PE Firms Archives - Page 34 of 45

An Interview with Senior Partner at New Heritage Capital, Charlie Gifford

January 12, 2022 Sean Mooney

Charlie Gifford co-founded private equity firm New Heritage Capital in 2006, and has been investing in founder-owned, lower middle-market businesses for 22 years. He leads the firm’s origination practice, focusing his efforts on generating new investment opportunities and developing and maintaining intermediary relationships. In addition to his passion for the New England Patriots, Gifford is a strong believer in the concept of capital-and-thought partnerships for the companies in which his firm invests. The result: incentives for both founders and investors pointing in the same direction.

I caught up with him to get his take on everything from identifying the right-fit investments and what makes a great partner, to why expertise matters and the opportunities ahead for PE in 2022.

Sean Mooney: You co-founded New Heritage Capital in 2006, what was the genesis of founding the firm?

Charlie Gifford: I met my two current partners in 1999 while working for our predecessor firm. As that firm grew and began to move upmarket, the three of us were still interested in partnering with founder-owned businesses that had yet to access the institutional capital markets. Furthermore, we wanted to continue the model from our predecessor firm—one that incentivized all-star founders to stay on board for three to five years to help us grow the business. We wanted to be a capital partner and a thought partner to these founders. So, we essentially do an equity recap where the owner’s met their liquidity objectives, but we also allow the business owner to remain in control. Of course, the ultimate goal is to achieve superior returns for our investors, and we inherently believe the best way to do that is to identify bullish founders—owners who are interested in maintaining control post-close, and who are motivated by what we call “long term greed,” not just “short term greed.”

SM: You have a unique approach to investing called The Private IPO®—can you talk a bit about that, and how it’s differentiated from other forms of investment?

CG: I always like to point out that in the public markets you wouldn’t want to invest in a company where all the board members and executives are selling their shares. But in private equity, this is the standard model. A company gets acquired and as soon as a day later all the key executives can be laid off. This is counterintuitive to how great companies are built. We think it’s better when the founder is voting with their wallet and not their feet. In this way, we attract a self-selected cohort of maniacal owners who want to stay on board, want to remain in control, and are dedicated to growing their business.

In our Private IPO® solution, we provide significant up front liquidity for founders but also let them keep more control and earn a big piece of the upside. The founders we partner with come for the control piece, but they stay for the equity structure on the backend. If the business meets its growth targets, then they get a huge equity stake on the backend. As their partner, we help them to develop a growth strategy that allows them to double, triple, and even more in size, maximizing that backend equity value for everyone.

SM: What do you look for in a good investment, or partner? In other words, how do you identify founder-owned businesses that are the right fit for both New Heritage and the founder-owner?

CG: Interestingly, one of the very common traits we see in our partners is the individual that has worked at a large strategic competitor in their industry. They have grown a little skeptical about the prospects of growth: perhaps the company has taken their eye off the ball, isn’t innovating, or doesn’t treat the employees well. These founders have identified a clear market opportunity, so when they spin out of their current company they immediately begin to take market share by offering a better service or product. This new company is more nimble and meets the needs of their customer base more effectively.

SM: How do outside experts and advisors play a role in your business?

CG: If we look at the concept of market efficiency (where we are now versus 1999) there used to be no such thing as market networks. PE funds were left trying to figure out every detail out and conduct diligence on their own. The market is extremely competitive right now, particularly in terms of full-time talent; but the ability to call on BluWave for specialized project needs or interim executive talent means you have a better shot at not getting beat to the punch. In general, we are all attracted to growth, strong management, and industry tailwinds; but without the ability to get smart fast, it’s near impossible to be competitive.

SM: The pandemic certainly changed business as usual. What is the biggest lesson you’ve learned from the past two years? How has it affected your future outlook?

CG: One of the benefits of being a 15 person firm, many of whom have worked together for over a decade, is that there is a real comfort level in being candid, and a true sense of “all for one and one for all.” Everyone at the table has a voice. Our approach is collaborative and collegial. So, when the pandemic hit, we worked remotely for six months; but people wanted to come back to the office as soon as it was safe to do so. We inherently believe that this is an apprenticeship business and you learn by watching and doing. As for the future outlook, we think it’s bright. Our companies managed through COVID very well and the resiliency of the private markets has been incredible. We see strong earnings and strong deal flow in 2022.

SM: What are some major PE themes you’ve seen in 2021 that you think will have implications for next year (and possibly beyond)?

CG: For starters, PE will likely continue to pay up for good companies, and will be forced to close quicker with fewer contingencies. But I am just waiting for the music to stop, because things cannot go up and to the right forever. Having said that, it does say a lot about our country that our economy is still robust given all of these economic challenges created by the pandemic.

One common refrain we will continue to hear is the difficulty to attract workers and rising cost of labor. Due to this “missing middle”, prospecting and rainmaking has suffered somewhat, because everyone is working tirelessly on the necessary tasks to close deals in advance of year end.

SM: Now for the most important question: How do you really feel about Tom Brady leaving the Patriots?

CG: When you’re talking about the GOAT it’s hard not to wish him well, given the fact he always did what was in the team’s best interest by accepting a below-market contract. What he’s accomplished is truly remarkable. That said, I’m a Pats fan first and a Brady fan second, and now Belichick seems to be having the team playing it’s best football of the season around the holidays after a rough start– a true telltale sign of a Belichick coached team. It looks as though America’s worst nightmare is back…without Brady this time.

December 2021 Roundup: BluWave Client Insights

January 7, 2022 Kyle Johnson

BluWave works with over 500 PE funds from around the globe, connecting them with pre-vetted, best-in-class, third-party service providers across a variety of resource and functional areas. From information technology and manufacturing to healthcare, consumer goods, and beyond, our clients are expert business builders. In other words, they have their heads in the game and their hands on the pulse of news you can use.

Check out the latest, curated collection of reports, insights, and musings from a handful of our PE fund clients on everything from differentiated investments in 2022 to The Great Resignation, cloud security, and sales enablement.

As a wrap-up to 2021, Joe Zidle from Blackstone reflects on differentiated investment opportunities in the coming year. He shares why certain global economies will weather coming headwinds better than others, why he predicts that the ability to generate alpha will increasingly drive outperformance in the US, and more.

The Experts Weigh In: Reflecting on Themes from 2021

December 28, 2021 Kyle Johnson

One of the advantages of providing specialized solutions for more than 500 PE funds and business leaders is that we gain a 360-degree view about what is impacting portfolio companies and the private equity industry as a whole. From our hundreds of interactions with fund managers, interim executives, business leaders, and experts from across industries we learn about trends, themes, and opportunities that affect all aspects of PE. As we look ahead to 2022, we reflect on some interesting insights that we gained from our network, as well as our founder and CEO, in 2021 that point to themes to watch for in the year ahead.

Theme 1: Focus on people as core strategy

While it may seem counterintuitive in such a technology- and-data-obsessed culture, what we’ve seen the past year (with no sign of slowing down) is a commitment to focusing on talent and culture as a core part of business strategy. With an anemic and highly “flexible” job market, companies are thinking of innovative ways to attract and retain top talent in order to compete, including giving the CHRO a seat at the table.

The expert’s take: “I believe human capital is one of the most valuable assets of any successful company. End of story. We have put in place a strategy to have our portfolio companies hire a Chief HR Officer—a role that drives strategic thinking, fundamental change through processes, and design efficiencies. This person’s role is to think strategically about the business, then marry that strategic thinking with decision-making around human capital. He or she understands long-term objectives and implements a hiring strategy to meet these objectives. It was a game-changer for our companies and enabled us to swiftly drive change and make money for the shareholders.” — Matthew Garff, Managing Director at Sun Capital

Theme 2: Public policy and its key role for PE

Recently, Congress and the current Administration have put forth measures that could affect the private equity industry and have a negative impact, particularly on women investors. The industry employs over 11 million Americans and supports thousands of small businesses; a fact that sometimes gets lost when legislators are just focused on the balance sheets of the funds.

The expert’s take: “Washington is trying to move very quickly: it’s like being in a baseball game but not knowing what inning you’re in. Oftentimes the intention of these proposals isn’t nefarious or ill-intended; rather, haste makes waste and politicians are drinking massive amounts of information from a firehose. One minute they are talking to someone like me, with a private equity agenda. The next minute, it’s someone from higher education, renewable energy, or critical infrastructure. Our job [as industry insiders and lobbyists] is to inform them about the realities and potential negative consequences in a non-incendiary way so they will actually listen; subsequently, we hope they make decisions based on the data-rich information we have provided.” — Pam Hendrickson, Vice Chair at The Riverside Company

Theme 3: Specialized talent offers a competitive advantage

One theme that started to stand out in 2021, and will likely continue to be true for years to come, was top-level executives leaving companies in search of more flexible, specialized projects that put them in the driver’s seat. What does this mean for the PE industry? A shift in focus to interim, specialized talent who can quickly and accurately provide results during the process of due diligence, recruiting, and beyond.

The expert’s take: “The private equity industry used to be about optimizing companies to get attractive returns. Today, it’s very competitive with hundreds of sponsors participating in every auction, often paying perfect prices for imperfect companies. To stand out, PE firms need to see something that’s not in the investment bank’s book. General insights from generalist advisers don’t cut it anymore. We’re equipping our clients with specialized resources that identify unique information that gives them a fundamentally different perspective in a competitive process.” — Sean Mooney, founder/CEO of BluWave

Theme 4: Prioritization of remote work

After years of testing the idea of working from home, the last two years have catapulted the acceptance of remote work—and working from anywhere—to the top of the “normal” list. In fact, companies report that a substantial number of new employees are prioritizing the ability to work remotely even ahead of a robust benefits package.

The expert’s take: “Candidates who were fortunate enough to be employed during the pandemic but unfortunate enough to deal with the constant disruption and stress are now coming up for air and looking around for new adventures. In tandem with this ‘fancy shiny object’ job search, most candidates learned that much of their knowledge and skills could be effectively managed remotely. That’s a game-changer. Once people figured out they could live in Park City, Utah while working for a company based in New York City, many of them made substantial lifestyle changes to strike that elusive work-life balance. It almost gave people permission to shed old norms and start fresh. They went from thinking, ‘I’m going to be stuck in an office for the rest of my life,” to “holy cow, I can work on the ski slopes!’ — William Tincup, President & Editor at Large for Recruiting Daily

Theme 5: Scarcity and its future implications

One thing is certain—from supply chain to the workforce, scarcity seems to be a theme du jour, if not douze mois une année. But how troublesome is it as we move into 2022, and what can we hope for in terms of how the economy will adjust?

The expert’s take: “Usually shortages are a sign of price controls, and usually when people say ‘we don’t have enough workers’ it means that the price they have to pay is too high to get the workers. Historically, there have only been shortages when raising prices is forbidden. This happened with gas controls in the 1950s. The puzzle with today’s shortages is why don’t suppliers just raise prices? My presumption is that they are afraid of being judged as gougers either by their customers or by the government. Eventually, prices will increase, instead of the other option: not having products. It’s already starting to happen. This will help eliminate the pressure on the supply chain.” — Russ Roberts, host of EconTalk and Hoover Institute Research Fellow

Theme 6: The rise of impact investing with a focus on ESG

Almost every investor you talk to these days, whether for a public or private company, has one thing top of mind: how are our portfolio companies performing against ESG standards, including the initiatives around diversity, equity, and inclusion (DE&I). While ESG has been an important reporting tactic for years, only in the last two has it reached the tipping point. Many firms have already seen a positive impact by investing in diverse workforce development, and it seems that it is definitely possible to have success with a triple bottom line investment thesis.

The expert’s take: “We recently made an investment in a waste management company and our investment thesis was to formalize all policies and procedures, then top grade the management team. After implementing our suggested changes, the company attracted a more diverse workforce, which in turn embraced the ‘professionalization’ of the company. This included the way the company related to and communicated with its diverse customer base. As a result, the company improved its margins, increased customer retention, and was better positioned to win larger contracts from commercial customers.” — Colleen Gurda, Founder of Riveter Capital

Theme 7: Family wealth expands into new industries through collaboration

Family wealth, most often managed by family offices with a staff of ten or fewer employees, is reaching beyond the usual suspects of real estate and legacy business toward direct investments in emerging markets. What was once thought to be “old money” is now shapeshifting with younger generations of family members at the helm, many of whom are interested in collaborating with other family offices to expand their reach.

The expert’s take: “Direct investing has been the core strategy for families for decades. What we’ve seen is an increase in collaboration between family offices that happened less regularly before. For the most part, private equity has been taking the lead on lower market buyouts; and families see the upside and potential of that. Pooling resources allows families to reduce risk [in industries they aren’t as familiar with] and take advantage of companies that land between $3M and $20M EBITDA, who are looking to sell. Families are also looking at platform plays such as buying up HVAC companies and other firms within an industry. We are also hearing a lot of talk now about ESG, and also “business drivers” both of which contribute to innovation.” — Glen Johnson, President of Membership at Family Office Exchange

Theme 8: As consolidation continues, culture is a top priority

While company culture is certainly an important part of any organization’s success, during and after an acquisition the focus on maintaining a “healthy culture” is paramount—and is often the difference between a smooth or rocky outcome. Add-ons and consolidations will continue to be at record highs in 2022, and acquirers are best served to create a solid strategy to ensure culture remains at the top of the priority list.

The expert’s take: “Here’s what we’ve learned with nearly 75 acquisitions under our belt, some of which worked and some didn’t. First and foremost, it has to be a business fit. A lot of people will buy companies when there isn’t a reason for the companies to be together. It’s just about size and irrelevant to the core business; you see this a lot with tech companies. But it’s not only about the business fit; there also has to be a cultural fit.” — Troy Templeton, Managing Partner at Trivest Capital

Procurement consulting group critical for COVID & inflation-related supply chain issues

Food and beverage portco critically needs procurement consulting group

A PE firm VP came to us with a critical need for a raw materials procurement strategy consulting group for their food and beverage portco. Having recently acquired the platform that was growing rapidly, they needed a group that could develop and implement a sophisticated purchasing and procurement strategy for them. With COVID and inflation leading to supply chain issues and fluctuating prices on their raw materials, they urgently needed a procurement expert with experience in PE & this section of the food and beverage raw materials market that could dig into the numbers and create a tactical plan.

BluWave identifies procurement group to match firm’s specific needs

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade procurement needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of procurement consulting groups and individuals that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria and then connected the client with the select pre-vetted procurement group from our invitation-only Intelligent Network that had the exact industry experience they were looking for.

Firm engages provider and begins developing procurement strategy

Within 72 hours of the initial scoping call, we connected the PE firm with the exact procurement group that they needed. The PE firm was able to confidently engage this group and quickly help the portco get on track with their procurement strategy while also cutting unnecessary costs in the supply chain.

Vital MSP to optimize and monitor Azure

PE Firm and portco contact BluWave for MSP need

An LMM PE firm ops partner and portco CFO came to us with a critical need for an IT Managed Services Provider (MSP) that could optimize and monitor the portco’s needs in the Azure development space. With past reliance on a small team that set everything up in Azure, their systems were in desperate need of optimization and 24/7 monitoring in order to ensure that no issues were occurring. They were in critical need of an MSP that had knowledge of the insurance business, was familiar with systems working for both internal and external users, and could understand how to use and integrate with APIs.

BluWave uses pre-vetted network to find top MSPs

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade MSP needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of MSPs that uniquely meet the private equity standard. We interviewed the PE firm and portco leadership to understand their specific key criteria and then introduced them to two select pre-vetted MSPs from our invitation-only Intelligent Network that fit their exact needs.

Firm and portco confidently engage with ideal provider

Within 48 hours of the initial scoping call, the PE firm and portfolio company were introduced to two PE-grade MSPs that had the exact expertise they were looking for. As the decisionmaker for the project, the portco CFO selected their ideal choice. The portco was able to confidently engage the provider without wasting time or cost and rest assured that their services were running correctly thanks to the provider’s 24/7 monitoring.

Interim CFO To Support Current CFO During Add-On Acquisition

Interim CFO needed for post-close accounting support at portco

A CFO at a PE-backed consumer products portco came to us with an urgent need for post-closing accounting support for an add-on acquisition the firm was about to close on for the portco. With the add-on about to close, there was an immediate need for an interim CFO that could translate the target’s accounting to align with GAAP, help with monthly closes, prep for audit, begin budgeting, and more. The portco CFO quickly needed an interim CFO for the new add-on that had small company experience, analytical skills, industry experience, and who was available to be onsite for the interim work.

BluWave quickly identifies exact-fit interim available to work

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade interim CFO needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of interim CFOs that uniquely meet the private equity standard. We interviewed the portco CFO to understand their specific key criteria, and then connected the client with two select pre-vetted interim CFOs from our invitation-only Intelligent Network that fit their exact needs.

Client selects ideal candidate to ensure smooth transition with add-on

Within 24 hours of the initial scoping call, the portfolio company CFO was introduced to two PE-grade interim CFOs that specialized in helping companies close books when undergoing a PE add-on acquisition. The client selected their ideal choice. The portco CFO was able to confidently engage the interim resource without wasting time or cost and gain the extra pair of hands he needed to ensure the add-on went smoothly.

Critical need for firm to lead digital transformation of portco

PE firm needs group to lead digital transformation for portco

A VP at a LMM PE firm came to us with a critical need for a group that could lead their transportation portco through a full digital transformation project. With the portco’s field service division expanding rapidly and potentially tripling in size soon, they were experiencing pain points related to the amount of paperwork that had to be handled as they dispatched their growing number of employees throughout the region. They urgently needed an IT strategy practitioner with experience in the LMM, transportation industry, and field services area that could help them take steps towards becoming fully paperless.

Using pre-vetted network, BluWave identifies IT strategist

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade IT strategy-related needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of IT strategy practitioners that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria and then connected the client with three select pre-vetted IT strategy consulting firms from our invitation-only Intelligent Network that had specialized practitioners in leading digital transformations.

Firm engages selected provider and begins digital transformation

Quickly after the initial scoping call, the PE firm and portfolio company were introduced to the three PE-grade IT strategy consulting firms that specialized in leading digital transformations for similar-sized companies in the transportation industry. The portco selected their ideal choice and was able to confidently begin their digital transformation without wasting time or cost, and while trusting it to an expert pair of hands.

In The Know: Inflation’s Impact on Private Equity

December 15, 2021 Kyle Johnson

As part of an ongoing series, we’re sharing real-time trending topics we are hearing from our 500+ PE fund clients. In our most recent installment, our consulting manager, Keenan Kolinsky, talks about the impacts of inflation he is hearing across our clients. We are hearing this manifest in two primary ways:

A surge in leveraging specialized pricing experts to help adjust portfolio company pricing structures
The increased need for sourcing and procurement resources to identify and secure cost-effective supplier and logistics relationships

To learn more, watch the video below.

Interested in learning more about the cases Keenan mentioned, view them here.

ESG: 3 Proactive steps your PE firm should be taking

December 14, 2021 Delaney Walker

ESG has grown in importance and prominence amongst the investing community in the past few months. After a year and a half of unprecedented times, investors have found that they can help cause positive change by placing a focus on ESG. Additionally, investors have found that ESG criteria often points to improved long-term returns, with roughly 53% of institutional investors agreeing that companies with better ESG track records generate better investment returns.

With the importance of ESG rising in terms of investment evaluation across the board, we are hearing from our more than 500 private equity firm clients that questions on ESG policies and reporting are increasingly coming from LPs. Before you start raising your next fund, here are three steps you can take to start being proactive in being able to answer any questions that may come.

1) Develop policies at the fund level.

If you don’t have them already, the best place to start with ESG is to develop policies at the fund level. These policies can serve as a guiding light for how actions can be taken throughout the firm, down into portco investing, to help advance ESG efforts.

Our clients have leveraged third-party ESG experts to help them develop and implement ESG strategies for the first time.

2) Conduct diligence on your deals.

ESG diligence should now be part of the routine diligence process when assessing any target. However, ESG criteria varies by industry and is extremely trade-specific, so it is most valuable to have an outside resource do this work for you. In fact, we saw this trend occur so much in Q3, that ESG diligence crept into the top 10 of the BluWave Private Equity Due Diligence Index for the first time ever.

Additionally, third-party ESG diligence resources have tools and scorecards they use to audit companies against SASB standards, allowing for an easy way for you to measure your target company against other companies in the same field.

3) Monitor progress against ESG targets at both the fund & portco level.

LPs are no longer just going to look for ESG policies to be in place, they are going to look to see if action is being taken against these policies. The best way to prove this is by having metrics that show progress, and we have third-party resources in our network that will help you build in ways to track them over time.

At the portco level, these resources will allow you to collect and visualize your ESG data, making the impact of your efforts easy to understand, demonstrate to LPs, and analyze. These resources will also allow you to implement software tools that will make tracking and monitoring your efforts more automated.

No matter your ESG need, we have the resources to help you streamline your efforts and prove your action. Contact us to schedule a scoping call, we’d be happy to hop on the phone and quickly get started in providing you with the solutions you need.

An Expert Interview with EconTalk Host and Hoover Institution Research Fellow Russ Roberts

December 14, 2021 Sean Mooney

Russ Roberts is not your typical economist. As the longtime host of the podcast EconTalk, the John and Jean De Nault Research Fellow at Stanford University’s Hoover Institution, and a collection of economics-related books to his name, it would be easy to throw him into a traditional category. But, as the current President of Shalem University in Jerusalem recently told me: “My perspective on economics is constantly evolving as I learn more about what it is to be a human.”

Roberts also holds the title as a three-time teacher of the year and has taught at George Mason University, Washington University in St. Louis (where he was the founding director of what is now the Center for Experiential Learning), the University of Rochester, Stanford University, and the University of California, Los Angeles. He earned his Ph.D. from the University of Chicago and his undergraduate degree in economics from the University of North Carolina at Chapel Hill.

It is from this vantage point that I recently spoke with Roberts from his office in Israel about everything from his success as a podcast host and author, to his thoughts on the private equity industry, the construct of scarcity, and why expertise is necessary—but often challenging to vet.

Sean Mooney: How would you describe your brand of economics, and how has it evolved over the last decade?

Russ Roberts: I trained at the University of Chicago but became increasingly interested in the Austrian School—a heterodox school of economic thought. But I always found the most interesting questions were not about economics; rather they were more in the realm of philosophy, history, and social trends.

When I launched my podcast (EconTalk) I interviewed traditional economists on standard issues of economics– the trade deficit with China, bitcoin versus traditional currency, and the causes of the financial crisis. But over the years (and I started doing EconTalk in 2006), I got interested in other questions: Why are so many people in despair? What does it mean to be American? Why is there no longer a consensus about our national narrative as Americans? Why are tribalism and populism on the rise?

Economics is not the central tool kit for figuring out those questions. Many economists are often blind to non-economic factors: they look only at things that can be measured. But it can’t end there. The questions I ask are also questions of identity, role of community, and how to live with differences of opinion: the things that I believe are increasingly important.

SM: Why do you think that EconTalk has been so successful for so long? What’s your secret?

RR: Success is definitely hard to measure with something like a podcast. I’ve definitely learned a lot, and I get nice emails from listeners who are grateful. So, that certainly feels like success. On a personal level, as a 15-year long host, I have become a better listener and less of an “interrupter.” This is a wonderful life skill. And that means I give my guests, even those I disagree with, more of a chance to make their case and for me to engage with their viewpoint respectfully and civilly. I’m interested in conversations, not debate. This is a very powerful difference: conversation is about a shared exploration by two people, not just who’s right. When I created more room for my guests by doing more listening, I think EconTalk became a much better program. Lastly, I have learned to say “I don’t know.” It allows someone the opportunity to educate me—to let them be the expert.

SM: From your perspective, what is the biggest misconception about capitalism?

RR: Along the lines of what I alluded to above, the misconception people often have that wealth is a zero-sum gain—wealth must be taken from someone else. With just a little thought, you can realize that wealth is not a zero-sum game. Look at the standard of living today versus one hundred years ago: did we take the wealth from, Mars? Almost everyone got wealthier over time. Through technology, innovation, and processes, the standard of living has gotten better without making everyone worse off. Not at someone else’s expense.

Of course, there are always exceptions and bad players. The free market allows us to de-personalize the goods or services we are buying, and ultimately rewards the best X who is doing Y. We don’t have to like Jeff Bezos’ personal decisions, but we can still appreciate what he’s built and how it enhances our lives. One of the great gifts of a market economy is that you don’t have to peer into someone’s soul.

SM: We are living in a time of scarcity—in terms of the supply chain, the workforce, etc. How did we get here? When do you think this will shift and why?

RR: The concept of scarcity is an enormous challenge to economics and my way of thinking. I wrote The Price of Everything and It’s a Wonderful Loaf about the role that prices play in terms of order. Here is the quick take: Usually shortages are a sign of price controls, and usually when people say “we don’t have enough workers” it means that the price they have to pay is too high to get the workers. Historically, there have only been shortages when raising prices is forbidden. This happened with gas controls in the 1950s.

The puzzle with today’s shortages is why don’t suppliers just raise prices? My presumption is that they are afraid of being judged as gougers either by their customers or by the government. Eventually, prices will increase, instead of the other option: not having products. It’s already starting to happen. This will help eliminate the pressure on the supply chain.

SM: You are continually in conversation with experts in their field (for EconTalk): why do you think expertise is important?

RR: For the average citizen, expertise is in disarray right now. There is a lot of confusion about how to know whether someone is truly an expert—is it because they write books, host a podcast, make a lot of money, are on TV? It’s challenging to figure out the real versus the pseudo-expert, but we don’t want to fall prey to this postmodern phenomenon where people think everyone is a liar.

For a business, the challenge has always been the tension between making a decision that is defensible versus making a decision that is correct. If you’re an executive at a growing company, and you hire a first-rate consulting firm to help solve your problem, you can always make the defensible argument. But, if it turns out they can’t answer the question or find a solution, then what do you do? That being said, I think the challenge for business leaders is to feel confident taking a chance with a smaller, specialized, partner (without the big brand name) that is likely better equipped to tackle your problem.

SM: What is your definition of innovation? Where do we need more of it?

RR: Getting more from less, and achieving more with the same amount of resources. More simply put: we can make a process incrementally better, but what is even more desirable is making it better with the assistance of technology. A common example is the slide rule. Of course, we could make it incrementally better; but a calculator does a much better job with a fraction of the cost and much more accurately.

As a side note: I don’t think most people understand the pressure businesses are under to innovate, and why most founders don’t sleep well at night: they never know where competition is coming from. This is the essence of capitalism and what ultimately fuels growth and advancement.

In terms of the second part of the question, I think we need more innovation in the rules of the game: governance, how democracy works, etc. Antitrust law created for brick and mortar businesses is not helpful for thinking about big tech. In other words, we need innovative thinking about life as it exists in the digital realm, and how to evolve old systems in order to account for all of the changing dynamics.

SM: What is one piece of advice or knowledge you would share with those in leadership positions?

RR: Privilege your principles. If you want to make ethical decisions as a leader, and you’re worried about the existence of your business, it’s very tempting to do things that are not consistent with your principles. It’s always better to take an ego hit than violate your principles.

SM: Can you tell us anything about your next book?

RR: It’s called Wild Problems: A Guide To Making Decisions That Define Us. Generally speaking, I focus on the decisions we can’t necessarily measure or do a proper “cost-benefit analysis” about. Essentially, the book is an exploration of our sense of self, and how dignity and pride often outweigh the day-to-day effects of decisions we make. Today, we have so many choices and this leads to a lot of anxiety and stress. We want an app or data to help us make the best decisions, but that’s not the way everything works. If it was, life would be much more predictable, perhaps…but certainly less fun or interesting.

PE VP Forum Recap | December 2021

December 7, 2021 Kyle Johnson

Every quarter we gather vice presidents in PE to discuss current industry topics and to offer these peers the chance to gather, share information, and decompress with one another. In our most recent event, we discussed many topics and have listed our top takeaways below.

These forums are invite-only and follow Chatham House Rules, so listed below are high-level takeaways only. Are you in private equity and interested in joining fellow PE VPs during our next PE VP Forum? Please contact us at events@bluwave.net.

Increased Deal Competition

Deal competition is at an all-time high, so firms are getting creative in how to best address this. Common themes across the ideas that were shared were:
- Determine the best approach for your firm that allows you to quickly identify the best possible deals where you have unique insights.
- Seek specialization from an investment strategy perspective.
- Utilize help in the form of third-party advisors that have industry expertise and can assist in assessing the deal.

Deal Surge

There is currently an overabundance of deals in the market which means sellers are considering values like speed and partnership in addition to price. Look for opportunities to emphasize these values in order to differentiate yourself when you can’t differentiate on price.

Labor Dynamics

Firms are continually facing difficulties in attracting and retaining talent due to the pressurized market. Internally, one solution has been to offer associates more than one track for their advancement, and externally, firms are developing innovative solutions for longer than average portco exec hiring processes including beginning recruiting processes before the deal even closes.

We thoroughly enjoyed getting to gather with PE VPs to discuss these current industry hot topics. We’s be happy to connect you to the PE-grade, exact-fit, third-party resources to assist you in this tight market, just contact us here.

Learn more about how we can specifically help Deal Quarterbacks and access a toolkit that can help you do your job more efficiently here.

Why BluWave was built with deal quarterbacks in mind

December 6, 2021 Delaney Walker

As a deal quarterback in private equity, Sean Mooney often struggled with getting connected to the PE-grade, specialized resources he needed to drive differential success. Sean found himself spending lots of time searching for providers on google and calling friends in search of an exact-fit service provider. This made the diligence process time-consuming and stressful. It also left only a small amount of time for the other things that matter. In order to combat this pressing issue, Sean came up with the idea for BluWave. In fact, Sean created BluWave specifically with deal quarterbacks in mind and is someone who did the job himself. Now, BluWave helps deal quarterbacks get time back in their day and gives them confidence in the third-party resources that they are utilizing.

We are here to provide deal quarterbacks with the exact-fit, private equity grade service provider they need, exactly when they need them.

Learn more about how BluWave can help deal QBs specifically in both due diligence and value creation.

If you are a deal quarterback that struggles with due diligence or value creation, we would be happy to connect with you and provide for the need you have, just contact us here.