In July 1984, early in Joseph Neubauer's tenure as chief executive of ARA Services, now Aramark, a former executive of the Philadelphia company dropped a bombshell on Neubauer after a friendly lunch in New York.
The executive told Neubauer that he wanted to take ARA private, with Neubauer staying as CEO.
Neubauer immediately rebuffed the offer, and the hostile-takeover attempt fizzled quickly. But Neubauer knew it wouldn't be the last, given the company's lagging stock price.
That spurred him into action.
"I figured if they can do it, we can do it ourselves," Neubauer, 75, said during an interview last month about his career at ARA.
In December 1984, Neubauer led a group of 62 executives taking ARA private in a $1.3 billion deal backed by just $100 million in equity.
Neubauer, then 42, paid $4 million in mostly borrowed money for an initial 7 percent stake that he added to over the years.
He was on his way to becoming a wealthy man and prominent philanthropist, accumulating and selling stock worth hundreds of millions of dollars over the following 30 years as Aramark went in and out of the public markets.
It's an extraordinary history, but Neubauer pointed to the flip side of the 1984 deal: "If it hadn't worked, I would have had to work the rest of my life to pay off my debts."
The gutsy 1984 buyout set the stage for Neubauer's long tenure at the helm of one of the world's largest food- and support-services firms. Aramark, which got that name in 1994, grew from $3 billion to $15 billion in annual revenue when he was CEO and then chairman, until he retired at the end of 2014.
Neubauer had a twofold focus as CEO. He thought not just about having the right mix of services but also having the right set of owners.
"In a service business, you don't have monopolies, you don't have patents, you don't have street corners," Neubauer said. "All you have is people, people who perform a service.
"Therefore, you have to create an alignment between people acting as entrepreneurs and people who work for large organizations. I tried to create the entrepreneurial spirit in the people."
He did that not just by ensuring that he and his top lieutenants were owners, but also by pushing ownership down the management chain.
"He literally ended up with thousands of people sharing" in the wealth, said Liza Cartmell, a former Aramark executive who worked closely with Neubauer on acquisitions.
American success story
Admirers point to Neubauer's life as a quintessential American success story.
Neubauer's parents left Germany for what was then Palestine after the wave of pogroms called Kristallnacht in 1938. He was born there in 1941 and sent alone at 14 to the United States to get an education, first staying with an aunt and uncle.
After he graduated from Tufts University and then earned an MBA from the University of Chicago, his career took him to Chemical Bank and then PepsiCo, before he came to Philadelphia in 1979 to be ARA's chief financial officer.
Martin Spector, a former Aramark general counsel, said Neubauer was a brilliant CFO, and inspirational during the 1984 takeover fight.
"He was able to put people together who would work day and night, who would do anything to support him," Spector said.
The first buyout
After the takeover attempt failed, Neubauer moved on to his own effort to take Aramark private.
To do so, he scraped together $100 million in equity. The 62 core executives contributed $17 million, much of it borrowed, said L. Frederick Sutherland, a longtime Aramark CFO.
The rest came from Wall Street firms, suppliers, smaller institutional investors, and others.
Neubauer kept outsiders from having a large stake. "I didn't want anybody to have more than I had, frankly," said Neubauer, who had options that gave him the largest position.
The buyout led to impressive investment returns for any executives who bought shares in 1984 and kept them through all of the firm's iterations. They are sitting on a 23 percent annual return - not counting dividends, Sutherland said.
That blows away the 11 percent annual return in the Standard & Poor's 500-stock index, including reinvested dividends, over roughly the same period.
Starting from a base of 62 executives in 1984, ownership expanded to more than 3,500 managers, who collectively owned 70 percent of Aramark when it went public in 2001. Neubauer's 17 percent stake was the largest by far, a regulatory filing said.
David Flaherty, who worked in communications at Aramark from 1980 to 1995, was among those included in a later round of management ownership. Aramark bought back his shares when he went to work at Commerce Bank.
"What that did for me is fund not-inexpensive college educations for three boys," Flaherty said.
Dealing with Wall St.
Because shares in the private company, based on quarterly appraisals, were outpacing other investments, it was not always easy to persuade Wall Street firms to sell them back, so the shares could be resold to employees.
Those attempts came to a head in 1998, when Aramark tried to buy out the remaining institutional investors. MetLife Inc. sued to block the plan, and won.
"Can you believe that? I'm giving you all this money," Neubauer said about that episode, "and you want to sue me?"
MetLife remained an investor until after the 2001 public offering.
Neubauer said he would like to have kept Aramark private longer, but investing in the day-to-day business and paying for acquisitions while buying back ever more expensive shares from employees who left the company were not sustainable.
But the publicly traded shares lagged, gaining just 20 percent over five years.
"People kept telling us that they love our bonds," because Aramark had predictable cash flows, "more than they like our stock," Neubauer said.
Those conversations led to the second going-private deal in January 2007.
Again, management had a 30 percent stake, led by Neubauer, with 20 percent. Six years later, the private-equity firms in the deal were ready to sell, so Aramark once again went public in December 2013.
Those going-public and going-private transactions were defining events for Aramark, in part because its presence in fragmented industries made it hard for Aramark to make transformative acquisitions.
But there were significant deals.
In 2001, while preparing to go public and dealing with the consequences of the 9/11 terrorist attacks, Aramark squeezed in the purchase of ServiceMaster's facilities-management arm for $800 million.
"That was probably the most defining acquisition," Neubauer said, because it formed "the crux of a lot of things we did subsequently." For example, it helped Aramark expand its hospital services.
Jack Lynch, who has been CEO of Main Line Health since 2005, was a ServiceMaster client in Houston, where he was a top executive at St. Luke's Episcopal Health System.
ServiceMaster, before being owned by Aramark, sometimes promised more than it could deliver. "What I found about Aramark is they pushed back if they didn't think they could deliver. They were realistic. They were customer-focused," said Lynch, who remains an Aramark client.
Lynch, whom Neubauer called a friend, said he never felt the need to call Neubauer. "He always had the people below him who could address the concerns, and I think that speaks to the leadership by him," Lynch said.
While buying the ServiceMaster unit turned out well, Neubauer also made some moves he described as disasters.
One was an attempt to move Aramark into the logistics business with its own warehouses. "We didn't have the scale, and we didn't know what we were doing," he said.
Through it all, Neubauer kept a close eye on Aramark's core services.
Gerald Shreiber, CEO of the Pennsauken-based J&J Snack Foods Corp., which supplies soft pretzels to many Aramark accounts, described being at a 2008 postseason Phillies game at Citizens Bank Park.
"I'm going around looking to make sure our stuff, our display cases, our product, is looking sharp. Who do I bump into? Joe Neubauer doing the same thing," Shreiber said.
"I remember being impressed. Here is the chairman of Aramark running around to make sure the napkins are right, and the product was right," Shreiber said.
Neubauer remembered the episode: "I would go to games, and I would watch one or two innings and then I would walk around to see what was going on.
"It's very, very important when you're in a service business to identify whether people are providing the service."
Ultimately, the frontline managers are key to whether that happens.
Neubauer is applying that insight to a philanthropic project in the Philadelphia School District.
"The frontline managers in the school system are the principals," he said. "We spend very little time training them how to be managers. That's what we're doing now with a group."