's the team that we put together. If you have the right team and add value, I think it's a great asset class.

21:30Steve Klinsky:So talk a little bit about your approach to investing in private credit right now.

21:35Alison Mass:Yeah. So we also love private credit, and we've been in the private credit strategies ever since 2008. So we've been in it now for 17 years.

21:45Steve Klinsky:Are you investing out of the same fund?

21:46Alison Mass:So here's what happened. When the Great Recession hit in 08 and Lehman went bankrupt, you could buy the first lien of the safest companies we had studied that someone else had bought that were on plan and non-cyclical. The markets were so distressed, we could buy first lien at 60 cents on the dollar and make over a 30 % return just holding it to maturity. So we first went into private credit as a private equity line item. But the key to our private credit is we've had$100 billion of enterprise value creation in our private equity funds with a 0.2 % loss rate since we started. We're very focused, kind of a family business mentality.

22:26Alison Mass:We don't have portfolio theory. We have family business theory. So we try to keep companies safe in safe industries. If someone else buys a business we like and we just don't want to outbid them, we can drop down and be a lender in that same industry to that same company with all the knowledge that we have as owners of private equity businesses. We have one central analytical engine. So let's say it's a great software company and another firm paid 20 times for it and we didn't want to pay 21. One, we're happy dropping down to six times debt with 14 parts equity underneath us. And we use our private equity team to educate our credit portfolio managers.

23:04Alison Mass:This is a good software business because there are good businesses and bad businesses in every sector. So it's been a very successful strategy. And also, we're essentially a family office, all of us, of our own families, as well as an executive. So I only want to be in asset classes that I and my family want to be in. So I'm a big personal investor. in our credit effort. We have a net lease strategy. We have non-control equity. We're going in a continuation vehicle strategy. So we're in things that we really believe in. But we use the, you know, if we can't buy the company, we use that same knowledge to whatever the company wants.

23:40Alison Mass:If they're not for sale, we can work with them in any way they want.

23:42Steve Klinsky:That's great flexibility.

23:43Alison Mass:Yeah. And it's all tied together. So it's not like we're marketing for five different firms. It's one team that we can use more and more and make stronger and stronger. That's how we got up to 300 people. When I left Forstman Little, it was the second biggest firm in the world with eight professionals and lots of jets. And I have 300 people and no jets. So that's the difference between... And I love Forstman Little. I had a great time there. I was very well treated. Some excellent investors. It's a little bit of a different culture.

24:12Steve Klinsky:Yeah. Some excellent investors came out of there.

24:14Alison Mass:Yeah, absolutely.

24:15Steve Klinsky:So outside of the office, I want to talk a little bit about that. You've long been involved in educational reform and you talked about your charter school. Why is that a personal passion of yours? And tell me about your latest project, the Modern States Education Alliance. Yeah.

24:29Alison Mass:So I'm involved in a bunch of charity. First of all, I do think it's not because of guilt of business. I think what we do in business, if you're building something that's very proper, we have a social dashboard. We've added or created over 70 ,000 jobs. And out of job losses, we pay very well. So I mean, I'm proud of what New Mountain does. That being said, you just want to have a full, active, meaningful life. So I and my family are involved in lots of charities. A lot of them are children's health, a lot are other things. But education has been really fundamental. And back in even before charter school, six years before charter schools, I set up after school centers in the most crime-run part of New York City called the Gary Klinsky Children's Centers that are still running.

25:11Alison Mass:I had an older brother named Gary who, when I was a kindergartner, he was a seventh grader. And he would give me school after school. It was incredibly important in my life. My mom was trained as a school teacher. He died of a genetic illness when I was in graduate school. So when I made partner at Forceman and I had some means, I went and created an after-school program in his name, which is still going. That's what gave me the hands-on experience to say, you know, I was in what was East New York, which at the time was the crack war capital in New York City, had more murders than the state of Nebraska in this one neighborhood.

25:50Alison Mass:And yet when I would go visit the school, the kids were fantastic. The teachers were fantastic. So there was something about the system, not the kids. So that's what led me to say, well, let's let me get into charter schools and take that concept to make a full day out of it. And then that got me on to, you know, deeper into education. Again, in the modern states, we did the Strayer deal, which was a wonderful, very high quality company, great education for people. But all tuition for college has gotten higher, higher, higher every year since 2000. There's$1.7 trillion of student debt.

26:28Steve Klinsky:It's an unreal number.

26:29Alison Mass:It's an unreal number. Even if you're an in-state person in a place like Indiana, Purdue's like$33 ,000 a year, and they're trying to keep the tuition down. So what modern states is, is there's a set of exams that people had forgotten about called the CLEP exams that are like advanced placement exams. but anybody can take them. They're also from the college board. They're in 32 subjects, and they've been around for 50 years. And basically every state, school, community, college will say, if you pass the college algebra club, you're done with college algebra. You have the credit. So you can do about a year of college just by passing these exams.

27:06Alison Mass:We hired the best professor in every one of these subjects, created an online course we give away for free at modernstates.org. Go on your phone or whatever, and anyone can go to them. And we give you a free course, free readings, free practice questions. If you pass our exam, we pay the CLEP exam fee, which is a hundred bucks. And if you're Abe Lincoln and you're totally impoverished, but you're ambitious, you can get a year of college this way and save a year of time and 30 grand of money. So we have 800 ,000 people have used it without advertising. We've given away 250 ,000 courses, which is 25 ,000 free years of college, and it's just getting started.

27:45Steve Klinsky:That's spectacular.

27:46Alison Mass:So that's the biggest charity thing I do now.

27:49Steve Klinsky:So you've had a front row seat to the evolution of private equity over the last 40 years, as we've discussed. But what changes are you predicting in the next 10?

27:57Alison Mass:So again, I think more and more about business building and true value add. And the other big evolution that's recent is this idea that you don't have to sell your best company in five years. you can continue it. Let your investors out if they want to be out. Let new investors in if they want to come in. Do a trophy asset continuation vehicle. I think that's a very, very important and proper evolution if you do it right. We've done two of those trophy asset CVs ourselves. And we like the strategy if another firm is doing that with their best asset, instead of selling it the way they would have a few years ago, they're saying, no, we're not going to sell it.

28:36Alison Mass:We're going to keep it, but invest as we keep it, we want to have a strategy to do that as well. So I think it's very important both from the GP point of view and as an investment strategy.

28:47Steve Klinsky:I'm going to ask you one last question off script before we go into our lightning round, which is I heard that you like to ask every prospective person who comes to work for New Mountain what the last book they read is or what book they're currently reading. So is that true? and why do you ask that question and what do you learn?

29:06Alison Mass:All right, well, I'm going to blow all future interviews by giving my secrets away. But, you know, when I hire somebody like as a new associate, I'm looking for someone who can run the firm one day. I assume they can run the computer models before they ever get to me. So besides trying to get to know them and what they're good and bad at, I ask them, what do they read and who do they admire? Because I'm looking for intellectual curiosity and breadth and I'm looking for what their value system is. So that's...

29:31Steve Klinsky:It's a good question.

29:32Alison Mass:Yeah.

29:33Steve Klinsky:All right. So we like to end these with a lightning round to sort of run through a couple of questions, get a quick answer. So what do you think your greatest strength as an investor is?

29:42Alison Mass:I think my greatest strength as an investor is pattern recognition and being able to put teams together where the weakness of one person is supplemented by the strength of another to get a coherent team together and to keep the eye on what is the key objective, how do you get to the key objective?

30:00Steve Klinsky:So what's the best piece of advice you've ever received? And if you remember, who gave you that advice?

30:05Alison Mass:Well, I have two answers. I'll give you one, which is when I almost got fired from Goldman Sachs. If you have enough time in this podcast, I was a first-year associate. It was a client of John Weinberg Knight Ritter newspapers. They were selling two little newspapers where they gave us the secret papers, and they say, protect these secret papers. And I was carrying those papers, and I was running around. We were on merger time. We were late. We ran from plane to plane. and I was using my brother's briefcase, the one who passed away, which was very narrow. And I couldn't put all the papers in it.

30:38Alison Mass:And I left the secret papers in the pocket of an airplane.

30:41Steve Klinsky:Oh, no. And I left and I come back and go, this is John Weinberg's favorite client.

30:46Alison Mass:And I've lost the secret papers. And so I had to go to the head of mergers, who at the time was Mike Overlock. And there was no way around it. I couldn't dodge. I had to tell him the truth. He said, let me talk to John Weinberg. And I'm thinking I'm, and I deserve to be fired for many reasons, but you know, they came back the next day and he said, John Weinberg says, get a bigger briefcase. And that was it? So that was it. So I went out and bought what at the time was called a nerd bag, the biggest briefcase I could. So the best advice I ever got was get a bigger briefcase. A little further from that, I read a book once by a theologian, Martin Buber, about there's, you know, hallowness and everything.

31:25Alison Mass:And it's your job as a human to kind of bring the hallowness out. So that was very involved in my thinking about charter schools and charity and other things. And also just how to deal with people, you know, in your own firm, the companies you're buying, just it's kind of an idea of there's a spark of divinity in everything and bring that spark out. And it could be a shelter dog you take home or whatever it is. So that was probably the most meaningful thing I read.

31:50Steve Klinsky:So which investor do you admire the most?

31:53Alison Mass:You know, I don't really admire stock pickers so much because I find it kind of, I don't know how consistent that really is. I admire anyone who truly builds a business and I admire from whatever their starting point is to wherever they got to. So if they started with absolutely nothing and they built the best Greek diner on the Lower East Side, I would admire that tremendously. If Elon Musk gets SpaceX going and SpaceX can catch the rocket when it lands, I admire that. So anybody who's building things in a good way and from wherever they started to wherever they got to. All right.

32:28Steve Klinsky:So we've talked about your passion for education. Where do you spend your time outside of the office, outside of the charitable work you do? Yeah.

32:36Alison Mass:So the most fun is when my kids were young enough and I had four of them at home, They're now all young adults. So I feel like my kids, my friends on the playground have moved away and I've left on the playground without them. So I'm a little, you know, I'm a little bit forlorn and all that, but I love movies. I love theater. I love reading. I love the city. I love, you know, going to someplace warm. We'll get away for the weekend. You know, so it's just, I don't have, I'm not like a huge sailor or golfer. I'm not, the only thing I'm really competitive about is business. I'm not at all competitive.

33:05Alison Mass:I don't think I gravitate towards is building new mountain, you know, building my family and building new mountains. is all I really care about.

33:10Steve Klinsky:You've done well with that.

33:11Alison Mass:So far, so good. So you wouldn't want to see me on the golf course. And people say, when are you going to retire? I have no golf game. I'd rather be in the office. They can't fire me. They can all quit, but they can't really fire me. So I love just doing what I'm doing.

33:24Steve Klinsky:If it makes you feel better, my dad retired when he was 93. Well, there you go. And he's 99 today. So I think it gave him longevity.

33:32Alison Mass:Yeah.

33:32Steve Klinsky:So thank you so much, Steve, for joining me.

33:35Alison Mass:Thanks for having me.

33:35Steve Klinsky:And thank you all for listening to this episode of Goldman Sachs Exchanges, Great Investors, which was recorded on February 18th, 2026. I'm Alison Mass. If you enjoyed this show, we hope you'll follow us on Apple Podcasts, Spotify or YouTube or wherever you listen to your podcasts and leave us a rating and a comment.

34:00Steve Klinsky:The opinions and views expressed herein are as of the date of publication, subject to change without notice, and may not necessarily reflect the institutional views of Goldman Sachs or its affiliates. The material provided is intended for informational purposes only and does not constitute investment advice, a recommendation from any Goldman Sachs entity to take any particular action, or an offer or solicitation to purchase or sell any securities or financial products. This material may contain forward-looking statements. Past performance is not indicative of future results. Neither Goldman Sachs nor any of its affiliates make any representations or warranties, expressed or implied, as to the accuracy or completeness of the statements or information contained herein, and disclaim any liability whatsoever for reliance on such information for any purpose.

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