Private Equity Spotlight: Building Legacies and Leading Change with Pam Hendrickson

[00:00:00] Sean Mooney: Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices in real time trends. I'm Sean Mooney, BluWave's founder and CEO. In this episode, we have a fantastic conversation with Pam Hendrickson, vice chairman of the Riverside company and chairman of the board of directors of the American Investment Council.
Enjoy.
So I'm very excited to be here with. I think. One of the bigger leaders in all of the private equity industry, not just from being a really great investor, a great operator, but also someone who advocates within the private equity industry and for the private equity industry and in many ways sees a lot of the good that happens that isn't always talked about.
And so I'm pleased to be joined here today by Pam Hendrickson. Pam, thanks for joining us.

[00:01:06] Pam Hendrickson: So happy to be here. Thanks for asking me, Sean.

[00:01:09] Sean Mooney: Maybe we'll jump right into it, Pam. And to set the stage here, it would be great to get a little bit of your story. Can you tell us a bit about how you kind of came up, how you got into the private equity industry?

[00:01:21] Pam Hendrickson: Sure. I grew up in New York City, 10 blocks from where I live now. And I went to college as a premed. So I got to organic chemistry. And I hated it and said to everyone around me, I don't want to be a doctor anymore because I can't even get through this ridiculous class, which is totally memorization. And my faculty advisor said, perhaps you should think about business.
So I did do that. I went actually straight from college to business school in Chicago. And I was sort of a baby, but I had made the argument that all the things I had done in college were it was maturity that you were looking for. And that was a reflection of that maturity. And then I spent 22 years in various jobs at JPMorgan Chase, which was originally Chemical Bank when I joined it, or Old Succotash, as it was known.
And a headhunter called me about this company, Riverside, and I crumpled up the number and threw it away, and said, what do they do, make boats? And my husband said, who runs an investment bank for the middle market, you know, I'm sorry you didn't go there, or you didn't find out more about it, because I would like to know more about it.
So, a year later, the same headhunter calls and says, I know you're not interested, but maybe you have a referral for me. And I said, you know, I probably am interested. So I went over and talked to Bailin Stewart and the rest, as they say, is history. And I've been here since 2006.

[00:02:54] Sean Mooney: And what was it, as you started learning more, because you could have continued on your track at a really, another fabled institution.
And just kept on going. What was it about that kind of made you hit pause and look left and right and just go, you know what, this might be kind of good.

[00:03:09] Pam Hendrickson: Well, the people was one thing. The other thing was, it was small and it was a build operation. At JPMorgan Chase, we were in merger mode. We had bought, I think, five banks by the time I left and I couldn't do that again.
Right. I was like, all right. At one point, I think I had to fire 60 percent of a department. And I really didn't want to have to do that. So it was so great to be at a place that it's all about building. And that's where I was. And that's what led me to it.

[00:03:41] Sean Mooney: That resonates a ton with me. So I grew up in Texas.
I grew up in really kind of a family business, so working on the back of manufacturing. And I went to college on the East Coast. My roommates were from New Jersey. I asked him, what are they going to do? They're going to do investment banking. And of course, my first answer was what's investment banking?
Okay, I guess I'll do that. And I ended up in a restructuring group at one of the premier financial restructuring advisors in that time in the country, which was still kind of a niche side kind of practice. And it was all about kind of trying to save companies and it was exhausting and everyone's constantly fighting and battling.
And it was intellectually massively stimulating, but it was all about how do you keep something from going down the drain and you're just constantly popping it up. And in the same kind of vein, I was like, I really want to get into something where it's building something in a positive way and not constantly in kind of crisis mode or firefighting.
And luckily one of the gentlemen, the managing director at the firm that I was working with was moving out to join a PE firm. And he grabbed me by the collar, and said, I heard you're pretty good, and he just took me with him, and so I was forever grateful. Because I wouldn't have naturally even really known to get into it, other than someone kind of telling me, like, you're coming, kid.

[00:05:01] Pam Hendrickson: Right, well, but, so isn't that interesting, Sean, that you and I both, Joined private equity because it was a built operation, which is not what you would think of when you pick up a paper, anyway.

[00:05:13] Sean Mooney: No, and we'll talk about this, because there's still this dated notion that this industry is a 1980s movie with Charlie Sheehan and Michael Douglas.
I've never really felt that way in this industry. Right. Before we kind of move on to that, And I think it's going to be a really interesting part of our conversation. But before we do that, one of the standard questions I love to ask just to get to know you a little better is we'd know you better if we knew this about you.
So Pam, what's one of the things that we would know you better if we knew?

[00:05:42] Pam Hendrickson: I really love to cook, but I don't have a lot of time. And so. Family and friends call me the gadget queen, and one of my favorite gadgets is a crinkle cutter for vegetables. Well, I use it for vegetables. So, if you're serving carrots as an hors d'oeuvre, and you crinkle cut them, everyone thinks you're a genius.

[00:06:04] Sean Mooney: Whoa.

[00:06:05] Pam Hendrickson: It takes exactly one minute.

[00:06:08] Sean Mooney: And this is something you get on Amazon and you can just kind of put them in and it looks like this artisanal It looks really,

[00:06:14] Pam Hendrickson: yes, yes, it's so fancy. I love it. And you could buy hummus or whatever dip you want from the grocery store. You could also make it, but it's also easier if you are really short of time to buy it.

[00:06:27] Sean Mooney: I'm a huge gadget person as well. And so I get these emails that I kind of like send out to the private equity world and just the business building world. And every one of them has like one of these little gadgety life hack type things. Perfect. And it's become though now like a burden, burden for my wife because boxes just show up because I got to have a new life hack.
For me, it's an enabler of a bad habit. And so I'm going to look into the crinkle cutter.

[00:06:50] Pam Hendrickson: I will actually send you the link for the crinkle cutter.

[00:06:54] Sean Mooney: I love it. Well, that'll save me because I got to write one of these things pretty soon.

[00:06:57] Pam Hendrickson: Actually, a friend of mine said she drove from Florida to South Carolina to deliver the crinkle cutter to her sister yesterday.
All right.

[00:07:04] Sean Mooney: Oh, I love it. So for those of you listening, you see this in the email, it came from Pam, and it'll be showing up at my house probably a day from now. And so, it's good. And uh, so my recent deep dive here is my son has been getting on us for having Teflon pans. He's mindful of kind of these forever chemicals.
And so now I'm going down this big rabbit hole on these pans that are infused with titanium and naturally non stick. And so I'll let you know how those work out, but it's okay.

[00:07:34] Pam Hendrickson: All right.

[00:07:35] Sean Mooney: We'll see. Well,

[00:07:35] Pam Hendrickson: then the friends of ours have an induction stove. That's a really interesting idea, too.

[00:07:40] Sean Mooney: Those are good stuff.
I love it. Okay, so we'll get back to the center here on our conversation, but I think that's a really interesting one. I love it. I need a life hack. There's going to be a brown box showing up on my door probably two days from now. Good to hear. So maybe as a foundational. Our listeners go from the whole scope of business builders from private equity investors to LPs, investment bankers, but also a lot of CEOs, a lot of people coming up in school who are trying to understand this industry from the best of the best practitioners like you.
And one of the things that I think is still broadly misunderstood is kind of what is private equity, and we'll talk about maybe some of the reasons why. But maybe to kick it off, I think the biggest misnomer is that Private equity in these hedge funds that they hear about on TV or the shows that they watch taking place on HBR or whatever, they think they're the same thing.
And so Pam, maybe to help kind of set the stage here, can you talk a little bit about what's the difference between private equity and hedge funds?

[00:08:43] Pam Hendrickson: Sure. We teach our CEOs at the beginning of our leadership summit. There's kind of the newbie CEO. And this is a very valuable concept for them because what's the difference between a hedge fund and a private equity firm?
They don't really know because they, I've been building their business, which is actually really hard to do and important. But while there are real structural differences between the two, I think at its core, a hedge fund is trying to make the highest return possible in the shortest amount of time possible.
So while they can technically invest in anything, they will generally invest in something that's liquid. So generally it's public and can be traded in and out of very quickly. Whereas a private equity firm is focused on building long term portfolio companies. Building for the long term. So, when you buy or you invest in a portfolio company, what's the growth strategy?
You can't save your way to prosperity. So, you have to figure out what that growth strategy is. And that's the fundamental difference.

[00:09:50] Sean Mooney: And I think that's a great summary. And at Ryansvale, I was talking with a friend of mine who's an investment banker and the sponsor coverage group of a well known investment banker we all know.
And it's just great kind of quotable quote. He goes, If Hedge funds find value, private equity firms create value, and it's just like you gotta build things. Next I want to talk about like how to or what does PE do and the how and the why, but some of the why is in some ways the industry has gotten so competitive that they have no choice but to create value.
Like the late nineties, when I first joined PE, it was probably a little bit candidly, a little more buy low, sell high. And I would look at the people I worked with and for, and I'm like, Oh my gosh, I wish I was 10 years older.

[00:10:33] Pam Hendrickson: But now multiples are so high that you can't buy low and sell high.

[00:10:37] Sean Mooney: Yeah. Yeah.

[00:10:37] Pam Hendrickson: Cause if you got to pay an a multiple for an a company, so you better have that growth strategy ahead of when you buy it.

[00:10:44] Sean Mooney: I think that's a great point. So Pam, if we kind of take it to the next level, we've talked a little bit about why they have to create value here. What does a private equity firm do to make that value appear when it hasn't yet?

[00:10:57] Pam Hendrickson: Well, people seem to think it's just about capital, but it's really not. It's really about both financial capital and intellectual capital. Which is what you're delivering to that firm. I actually remember a CEO saying to me, it was so great to have a partner during a global pandemic, because I had never been through a global pandemic before who had, and it was great to be able to brainstorm and have ideas about, okay, now what do we do?
So I think that's a really important part that often gets neglected.

[00:11:33] Sean Mooney: A hundred percent. The easiest thing in the world to do. When I was in P. E. and the scariest thing to do also was when you cut that check and send a wire. Anyone can buy a company.

[00:11:44] Pam Hendrickson: Anyone can buy a company.

[00:11:46] Sean Mooney: The harder thing is to create the value when you've paid a nearly perfectly competitive price for it.

[00:11:52] Pam Hendrickson: Exactly, and I say this all the time, you can't save your way to prosperity. So, right. You either have to be better at doing something, you might do adjacencies in add ons, you might go to a different country. There's a lot of growth strategies, a lot of levers you can pull, at least for Riverside, because we buy only small companies.
So, those are the important things. We have 80 operating partners now, and they are really trying to coach the boards and the CEO of a company on how to grow, it's a, it's an idea bouncer offer person.

[00:12:30] Sean Mooney: It's really interesting that you talk about, so if I kind of go back in the way back machine and like 2004 of private equity and kind of our value creation plan was, we're going to try to.
Buy right, because there wasn't the competitive tension, so we weren't having to overpay. And a joke, our value creation plan was upgrade the accounting system and add a salesperson, and then find the obvious savings. Right. But even back then, it was never fire, because you're never going to fire your way to growth.
And then today, as I go back right before founding BluWave, it was, you would win, and you would compete against 200 private equity firms, and I'd have like heart palpitations going, Dear God, we won. Now we've got to create something that's kind of a butterfly out of a moth, not to say a moth in a bad way, it's just like you're gonna have to transform these companies.
And then now as a CEO and founder of a company, you realize how lonely at the top it is.

[00:13:24] Pam Hendrickson: So lonely. That's actually was the impetus for Riverside's Leadership Summit, where we invite the C suites of all of the companies in which we've invested. There's now today, there's probably 400 people who come and they share best practices.
There's some learning that goes on that you wouldn't, for example, this year, the theme was artificial intelligence. How can you use it? What are the pitfalls, et cetera, et cetera, which they wouldn't get normally as just the CEO of a company that owns eyelash salons, for example. And that loneliness at the top is a thing that comes out every year in the reviews.
They love that networking time, that time that they can talk to each other and find out, well, what are you doing about this problem? So that's been great.

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[00:14:32] Sean Mooney: So you provide this amazing ecosystem of peer business builders that are trying to create something that didn't exist. What other things are you all doing to support the value creation, you know, within your ecosystem of operating executives, your investment professionals, what are some of the things that you do within the different levers of value creation?

[00:14:53] Pam Hendrickson: Well, so let's take technology. Great. There's a thing called the RISO, which is the Riverside Information Security Office, because everybody is conscious of cyber risk now. And so we will risk rate every single company when we invest in it. Companies that hold credit card information are obviously way more risky than those that don't, and we will send a third party in to tell you this is where you are now.
These are the steps we think that you need to do to mitigate this. And we're not trying to build a global galactic J. P. Morgan thing. These are right size for our small companies. So on the scale of, if it's a one to five scale, we're probably a three. That's fine. So they will have immediate actions next steps and longer term next steps.
And those are things that we really need to do. And all of our companies, we're influencing our companies to do these things, and they all have to stand on their own merits because it's really critical that you're not ordering. I mean, you can't order someone to do something. You just want to say it's good enough that you want to do it.

[00:16:09] Sean Mooney: You brought a couple of good points that I think are really important. And one is, I think people think from the private equity lens that you have this kind of absolute control. And really what I learned as I was coming up as NO, we're still collaborating and persuading. The only absolutes we have is when to buy the company, when to sell it, and ultimately the highest C suite when we have to fire and when we have to hire.
Everything else is working collaboratively with individual companies to make them successful. And then lifting revenue, and then making sure their costs are right, and then bringing in the right people, and then upgrading the technology, and you're just building this whole house, but each house is on its own block.

[00:16:51] Pam Hendrickson: I think the partnership piece is really, really critical. At Riverside, we even have a toolkit to enable a company to look and say, okay, I need someone to write my HR manual. Who are the people that you recommend or that other people have recommend? And it's sort of listed with, these are the companies that have used it.
If you want to call another CEO and ask them what was good and what was bad about it, you can.

[00:17:17] Sean Mooney: Yeah, I like that.

[00:17:18] Pam Hendrickson: So those are the kinds of things that I think you want to make sure that you offer. Thanks a lot.

[00:17:24] Sean Mooney: And the other thing I really like that you brought on is I think a lot of people are learning to appreciate that the industry is about growth and building elements of value that didn't or couldn't exist before they had the fuel and the ecosystem and the resources that were thereby enabled.
But the other thing that I think you also talked about is, it's not only the success of growth, but it's also showing up the safety of these businesses and so things like cyber risk, it's like, You're protecting the downside while also lifting up the growth of the business at the same time.

[00:17:54] Pam Hendrickson: Absolutely, and in fact, I can't even tell you the number of times we've walked into a company, and they go, isn't GAP where I buy my jeans?
As we say, no, you actually have to do an audit. No, you actually have to comply with the law. And so we're like an arm of the federal government because we're ensuring that all of these little businesses are complying.

[00:18:20] Sean Mooney: Yeah. The governance part is, I think also to your point is a huge part of like, we're going to do things in a buttoned up professional way.
Whereas a lot of times when you're kind of a single owner operator, you know, it's a little bit more fast and loose and it's not intentional, but it's, it's something that they just didn't even know. And so even just that kind of like professionalization that just creates, like we said, not only success, but safety within these organizations.

[00:18:47] Pam Hendrickson: Absolutely, and I think that's a really critical point that often gets lost because you might find one story, one bad story of a private equity firm that owns some firm, that owns some portfolio company that didn't do the right thing. But what about the millions of millions of businesses out there? That are not doing the right thing and are not owned by private equity.

[00:19:10] Sean Mooney: The outlier phenomenon is something that's always kind of driven me nuts. And as I would meet friends and they're like, Oh, I'm in private equity. And they'd look and like, you flying around on jets and like, well, yeah, but it's called Southwest or it's like the last seat of the Embraer, you know, flying out of like a semi regional airport.
No, never on a jet. I drive a GMC Sierra pickup truck, you know, leave me alone.

[00:19:37] Pam Hendrickson: I was talking to someone this morning and she was saying, well, it's not a great hotel. I go, believe me, the hotels I've stayed in, in various parts of Mississippi, you don't want to know.

[00:19:49] Sean Mooney: So as you think about the things that Riverside and you all are doing to support these companies, There's obviously benefits for those companies, their employees, for the investors, the pension funds that are investing in you all, the university endowments, there's benefits that are directly aligned within this ecosystem.
What are some of the other benefits more broadly as you think about the economy and more extended stakeholders?

[00:20:14] Pam Hendrickson: Well, I think defining the stakeholders first is really important, right? So you obviously have investors, but you also have employees and you have communities. And those are all really important.
I think for some reason there's this impression out there that private equity is universally on the coast and it's only big companies, but 85 percent of the money actually went to small companies. And most of them are in the middle of the country. They're not on the coast. I mean, I don't actually think we own a company in New York.
So that's really important. And then the creation of jobs. I mean, I looked at our, just for kicks, I looked at our US control funds and we've created 1200 jobs in the last five years. So that is great. And those were jobs that didn't exist. And the average worker is earning 80, 000. So that's really critical, but the private equity has been so focused on building that it hasn't probably done a PR campaign on how it's helping the community.
For example, we did an exit on a company in Beaverton, Oregon. Well, the Valley Times is the paper in Beaverton. Did we send anything to the Beaverton? Or the Valley Times? Probably not. It was probably in the Wall Street Journal. We need to probably think about that a little bit.

[00:21:42] Sean Mooney: That's one of the things that I always felt frustrated personally, because I was proud of the work that I was doing and I thought it mattered and it made differences because you're giving fuel to build stuff.
It's a business building exercise. And that's why going back to my roots, you know, wearing hard helmets and stilted boots is what drove me to the industry. And then people were calling me like Bud Fox, you know, from a Wall Street movie. I'm like, I don't think you all understand the vast majority of this industry are small and mid sized businesses investing in small and mid sized businesses.
And what it comes with is working 90 hours a week. And not knowing my kids first names, but it was this huge frustration. And then as I started thinking about one of the biggest problems that the industry has is the first word in private equity is private. You know, I think a lot of the people in this industry kind of have this scout mentality where it's like discretion's the better part of valor.
We're going to keep our head down and we're just going to do good stuff that works. And it's this kind of like this podcast, the Karma school of business. Just do good things with and for good people, and then we'll get credit for it. And unfortunately, that's not always how the world works.

[00:22:52] Pam Hendrickson: That is definitely not how the world works, and I once heard Mike Milken say, how people feel about you is the way regulation is going to go.
So, at the moment, the private equity industry is being scrutinized by the following federal regulatory agencies. The FTC, the DOJ, the SEC, HHS, Treasury, the CFPB, and FERC, which is the energy. I mean, I also am very proud of the work we do. I think what we do is a really good thing. Pete Stavros at KKR thinks what he does is a really good thing.

[00:23:30] Sean Mooney: And it was a great story in 60 Minutes, for those of you who haven't seen it, there's an episode of what? Pete Stavros and KKR doing in terms of building equity value for deep, deep swaths within their organizations that build wealth in ways that you could never, ever aspire to create, you know, at an hourly level.

[00:23:47] Pam Hendrickson: And by the way, that works really well for small companies too. We just have launched our company Scram. Which is a company that provides things for when you drink too much, basically. It's most famous client is Lindsay Lohan because they put a bracelet on her when she was not in prison that could track her that way.
And I think that's really critical. I mean, it's aligning your human capital strategy with how to create value. And I think you need to really do that.

[00:24:18] Sean Mooney: It's aligning, not only your ability to make a wage, but to benefit from the value creation directly and think like another business builder, like a business owner that can create profound changes in mindset when you realize you're not only working for an hourly wage, but you're working for a piece of everything you're creating as well that can have dramatically amplified results for a lot of folks.
So as we think about the PE issue, like one of the things that, as I go back in time, I remember 2008 and 2009, the great financial crisis, and I was kind of proud of ourselves, like we were the one industry that didn't blow up. We ran towards our companies, we gave them every benefit they could ever hope for, we gave them capital, kept our employees intact because we knew they were valuable, and we were the one industry that got regulated.
I was

[00:25:06] Pam Hendrickson: like, what the heck? What's wrong with this picture?

[00:25:09] Sean Mooney: All these other industries blew up and we're the ones that now have to be regulated, and I have to essentially not hire an associate next year because I've got to pay attorneys for regulations that have nothing to do with what we do. And so, I'm curious, Pam, why, The politicians in Washington, D.
C. attack private equity so much.

[00:25:31] Pam Hendrickson: Well, I've heard you say this, Sean, which is, using your words is really important. And I think most private equity people keep their heads down and do their job. And their job is to build companies. Their job is not to talk to politicians, regulators, etc. However, we need to do that.
We need to get better at communicating the balance between employees, communities, and shareholders, or investors. We haven't done that historically. Well, we're doing a better job of it now, but there are people who've been doing it for years. And if you just go to Washington with your hair on fire one minute, that doesn't really help you.
So I think using your words is really important. Telling stories. Those are the things that resonate. And going to more local news.

[00:26:27] Sean Mooney: A hundred percent. And it's one of those things where when we started getting involved in some of kind of the advocacy efforts, because in some ways I'm trying to validate the vast majority of my prior career, which I was proud of.
And one of the analogies that struck my mind is like, if there's a party and they're playing musical chairs and you never even show up, guess who's never getting a chair when that music stops? Totally.

[00:26:46] Pam Hendrickson: And

[00:26:46] Sean Mooney: private equity industry never shows up. I mean, there's some that do.

[00:26:50] Pam Hendrickson: Right.

[00:26:50] Sean Mooney: And I think they're probably pulling more of the weight for the rest of the industry Are there any parts of the industry that broadly don't engage in ways that you think they should?

[00:26:59] Pam Hendrickson: Well, I think there's probably a lot of people that don't. And obviously, like every industry, there's a bad actor or two. But overwhelmingly, 80 percent of the assets in private equity belong to the American Investment Council. I have a lot of confidence in our members and that they're doing the right thing, that Pete Stavros and Ownership Works are doing the right thing, making sure that Parallels Data Convergence Project, which is measuring ESG, is great.
And for some reason, the only story you hear about are bad stories.

[00:27:37] Sean Mooney: It's an easy hit job, you know, for people who don't show up and don't defend themselves. And this might be a little bit provocative, but I came from a lower middle market private equity firm,

[00:27:45] Pam Hendrickson: right?

[00:27:46] Sean Mooney: And what I will say, you know, and this might touch some nerves I don't think the lower in the middle market of private equity do a good enough job engaging and standing up.

[00:27:57] Pam Hendrickson: Absolutely I agree with you Sean. I think the bigger firms Understand the importance of this and so they do I think the smaller firms A, don't engage, and B, often don't know. For example, there is a proposal out now on the new Hart Scott Rodino form. Now most of the deals that a smaller firm does wouldn't hit Hart Scott Rodino.
You wouldn't need to file it. However, in the new form, there's a 10 year look back. You buy a company, you might have had three owners by the time you're reaching that Hart Scott Rodino, and you have to have kept 10 years of add on information. I don't think anybody's focused on that.

[00:28:41] Sean Mooney: And to what end? What does that

[00:28:43] Pam Hendrickson: Exactly.
It doesn't accomplish it. In fact, I was telling someone today, and she's a lawyer, she said, I probably shouldn't save this, because it's probably business for us, but Isn't that just a waste of money?

[00:28:56] Sean Mooney: You know, maybe it's the whole idea is just throw sand in the gears of something and that is valuable.
There's a thread of humanity that finds satisfaction in tearing things down versus building things up.

[00:29:07] Pam Hendrickson: Right. And so one thing that I think is important for people to remember is that Because there isn't a lot of engagement in the middle and lower middle market, the document hygiene is going to be really important, that you don't send emails that are inappropriate.
For example, when you buy the majority share of a company, that you're cognizant of the distinction between acting as a shareholder, And doing the right things that way because I think document hygiene is really important and I don't know how to get the word out, but hopefully this will help.

[00:29:44] Sean Mooney: It's important because one of the things that we've talked about is there's a misunderstanding of the industry and what it does.
There's a mentality to grab onto outliers. And a lot of times you'll hear about, Oh, this private equity company went bankrupt. Well, when you look at a whole private equity firms go bankrupt, much less than the broader economy. But the people that are doing that, they take that same outlier approach where it's like, we're going to look for one email out of 10, 000 emails that were sent last year.
And we're going to use that to create a narrative, and then we're going to amplify the 0. 1 percent data point and make that 90 percent of the story. It's one of those things where I've found in various times in my career that the world isn't the way I wished it was, but it is what it is.

[00:30:32] Pam Hendrickson: Exactly. So just don't give them the ammunition.

[00:30:36] Sean Mooney: Yeah.

[00:30:36] Pam Hendrickson: Don't provide the ammunition.

[00:30:38] Sean Mooney: It's really good advice. So, let's turn the page here and talk a little bit about something that's happening macroeconomically that I think is really important for everyone to kind of understand. It's been in the news a lot, the baby boomers are coming through, they're retiring, which has its own implications broadly in the economy right now, and we're seeing that in some of the job openings and the inability to, frankly, fill those jobs.
But they're also a generation that have been tremendous business builders over time and created these amazing companies that provide value to all of us in terms of things we buy and services we use. Now that's going to be another really hard thing to fill. A lot of those companies can't go public or you can't afford to go public and you can't sell it to a bank.
And so what do they do? What are their options other than just not going public or selling to a competitor or outright

[00:31:37] Pam Hendrickson: bankrupting the company or something? And a lot of the kids are not interested. I mean, they're doing other things. So, It's interesting, and I think it's, again, a thing I'm proud of, which is, people need to monetize their life's work.
One of the CEOs of a company I was talking to the other day said to me, So, we're buying all these add ons, and I often go into these sort of mom and pop, This is a, an early child care company and I will go in and say, do you have benefits? And they'll say, well, we get sick days, but they don't have dental.
They don't have any of the things that we would say a normal company should have. And he has scale. So when you monetize your life's work and you get benefits for all the employees. So it's a great winning strategy for people. And if private equity didn't exist, then you would say a pool of long term capital needs to exist that can buy these companies or that can offer a succession plan of some kind.

[00:32:43] Sean Mooney: It's really interesting. And that's in some ways what created the industry in the late 70s, like the modern era of P. E. Okay, only small people can go public. You can get 60 cents on a dollar for your equipment from a bank. Or you can sell outright to a competitor who's just going to do what they will do to your business.
Or you could bring in a financial partner who will help you keep a stake in the business. So you get another bite of the Apple. So your next generation can still benefit from what's coming next. But it's totally fair to also want to monetize your life's work.

[00:33:14] Pam Hendrickson: Absolutely.

[00:33:15] Sean Mooney: And there's a societal benefit to it that in this seat I now kind of feel is when you're building a company in the early days It's all gas no brakes because you don't really have a lot to lose.
You're like, all right, let's go. And then it becomes something that means something and you find yourself playing defense. Because you're like, now I got a lot to lose. It's human nature. Losses weigh more heavily than gains. That's the way it is. And so, the other thing is you think about this generation that probably wants to pass down some economics, but also probably wants to retire and not work 80 hours a week anymore, after working for 50 years 80 hours a week.
Is there a door number three? And I think that's kind of where P. E. has stepped in also for this kind of generation of not only baby boomers, but kind of greatest generation before them to say, we're going to let you take some chips off and we'll let you do estate planning. We're going to let this business that you spent your whole career building go back to throttling down because you can take that burden of, oh my gosh, I'm going to lose everything.

[00:34:11] Pam Hendrickson: Absolutely true. It's another reason why I think this is a really good industry. What are those people going to do if they can't retire? And very often, we will keep people on the board. So if they have something to do, because they have great client relationships, great customer relationships often. So actually remember when we bought a very famous cookie company.
And she stayed on the board because she didn't want to run the company day to day anymore. But she wanted to have impact.

[00:34:45] Sean Mooney: A, there's something very noble about bringing cookies to the rest of the world. And so, I can get behind that. But B, that's exactly it. It's interesting at BluWave, we've created this kind of ecosystem, it's like a magic toolbox for all the business builders, and pretty much every week I have a conversation with someone who had sold their company, but they're looking to do something valuable afterwards, and they want to be a board member, or a senior advisor, or a consultant, or maybe like, I'm going to take two years off, or a year off, or six months off, The answer really is three months.

[00:35:18] Pam Hendrickson: Then you get tired, then you get sick of being retired and you want to go do something else.

[00:35:23] Sean Mooney: But they can't help themselves. But like, they don't want to do 90 hours a week again, or 80 hours a week. And that's what it takes to get these companies going. And it comes with great sacrifice. So that door number three that came, I think provides a good Value and maybe I'm thin skin, but I personally get upset.
It's like, why didn't I get credit for some of the things that I did in my earlier part of the career? And in the same way, you know, maybe some other do, and maybe I'm just being a baby, but, but it's how I felt and feel.

[00:35:50] Pam Hendrickson: Well, you probably will get credit from us, but you know, I remember a time, one time when we bought a company really quickly because the founder was dying of cancer and he really wanted to protect his family and his employees.
So there's a perfect example of if private equity didn't exist, what would he have done? Right? What would he have done?

[00:36:11] Sean Mooney: Probably it just would have gone away. Exactly.

[00:36:13] Pam Hendrickson: Exactly. Or to your point, it would have gone to a strategic competitor. Exactly. Wouldn't have cared about the employees, would have fired them all and moved the company to wherever it was.
No, a hundred percent.

[00:36:24] Sean Mooney: It's an important conversation. It's one that isn't held enough. And I think it's a fair perspective to share in for the industry to continue to evolve. And I'll say this, and this might be provocative. I think we need more people who are comfortable being out in the world and maybe taking the first word of private equity out.

[00:36:44] Pam Hendrickson: I have often said we should change the name.

[00:36:47] Sean Mooney: Yeah.

[00:36:47] Pam Hendrickson: It should be Growth Capital or something else.

[00:36:50] Sean Mooney: Yeah, a hundred percent. And so maybe that's something that will evolve over time because the brand as it exists today I think is unfairly cast in a light that it doesn't deserve and didn't merit, but it is what it is.
The good thing about private equity is they're action oriented and they know how to fix things and so I hope the industry kind of continues to evolve as we're seeing progress with every day.

[00:37:10] Pam Hendrickson: Actually, I think we should make t shirts that say use your words.

[00:37:16] Sean Mooney: I like that. To

[00:37:16] Pam Hendrickson: quote Sean.

[00:37:18] Sean Mooney: Yeah. Sean, two kids, and private equity.
Right, exactly. And family. I like that. So, as we round out the conversation here, Pam, I'd love to just learn a little bit more from you and kind of the art of humanity that I think people who know me know that I struggle with every day. The

[00:37:35] Pam Hendrickson: art of

[00:37:35] Sean Mooney: humanity?

[00:37:36] Pam Hendrickson: Oh my goodness.

[00:37:37] Sean Mooney: I aspire and I try, and like, it's one of those sayings that life's a journey, not a destination, and I've been on a journey for a long time.
One of the things that I always love is like, what are these mantras or life hacks or perspectives that have been earned by others that I can then use on myself as this Walmart version of innovation and just like Frankenstein myself with good perspectives, advices, and life hacks, and also gizmos and gadgets like vegetable cutters.

[00:38:00] Pam Hendrickson: Okay, well you are going to get a vegetable cutter, but I come from a long line of Navy admirals. And a very good friend of mine was a SEAL team captain. So there are life hacks that I did on a bookmark that are called Hendrickson's Habits. And some congressman was here the other day and he said, What's your favorite one?
And I said, I think my favorite one is manage your career like a Navy SEAL. And that means that you are an example of this. Just manage what's in front of you to the best of your ability. Because something might happen in the future, but you can't plan for it now. You just have to manage what you're doing right now.
And then probably got, who is my friend, would say in terms of leadership hacks, work harder than the people you lead, be decisive. I remember as a young child, my grandfather saying, you know, if the boat's keeping going around and around, you need to set off in a direction. It could be wrong and you might have to turn around.
But it's better than going around in circles and lead by influencing, not ordering, which is really a great private equity thing to say, because we do lead by influence. And remember that everyone on your team is equally important.

[00:39:19] Sean Mooney: I love those perspectives. Those are great. I've been writing these down and I'm going to share these with my kids who might not listen today.

[00:39:27] Pam Hendrickson: Well, it's taken me. I don't even want to say how long to come to this conclusion. Um,

[00:39:32] Sean Mooney: And it's great advice. It's something that I think thematically is so consistent with the rest of this conversation. Like, just take action. Take a step forward. Don't get caught in the circle. Build value. And it resonates on so many levels.
And I have a number of family members who have been in different branches of the military. And when COVID really hit, I was like, how do you make decisions in kind of this hazy environment? And I was really struggling because like, I don't know what to do. I don't know if anyone did in March of 2020. So I just started reaching, like, you know who really knows, and I started talking to people who were in the military and started reaching like, oh, you gotta look at this guy named Colonel Jump.
He was a military strategist and tactician who came out of the Army, which was then the Air Force, and then became the Air Force. And he's like, in life and business and air combat, the key thing is, He came up with this beautiful acronym called OODALOOPS.

[00:40:21] Pam Hendrickson: OODALOOPS.

[00:40:22] Sean Mooney: OODALOOPS. Uh

[00:40:23] Pam Hendrickson: huh. And

[00:40:23] Sean Mooney: it's just this concept of, he called it, of course, very military in the words chosen, but Observation, Orientation, Decision, and Action.
And you just do this in this rapid cycle. So it's just like, look at the world, gain a perspective, decide what to do. Do something, and then see how it works and do that whole cycle again.

[00:40:40] Pam Hendrickson: So

[00:40:41] Sean Mooney: smart. Exactly what you're describing is, and what you've talked about with us today, is that whole process of dare to look at the world and see what's going on and do something, and then take one step forward.

[00:40:51] Pam Hendrickson: Absolutely.

[00:40:52] Sean Mooney: And then see how it goes. And that's the hardest thing to do, is take that step.

[00:40:55] Pam Hendrickson: Exactly. And then figure out what your criteria is going to be for evaluating it.

[00:40:59] Sean Mooney: Yeah.

[00:41:00] Pam Hendrickson: Right? And move quickly. There's a lot of people who don't move quickly enough, and I do think that's very important.

[00:41:06] Sean Mooney: Very, very well said.
And particularly today, this is a time where it's easy to get paralyzed. And it's easy to kind of be enveloped with fear, not only because of geopolitics, the economic topsy turviness, which I think is actually entering the next phase of growth, personally, from all the data we see. But also from this period of tremendous change around things like what you're talking about earlier AI, it's so easy to get scared But if you get excited by it and you change your mindset, there's a lot to get excited about what it's gonna bring to humanity

[00:41:34] Pam Hendrickson: Absolutely, just embrace, embrace change.

[00:41:38] Sean Mooney: So Pam, this has been a really nice positive conversation about building things And a perspective on how to do it. And so I really appreciate you taking the time to share your perspectives and probably hard earned wisdom and insights over time. And I've learned a ton of things that I wish I knew before.
So thank you. Thank you. Thank you for visiting us today and sharing your thoughts and perspectives here.

[00:42:04] Pam Hendrickson: Thanks so much, Sean.

[00:42:07] Sean Mooney: That's all we have for today. Special thanks to Pam for joining. If you'd like to learn more about Pam Hendrickson and the Riverside Company, please see the episode notes for links.
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Onward.

Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.