Private Equity Veteran Robert Davis ’97 on the Importance of Character in Deal Making

For 16 years, Robert Davis ’97 has worked in Aetna’s private equity group, participating in more than 50 deals and investing over $1 billion. One of the most important things he’s learned over the course of his career, he told a group of Yale SOM students, is that how you conduct yourself in a deal is often as important as the terms you’re able to get.

"We’re all smart—our competition is smart, too. That’s not what’s going to distinguish you," he said. "What you need to focus on over the next 10 to 20 years is developing yourself so you possess the necessary character not just to be successful, but to be a leader."

It’s essential to bring character to your business dealings.

Davis, a managing director at Aetna, spoke on September 5 at the first Colloquium in Advanced Management, a series of conversations between top industry leaders and students that is part of the Master of Advanced Management curriculum.

“It’s essential to bring character to your business dealings,” Davis told students, defining character as having integrity, standing behind what you say, and being honest.   “If you don’t, you may win the short-term battle. But in the long-term it will come back to haunt you.”

The reason, he said, is that a crucial aspect to any business transaction is the relationship between the two parties. Over his career, Davis has worked hard to build trust with potential partners, which begins with making the effort to get to know them as people. “People do business with people they like,” he said.

Davis also spoke about key moments in his professional life. In 2005, he said, he and his partners felt that prices for acquisitions were becoming inflated and they refrained from doing leveraged deals for roughly two years. “It served us really well when the wheels came off in the downturn,” he said. One reason that the group felt able to step back from the market is that Aetna has never pushed the team to invest a set amount of money every year; that helps them to avoid frothy markets. “At least half of deals in the private equity business shouldn’t be done,” he said. “But private equity fund managers do it to generate fees or because the funds need to be deployed, which is an odd basis for an investment strategy.”

When it comes to working in the private equity business, Davis said, it helps to have what he calls the X factor, which helps sway management teams and gives a private equity fund manager the ability to ask for $100 million from an institution and get it. “It’s a combination of personal attributes that engenders in others confidence and belief in you,” he said. “It’s different from charisma, which is actually extremely rare. It’s sincerity, gravity, self-confidence—all things that you can build. And it doesn’t hurt to have a sense of humor.”