In this episode of the Private Equity Podcast, host Alex Rawlings is joined by Paul Adams, an experienced CEO in the home and residential services sector. Paul shares his extensive experience in leading private equity-backed companies through multiple acquisitions and the challenges of navigating a highly fragmented industry. They dive into why private equity is increasingly focused on the residential services sector, what makes it such an attractive investment opportunity, and the importance of managing labor shortages in a people-driven business.

[00:00] Introduction of Paul Adams.

[00:44] Paul’s background in HVAC, electrical, and plumbing services.

[01:38] Challenges private equity faces with mom-and-pop shops in home services.

[02:08] Importance of patience and strong M&A skills in home services.

[02:36] Balancing private equity's need for speed with the slower pace of acquisitions.

[03:33] The emotional side of selling a family legacy and employee concerns.

[03:59] How generational handovers can create trust issues during acquisitions.

[04:28] Building trust and relationships with founders during the process.

[04:57] Paul’s approach to working with contractors in residential services.

[05:26] The people-driven nature of service businesses and their focus on relationships.

[05:53] Addressing concerns of sellers about their employees and legacy post-sale.

[06:52] Challenges in attracting technicians despite the sector's essential nature.

[07:19] Impact of the labor shortage on growth in home services.

[08:19] Acquiring companies to meet demand and gain market share.

[09:18] Changes in the sector, including energy efficiency and government rebates.

[09:48] How government regulations are driving growth in system replacements.

[10:17] Increasing profitability through system replacements and upgrades.

[10:47] Private equity's interest in home services due to favorable cash flow.

[11:15] Low capital requirements and barriers to entry in home services.

[11:41] Challenges for small companies to scale due to limited technicians.

[12:09] Struggles of small businesses in growth because of labor shortages.

[12:35] Fragmentation and integration challenges in residential services.

[13:05] Costs of elevating unsophisticated businesses post-acquisition.

[14:04] Importance of proper systems to meet customer expectations.

[14:33] Paul’s strategy in buy-and-build and lessons learned from past experiences.

[14:57] Avoiding big announcements and press releases post-acquisition.

[15:29] Focusing on investment and continuity to maintain business stability.

[16:19] Benefits of working in the background for better performance.

[17:17] The power of consistency in building successful businesses.

[19:43] Paul’s passion for the residential services industry and M&A challenges.

[20:12] Alex’s closing remarks and a reminder to subscribe to the podcast.

You can connect with Paul Adams on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com.

Welcome back to The Private Equity Podcast, by Raw Selection! In this episode, Alex Rawlings is joined by Richard Brekka, Managing Partner and Co-Founder of Second Alpha. Richard dives deep into the explosive growth of the secondaries market, explaining how his firm provides liquidity to shareholders of private tech companies. The pair discuss the rise of secondary funds, why more companies are staying private longer, and the unique opportunities in the market for smaller, profitable tech companies.

Breakdown:

[00:00] Introduction to Richard Brekka, Managing Partner and Co-Founder of Second Alpha.

[00:12] Richard explains the secondary market's growth and why 90% of it is in unicorn companies.

[01:10] Richard’s background and how he got into secondary investing after working in venture capital.

[01:37] The common mistake of holding on to investments too long and the importance of realizing value sooner.

[02:05] Richard explains the two types of secondary markets: fund secondaries and direct secondaries.

[02:58] Growth in secondary funds driven by a lack of liquidity for GPs and the emergence of unicorn companies staying private longer.

[03:58] Richard shares why 90% of transactions in the secondary market are focused on unicorn companies.

[05:25] Discussion on the $2.3 trillion unicorn market and the trillion-dollar opportunity in companies valued between $100 million and $1 billion.

[06:21] How Second Alpha identifies companies for investment by targeting profitable, growing companies over $100 million in revenue.

[07:50] Second Alpha’s approach to providing liquidity to shareholders and building long-term relationships with CEOs.

[08:49] Richard discusses the various reasons shareholders seek liquidity, from personal financial needs to new business investments.

[10:12] The value Second Alpha provides to CEOs and how they become a trusted partner in helping companies toward their exit.

[11:00] Richard explains the challenges of accessing private companies for investment and how Second Alpha overcomes these obstacles.

[11:58] The importance of building trust with CEOs and navigating rights of first refusal in secondary deals.

[13:26] Second Alpha’s role as a helpful partner to the CEOs, offering introductions, advice, and exit planning support.

[14:53] Challenges private companies face after 10 years of growth, including management changes and adapting to market shifts.

[16:22] How companies must pivot and develop new products to continue growing and reach their next phase of success.

[17:20] Second Alpha’s focus on North American technology companies with strong revenue and profitability.

[18:46] The advantage of investing in growth-stage companies at a discount through secondary transactions.

[20:39] The role of artificial intelligence and cloud technologies in transforming industries and the efficiency opportunities they bring.

[22:32] Second Alpha’s focus on disrupting industries like data analytics and finding efficiencies in cloud infrastructure.

You can connect with Richard Brekka on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com

In this episode of the Private Equity Podcast, host Alex Rawlings sits down with Chad Kalland, an experienced CEO in the industrial services sector with multiple private equity-backed exits under his belt. Chad shares his insights on navigating cultural changes, integrating acquisitions, and driving growth in a private equity-backed environment. He also dives into key lessons learned from his successful exits, how to keep teams engaged during times of rapid change, and the importance of choosing the right private equity partner.

[00:00] Introduction of Chad Kalland.

[00:12] Importance of growing as a platform company with potential runway.

[00:41] Chad’s experience with private equity-backed exits and acquisitions.

[01:46] Mistakes private equity firms make by implementing changes too quickly.

[02:16] Understanding business strengths before making changes.

[02:43] Evaluating talent and their unique skills in an organization.

[03:12] Transitioning from founder-owned businesses to private equity-backed environments.

[03:42] Evaluating a company’s culture before acquisition to ease integration.

[04:11] Incorporating the acquired company’s strengths into the platform.

[04:39] Fostering a merger mindset instead of a takeover during acquisitions.

[05:08] Injecting private equity-backed speed into founder-owned businesses.

[05:38] Bringing acquired leadership into the fold to integrate with the platform.

[06:07] Key lessons learned in integrating companies, especially service lines.

[07:04] Missteps by not integrating acquired companies quickly enough.

[08:02] Adding service lines to increase market share.

[08:30] Ensuring smooth service line integration for long-term growth.

[09:28] Maintaining employee engagement during changes and new processes.

[09:57] Motivating technicians and engineers during transitions.

[10:27] Developing employees and offering leadership opportunities to improve retention.

[11:27] Strategies for retaining employees in a labor-intensive industry.

[11:53] Keeping new hires engaged and committed during the first 90 days.

[12:23] Onboarding and training to improve retention.

[12:52] Lessons from two successful private equity-backed exits.

[13:22] Adapting to private equity decision-making processes with new stakeholders.

[13:51] Finding the right private equity partner for growth.

[14:20] Evaluating private equity partners beyond the highest offer.

[14:49] Choosing between remaining a platform or joining a strategic acquirer.

[15:17] Benefits of staying on as the platform versus integrating into a larger organization.

[16:16] Focusing on high-margin services for profitability.

[17:15] Adding organic growth to acquired companies for value creation.

[18:09] Understanding employee motivation as a leader.

[19:35] Other leadership podcasts and books, like Simon Sinek’s work.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

You can connect with Chad Kalland on LinkedIn by visiting his profile here.

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com.

Welcome back to The Private Equity Podcast, by Raw Selection! In this episode, our host, Alex Rawlings is joined by Marc Jourlait, a seasoned Private Equity Operating Partner with extensive experience as a former CEO, leading multiple successful exits. Marc shares his unique insights into the role of the Operating Partner, the importance of driving value creation early in the investment cycle, and why private equity firms must act quickly in their hold period.

Breakdown:

[00:00] Introduction of Marc Jourlait.

[01:36] Overview of Marc’s career journey, from Apple to private equity.

[02:03] Importance of acting quickly in the hold period to create value.

[03:00] Why replacing key personnel, like the CFO, is crucial early in the investment cycle.

[03:30] Causes of delay: risk management and decision-making dynamics in private equity.

[04:30] The importance of early involvement, even pre-close, to maximize value creation.

[04:59] Benefits of operating partners engaging with the management team before deal closure.

[05:49] How early engagement can lead to stronger value creation and faster exits.

[06:18] The operating partner model and its differences between the US and Europe.

[06:46] Riverside’s model of using former CEOs as generalist operating partners.

[07:37] Operating partners at Riverside: from acquisition to exit, staying engaged.

[08:05] Benefits of operating partners serving as board chairmen for governance and guidance.

[09:02] Shift in private equity from financial engineering to operational improvements.

[09:31] Importance of having a clear value creation roadmap from the start.

[10:01] The short five-year hold period in private equity requires fast action.

[11:00] European firms’ reluctance to invest in operating partners compared to the US.

[12:07] How value creation is now more focused on operational improvements over financial strategies.

[12:35] Key areas for value creation: pricing, operations, and cost management.

[13:04] How private equity firms create a clear story to maximize exit premiums.

[14:01] Discussion on employee ownership and its growing adoption in private equity.

[14:37] Riverside’s involvement with Ownership Works and its impact on employee ownership.

[15:07] How Ownership Works offers equity to all employees, driving engagement.

[16:12] Employee ownership as a catalyst for company success and value creation.

[17:57] Impact of employee ownership on engagement and business performance.

[20:14] Marc’s enthusiasm for the Ownership Works program and its positive transformation.

[22:13] Marc’s encouragement for more private equity firms to adopt employee ownership.

[22:41] Importance of employee ownership in driving engagement and maximizing value creation.

[24:04] Marc’s commitment to continuous learning and networking for professional growth.

[24:58] Marc invites listeners to connect with him on LinkedIn.

You can connect with Marc Jourlait on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com.

Welcome back to The Private Equity Podcast by Raw Selection! Alex is joined by Drew Schardt, Vice Chairman and Global Head of Investment Strategy at Hamilton Lane. Drew brings over 17 years of experience at the firm, sharing valuable insights into the current state of private equity, how the market is evolving, and what’s in store for the rest of 2024. He dives into the importance of using data and technology to make informed investment decisions, and how Hamilton Lane is preparing for upcoming opportunities in sectors like healthcare, industrials, and private credit.

Breakdown:

[00:00] Introduction to Drew Schardt, Vice Chairman and Global Head of Investment Strategy at Hamilton Lane.

[00:45] Overview of Drew’s role at Hamilton Lane and his background in private equity.

[02:09] Key mistake private equity firms make: not acting quickly enough on management changes.

[03:06] Importance of transparency and using real-time data for better investment decisions.

[04:32] Role of technology and data platforms in improving decision-making in private equity.

[05:59] Private equity's recovery after global downturns.

[06:42] Lower leverage levels compared to the global financial crisis.

[07:37] How private equity evolved with stronger financial resilience and broader acceptance.

[09:00] Soft landing vs. recession risks in the economic outlook.

[09:58] Emerging deal flow and closing the buyer-seller price gap.

[10:56] Impact of global monetary policy on deal-making.

[12:09] Stabilized purchase price multiples aiding deal flow.

[12:53] Increased exit activity and liquidity in private equity markets.

[13:51] Robust deal flow and exits expected in the second half of 2024.

[15:50] How interest rate policies influence pricing and deal-making.

[16:17] Stabilized purchase price multiples across industries.

[17:11] Historical trends showing Q4 as the busiest for deal activity.

[17:40] Managing investment risk through asset selection.

[18:39] Drew’s approach to portfolio diversification and risk management.

[19:43] Key sectors of interest for Hamilton Lane, including healthcare and industrials.

[20:39] Importance of having multiple levers in value creation strategies.

[21:50] Emerging opportunities in private credit, infrastructure, and secondaries.

[24:33] Focus on defensive sectors like healthcare and industrials.

[26:10] How Hamilton Lane is preparing to capitalize on market opportunities.

[31:27] Focus sectors for Hamilton Lane: clinical research, supply chains, and logistics.

[33:05] Supply chain automation as an investment area.

[34:17] Sector-specific investment strategies for Hamilton Lane.

[35:40] How technology is increasing transparency and attracting new investors.

[37:09] Drew’s reading recommendations: "Radical Candor" by Kim Scott and works by Malcolm Gladwell.

[40:00] Closing remarks from Alex.

You can connect with Drew Schardt on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com

Welcome to The Private Equity Podcast, by Raw Selection! Today, we're joined by Kevin McShane, a seasoned Chief Revenue Officer turned Operating Partner, with a wealth of experience from multiple private equity-backed exits. In this episode, Kevin shares insights on his journey, the impact of AI on driving revenue and EBITDA, and his key learnings from successful exits in the technology sector. We'll also dive into the role of AI in private equity and discuss Kevin's transition from CRO to Operating Partner.

Breakdown:

[00:00] Kevin McShane's Introduction – Overview of Kevin’s career in tech, private equity, and his role as an operating partner.

[00:10] Kevin discusses how AI can drive revenue and EBITDA growth.

[00:39] How portfolio companies are using AI for decision-making and growth.

[01:08] 25 years in tech, CRO roles, and his transition to an operating partner.

[03:05] Kevin highlights missed opportunities in private equity due to slow AI adoption.

[04:00] Examples of AI in sales, demand generation, and customer success.

[05:26] How AI implementation led to cost savings and pipeline growth.

[06:24] How AI can be cost-effectively integrated into existing CRM and marketing tools.

[09:42] Insights on recent stock price dips and tech sector trends.

[12:44] Kevin emphasizes the role of strong CFO and leadership relationships in successful exits.

[16:52] The importance of relationships and keeping ego in check for team success.

[19:44] Kevin’s advice on moving from CRO to an operating partner role.

[24:00] How Kevin builds trust and guides teams without direct authority as an operating partner.

[30:41] Collaboration with leadership to develop and own strategic initiatives.

You can connect with Kevin McShane on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com.

Welcome back to The Private Equity Podcast, by Raw Selection! In this episode, Alex Rawlings, speaks with Geoff Lurie, Managing Partner at Traub Capital Partners. Geoff brings decades of experience as an operator-turned-private equity investor. He shares his invaluable insights on how private equity firms and portfolio companies can collaborate more effectively for superior results.

Breakdown:

[00:00] Geoff Lurie, Managing Partner at Traub Capital Partners, is introduced as an operator-turned-PE investor.

[00:25] Geoff emphasizes the need to focus on how price increases are perceived on the other side.

[00:55] Alex discusses the tough market conditions for private equity and hints at potential positive changes with increasing hiring and deal flow.

[02:18] Geoff explains the issue with PE firms assuming that entrepreneurs must suddenly change how they operate post-acquisition.

[02:47] Managing expectations and helping entrepreneurs report to the PE firm without losing their edge.

[03:42] Entrepreneurs struggle to adjust to reporting to external investors after being self-reliant.

[05:07] The importance of the first 100 days after an acquisition, setting up reporting structures and management.

[06:26] The crucial role of the CFO in portfolio companies, and why PE firms often replace them after acquisition.

[08:19] Geoff discusses how changing consumer sentiment impacts the success of private equity-backed companies.

[11:01] Differences between financial modeling and the practical steps needed to increase margins in portfolio companies.

[13:17] The importance of understanding real-world difficulties in implementing changes in portfolio companies.

[14:28] Alex asks how young private equity professionals can gain operational understanding without becoming CEOs.

[16:26] Alex plugs Raw Selection’s services, explaining the firm’s focus on executive searches for private equity-backed businesses.

[17:24] Geoff discusses the importance of managing debt properly and avoiding over-leverage in portfolio companies.

[18:23] Avoiding the mistake of using short-term working capital loans for long-term growth.

[19:42] Geoff explains how private equity firms motivate middle management by offering equity incentives.

[21:04] The importance of instilling an “enterprise, team, individual” mindset in portfolio companies.

[24:20] Geoff shares a personal anecdote about overhearing a young woman discussing her desire for a high-paying job without office work.

[26:20] Geoff talks about his transition from operator to private equity investor and why he made the switch.

[29:43] The best time to sell a portfolio company is on the way up, not at the top.

[31:10] Geoff explains the importance of setting up the right structure to allow CEOs to focus on future growth, not just day-to-day operations.

[32:34] Geoff shares that his passion stems from mentoring young professionals and imparting knowledge.

You can connect with Geoff Lurie on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com.

Welcome back to the Raw Selection Private Equity Podcast! In this episode of our Playbook series, we're thrilled to have Ted Clark return. Ted, a seasoned chief executive now making waves as a private equity investor with Iron Path Capital, shares invaluable insights into the art of deal origination. Having previously discussed growing enterprise value from $30 million to $1.4 billion, Ted now dives into the strategies that set Iron Path Capital apart in the competitive landscape of private equity. This session is packed with actionable advice for anyone looking to enhance their deal-making prowess. So, let's jump right into another insightful discussion with Ted Clark.

Breakdown:

[00:00] Introduction of Ted Clark, highlighting his transition from chief executive to private equity investor, focusing on deal origination strategies.

[01:11] Overview of specialization trends in private equity and their advantages in deal origination.

[02:32] The intersection of specialty chemicals and life sciences in private equity investments.

[04:00] Importance of having a clear vision and foundational strategy for where to invest.

[05:00] Strategies used by Iron Path Capital to originate deals, emphasizing the importance of a solid investment thesis.

[07:26] Leveraging professional networks to gain insights and access potential investment opportunities.

[10:00] How Iron Path Capital uses a systematic approach to deal origination to maximize effectiveness.

[13:14] Ted Clark explains the benefits of having an operational background in enhancing credibility and understanding in deal negotiations.

[18:00] Discussion on the synergy between operational experience and private equity investment strategies.

[20:21] Ted Clark shares strategies for effectively leveraging his experience to enhance deal origination and execution.

[25:22] Insights into building and maintaining relationships with investment bankers to enhance deal flow.

[27:15] Closing remarks and ways to contact Ted Clark for further discussion or collaboration.

You can connect with Ted Clark on LinkedIn by visiting his profile here.

To be added to the book waitlist, you can email alex.offer@raw-selection.com

Thank you for tuning in!

To get the newest Private Equity episodes, you can subscribe on iTunes or Spotify here.

Lastly, if you have any feedback on the podcast or want to reach out to Alex with any questions, send an email to alex.rawlings@raw-selection.com.