If You’re Not Using This $450M PE Framework, You’re Already Behind

And I think our first thing is looking at the dead load. And we're in the business of levers by our side. We've got to have the L, we have an LBO, we've got to have the leverage. But race are high. And so if we can underwrite today's rates and maybe even slight rate increases, then we feel pretty good about the next five years, where we would expect to see rates continue to drop over time, based on the strength of the economy. My name is Ryan Miller, and for the past 15 years of helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launch in your business or taking your life to the next level. Let me show you what TVV answers. So that you too can enjoy your pursuit of making billions. Let's get into it. If you want to triple a company in five years, then this is the Playbooks Pros actually use. Elliot Curlin lifts the veil on quiet power moves, private equity operators deploy to turn ordinary businesses into unstoppable gross machines. These are theories. These are the hidden levers insiders use to reshape companies, rewrite destinies, and build value at a pace most founders never see coming. All this amare coming right now. Here we go. Elliot, welcome to the show, man. Thanks, Ryan. Really excited to be on. Huge fan. I love the way that you think about business. And the lessons that you draw out and excited to be a contributor here. I enjoyed part of the community. And now I get to be on the other side. So thanks. Yeah, it's great to have you, man. You know, let's dive in. This has been fun. We've been waiting. I've been very excited to talk to you, my man. So you spend more than two decades in operational private equity, including a long run at insight equity. And you've been investing in about seven countries before launching Broadway in 2022. So my question for you is, how did that evolution from deal maker to hands-on operator shape the conviction and structure behind Broadway's operating model? Yeah. We recognized a need in the lower mill market, where there's a lot of companies, a lot of owners, founders, families who don't have access to the types of high-powered strategic consulting analytical approaches employed by larger companies and by the strategic consulting firms like McKenzie, Bang, BCG. We can really dissect a company, identify problems, and importantly chart the path to correction. And so we not only want to provide the advice, but benefit from that and the improvements that we make by capturing some of that upside as investors alongside of the management. So we employ a lot of similar tools that you would see, actually, the same tools that we've built on, as we've utilized them in the lower middle market, that the baiting company would use. Over many cycles, many industry cycles, economic cycles, and in different industries, you start to see the same tools apply to any business. It doesn't matter if it's an automotive company, a manufacturing services distribution. There's a lot of the same revenue drivers, cost considerations, and growth opportunities to pursue. If you use data, if you capture data, and use it in an analytical way to chart your strategy and the track it gets it. - I mean, brilliant. So taking your operating model at Broadwing, I think you guys are around 450 million AUM. So what can say, an emerging fund manager, or a family of those, you know, all of us are in our own flavors of high finance? What can somebody take from your model, and maybe apply it to just starting out and get going? What some of those excellent points that they can extrapolate to their own business? - Yeah, I think there's a few things, and it really does apply across the board. If you want, there's different ways to approach buying a company. If you have a company in mind, how do you structure the funding for that, the capital? You can do it off your own balance sheet. You can do it by passing the hat, right? We'd call it where it's a little bit more of a pledge fund, and you know that people are interested in what you're going to acquire. Or if you want to start building a holding company of companies, one that adds to it, maybe more of a purchase has a way approach. In any of those situations, what we're always thinking of is, how do we differentiate ourselves from other potential buyers? And one of the ways we do that is through an operational approach. And because it's proven, because it's tested, because we've done this multiple times before, we can point to success examples, and use those as we're talking to management teams, into sellers, as to why they should partner with us. What makes a story? So I would say that having a playbook, whether it's broadwings or one like it, having the experience implementing that playbook, being able to point to tangible, factual results, and how that impacts not just the financial returns of the business, but the daily lives of employees, how it gives you a competitive edge in the marketplace to compete against your competitors. That's very convincing. As you seek to capture your first investment or multiple investments as you build a font. For being operational, it really translates to being a partner with management. And if you're a partner with them, it's a lot easier to travel that route together than if it's just a transaction. I'm just going to buy it. Somebody knew this buyer now owns it. Good luck with it. Right. We want to partner together as we move forward. And I feel that to be a very effective way to get sellers to talk to you, to get sellers involved in your strategy, and to have their support after you invest in their company. Brilliant. You know, you're your firm broadwing. You guys focus on founder and family owned, lower to middle market businesses. So I think generally around five to 30 million a bit of range. So beyond those numbers, what are some of those non-obvious screening filters that tell you whether a company is truly a good fit for that operating model that you guys have? So you're absolutely right. We're looking at the middle market as a broad definition now. You could say a company with 25 to 75 million would be a middle market company because there's private equity funds out there. Lots of them that would buy those. We're trying to stay below that 25 to 30 entry size. Our sweet spot's probably five to 20, five to 15. And in that size range, we often find companies where the seller, we kind of see two flavors. It's really a seller or an ownership group or a family who doesn't have a clear offering. An exit ramp we call it. How do they work themselves out of their job, out of their company? Because they're so important to. Or we often see a founder or an entrepreneur who's looking to scale. And they want a partner to grow with them. And somebody who's had experience with M&A before, with Greenfield Expansion, with major capital and capacity expansion projects, it involves financial commitment and maybe some perceived risk, signing up to new leases, expanding on beyond your comfort zones. And we've got tools and tactics to help grow a company that way. So those are really the two categories. When you're so important to the business that you don't have an exit ramp, it can be very helpful to bring somebody in to help create that scaffolding around the business. And once that scaffolding is built, then the owner of the founder can step away. But in all that structures in place, you never know, as a buyer or a seller, is everything going to collapse when that founder steps away, when that family steps away. So we like being the first institutional capital because there's a lot of opportunity for an operational approach. To give scaffolding from a talent standpoint, make sure we have the right team, that we have the right roles identified that we will need to scale for growth, make sure we have the right technology in place, technology brings efficiency. And by this way, things like ERP system, customer relationship management system, inventory management, a lot of technology that can be done in spreadsheets and more basic ways, maybe manually cutting checks instead of having a payroll processor. But that requires people and its inefficiencies were touch points, opportunities dropped the ball, technology and talent are usually where we start to make sure we have the right people map and understand the gaps in the right technology map. - And brilliant, I love that. You know, it reminds me so in a former life, I always joke around that I'm a recovering CFO. And so when I was brought in to an insurance company, we were, I was brought in to help sell it. And I stood up three different strategies that are pretty similar to what you said. I was people processing technology and really drilling down on that for, I know when you're pre-seller, we call it window dressing. You're just getting ready to make sure everything's tight and everything's looking good. And so we did a lot of that. And it talks just about exactly what you talk about. The technology, the people, all of that. And so my question then is, when you're looking at a company and it sounds like you do a lot of your deals rightfully so from the income statement. Not entirely. Gone are the balance sheet private equity guys. It's now the income statement. Great operators, cleanup operations. And this is one of the areas that you do. So you represent that new wave. And which one of the many things I love about you. Now, what I would love to know is when you're looking at a company and it looks like it's growing, how do you guys dive into that? Well, how do you dive into really analyzing growth to make sure that you see what you think you're seeing? - Right. Yes, important to unpack that. Both was driving the growth from a volume standpoint, right, the volume of services or the products that are being made, the pricing around it, and the margin that comes off of that. I think when we're first looking at a company, the real question is, why has it been successful so far? And can it continue? It's easy to look in the rear view mirror, right? Where I think we're all inclined to look in the rear view mirror and kind of see, what have we done? And understanding what we've done and where that gets us to is important. That's why we do diligence. That's why we dig in on the financials, on the operational metrics and kind of how operations relates to the financials was driving what was caused, what's effect. But we also need to know what's going to continue. And so, in private equity, we talked a lot about LTM, EBITDA, latest 12 months EBITDA, right? And we'd like to say here you can't eat LTM. That helped the people that sold you the business, right? That was in the past. What we need to focus on is the next 12 months. The next three months, next 12 months, next 36 months. And so as we go into an investment pretty early on, we want to know what's the vision in the plan where we headed over a five year partnership period and where we headed over the next 12 months. Because what got us here, and by extension, what got us here is also what we're paying for. And so, what got us to this price needs to at least continue and hopefully continue growing. And so we spend a lot of time trying to model out what are the assumptions and the drivers in the business that are going to keep sharing things for. And are we still good at that, right? Are there unique macroeconomic tariffs? Right, tariffs for some people. They help other people, input cost spikes, COVID supply runups, right? These aren't necessarily directly significant variables. And so when those go away, what is an adjusted and perform a go forward number look like? But we need to know what we're really good at where we make our money. A lot of companies will offer any service or good they can sell. And that's in our nature to sell what we can sell. But just because we can sell it, doesn't mean we're good at making it or that we're good at performing that service. And even if we are good at it, are we making money? Are we able to price them right? And so we spend a lot of time also understanding what are the value drivers, the pricing drivers, not just volume, but on the pricing side. And are we a risk there? Will we get price compression, pricing risk going forward if things change again? So it really is a price, it's a volume, and it's a forward looking, not a backwards looking perspective. I love it, man. Now, earlier you were talking about one of the takeaways people can have is have their own playbook. And you've talked about a five-part value creation playbook. So how do you sequence those initiatives in the first, say, 120 days post-close when time, trust, and capacity are all constrained in those early days? I like that. Yeah, time, trust, and capacity. They're all a short supply. You're trying to build that, right? You're multiplying that. So you really have to be focused. We've come up with a way to focus the first 120 days. And even within that, we have the first 10 days. So we have a 10-day hot list. And these are the critical urgent must-haves that need to get done and really consume management's attention and in our team's attention up front. And it's an all-hands-on-deck approach. Those are important for cybersecurity, treasury controls, and management. There's internal communications to key stakeholders. We want to have all of that planned and executed planned beforehand, but executed in those first 10 days. Moving on then to the rest of what we call fortify the foundation. The foundations for scaling growth. But we have a lot we want to get right. And that's our 120-day plan. We're working with management. In fact, we'll typically have one assignment for broadwing person and right next to them is a management person. And so every item on the list, and there's a tracker that's well over 100 lines long. Everything has a delivery date, a start date, a delivery date, because of the prioritization, as well as an internal owner, and a broadwing-- broadwing counterpart. And so we're pushing on those. Not everything's going to get done in the first 120 days, but it's important to know what it is that we're going to be. And if we need to schedule things out, we can't go back to your capacity point. There's only so much. And we're asking not only a lot to be done in terms of operational improvement, but we also are introducing a lot of faces, new people, either to their team or from broadwing. We're also introducing a lot of new processes and reporting cases and communication cases. And so we understand there's a lot of flux. And everybody needs to kind of settle into the new environment. So we're willing to extend that out if we need to. But as we move to the 120 day process, then we start to introduce more and more elements and develop with management, more and more elements of the strategic plan. And from our playbook, we have five parts that are be happy to outline, because they're unique, but they also continue to build. We start with talent and technology. That's the thing to do. But it's something that goes on for an intern investment. It's all important. The technology investment upfront can take time and money. And so hopefully that's more discreet. And then it's done and you maintain an upgrade. But certainly on the people side of things, we're always investing in people. How do we strengthen the team? How do we improve our internal communication? We can talk more about that. We have some tools that we use. Are we getting the right people incentivizing them, properly describing their roles so that expectations are aligned and performances is rightly assessed? So we work on that throughout the entire discussion period. We also focus a lot on growth and on operations optimization. So we call it gas, stepping on the gas, growth acceleration system, and the way of ops optimization. And we talk about those every week, even as a firm, that are on a track every week for every company. We go through talent technology, growth acceleration, and operations optimization. Growth acceleration looks like things. Kind of three big levers there. It's greenfield growth, new location, new geography, organic growth with existing customers, new customers, sales engine selling, what we already do. And then M&A growth, right, that's always something we look at as well as is it better to go ahead and acquire this skill set for this geography or this customer set than to try and develop it over time? In addition to those, we were always thinking about exit. We call it asset monetization and exit. So that could be non-court and restiturative and recap. You know, we're looking at ways to monetize and they were also looking at exit. So we call it AME. What are we aiming for? And then finally, we have stakeholder impact plan. And that's something up front where we think about the lived experience of our employees and the communities where they operate. And we want to partner with management to create exciting opportunities, things that they're engaged in that they feel ownership over to improve employee lives in the community. And we call that our stakeholder impact plan and we'll measure that throughout the entire partnership area. Some of those take a little longer, but it can be things including employee education opportunities, internal training, and retention strategies, community impact and involvement, employee counseling. Sometimes it's stuff like the cafeteria or a childcare, sometimes it's working out, employee wellness. And so we really want to be intentional about that because we've found that if we're not, it could happen. But you also might look up and say, wow, we missed some opportunities there for the last few years. So we've learned to try and play for that up front as well. So those are the growth acceleration system, ops-op, talent technology, pain, asset monetization and exit, and then our stakeholder impact plan. So that all, I'm kidding. That's crazy, good for you. That's very thorough, man, that's, I can see why you guys are absolutely leaders in your industry, man. Now, you said that it's impossible to manage what you can measure, which I agree. So what does your first 90-day dashboard build look like in a company with, say, maybe some weak data infrastructure? So a lot of times, there's a couple of challenges up front to getting frequently regularly reported accurate data. And it's finance data, that's important, right? And again, we're trying to build a windshield here to dashboard to move forward with. Sometimes you have to start by looking backwards, because that's a little easier to measure. It's not the leading indicators that are being tracked. It's what did we do last month, last quarter, or last week? So the first is, do we have a culture that manages by data and appreciates what matters can do to help us steer our business, right? And then the second is, can we gather that? And if we do, is it quality data, right? Nobody wants garbage and garbage out. Nobody wants to just create a lot of data so that somebody else can throw it away or look at it or not. But especially somebody that's not managing the business. So when we developed KPIs, we're trying to do it with management in a way where we say, CEO, CFO, COO, what is it that you intuitively look at to know that the business is going well? Or that things aren't going well? What is it that you intuitively, over the years, have realized this is important, and is correlated with success in the business? And then how can we help create a way to track that data, to gather it, store it, we can analyze it, we can format it, but really, how do we get it? And how do we make sure it's correct? And so a lot of times, where you're going to start with is cash tracking. You're looking for leading indicators to the same, you can get them on sales, then on cost. And cash is usually the most straightforward, consolidated counts, make sure you have control over those accounts. In terms of sales, it's a lot of inputs, right? Meeting lists, leads, bits, orders, backlog, right? Trying to get pipeline and backlog right for any business. And then on operations is how do we convert that profitably into margin? So what's our throughput, what's our capacity, what's our utilization of our capacity that helps us plan for future capital needs? And you can of course get squeezed on the cash side from things like working capital and CAPEX as well. And so we keep it, careful, I'm working capital in particular. CAPEX, we have a little more time to plan for, right? So yeah, it's a little bit of a longer activity when you're building assets. Yeah, and we're in capital is huge. I mean, that's what, that's how you leave the lights on. So where do you see in some of these companies that you're looking at and you're turning them around or whatever that might be? Where do you see a lot of, say, either bloat or waste or like some of the gaps or the holes in the dam and you got to put a finger in it and plug that gap? Where do you see a lot of these companies when you take over? Where are they leading revenue expenses? Are there common themes that you see for you? I think there's a couple. And one may actually be a little bit of the inverse before you're asking, which is their tooth thin. A lot of times they're tooth thin on phonage reporting and operational metrics reporting. So tracking those items that you're gonna want to use to build that windshield, to look for it, to help steer the company. And that often will require beaching up the finance department, accounting and finance, managerial accounting, so it could be on the FPNA side or more of a controller function. Or it could be a CFO, right? Maybe it's just been a controller. There's kind of been closing the books, but hadn't been a little bit more strategic about using the data. On the upside, a lot of times we'll see the opportunity for lean implementation. And we often will go through projects with our management teams to identify where there is waste on the plant floor. That's not always just extra material, making too much stuff or not making it to spec. A lot of times it can be touching it too much, not having enough automation where there's too many people involved or where we could use technology to make things more efficient. Make it more seamless, right? The less times that we have to touch your transfer material, the less times that a person has to be involved, the better the chance we can reduce the uncertainty of the production process. And as a result, improve safety, quality and ultimately delivery, right, kind of production finished good. So we'll see that as well. So a lot of times we'll do lean exercises or bring in some consultants that we work with to help look at lean. And how can we admit that either in a service company or a manufacturing business. The final one, Ryan, is on pricing. A lot of times, we need to understand the value of our product and the value of our product to our customers and what they really care about. And sometimes we over-deliver product. We don't need to make something that complex. Sometimes we under-deliver on product and we're losing sales opportunities. And sometimes we might not be pricing for what we actually deliver in terms of perceived value from our customers. So we spent a lot of time trying to understand, talk to customers, voice-to-customer analysis, what is it they value, what is it they want from us, why do they buy it from us, and then try and adjust our product and our pricing strategy accordingly. - I love that. When you come in, and this is, we'll say, an exciting area to put it lightly for private equity is when you purchase a company, and then you come in and you got some moves to make. Maybe you got to hire more people, maybe you got to let some go, new systems, old systems, whatever that might be. And so many PD firms say that they partner with management. Now you guys emphasize being on site early and often. So my question for you is how do you drive change without disempowering the operators when you guys show up? - It's a great question. We have to make sure we're not too intimidated, right? And on site early, on site often is, is both a philosophy, but it's also a tactic. It's a philosophy because we want to be partners with management, we want to journey with them. And at the same time, we don't want to get in their way. You know, on what end one extreme might be, are we looking to take over their job? No, right, we can't run their company. We don't know their company or their business as well as they do, we're investors. We think operationally to help improve investment returns, but we're investors, we don't want to run their company. And so we're not a threat to take their job. And now I think it's important people understand it because new faces with new ideas and our ideas, our ideas that they're not necessarily, you know, mandates. There's nothing sacri-saint about what we're seeing. We just seeing that a lot of times these strategies, these analyses can be insightful and can work in a variety of contexts and industries. So let's look at this together. And we really try and involve management. I think that's one of the keys to get buy-in of the finished product is to get involvement as you develop, as you scope it. Here's what we're trying to accomplish as we plan how we're gonna do it. You know, how do we access this information? How do we get it? And try and involve them the entire way. That way, there's alignment around the output, there's ownership, there's shared ownership, about the output. So we involve management. This isn't a top-down. We have to jump through this hoop. It's more of a, here's a tool that we've used before. If we use this together, can we all benefit? So we'll work with them side-by-side to scope it and to deliver it as well. And then talk about how do we implement this? At, again, a lot of these discussions, a lot of these discovery processes are best done. We can together at the same piece of paper in person. You can live on a screen, add a lot of stuff, but if you're literally cluelaboring, right? Like, if you think about the word collaborate, it literally is co-labor. If we're there collaborating, co-laboring with them, there's a better chance that we get the right answers and cycling through the least. And there's a better chance that it gets simpler. Because we have buy. - I love that. That builds a lot of trust, I think, with those people. As we talked about earlier, we're a trust in capacity. And these things are in short supply in the very beginning. So people don't know, right? New company buys a cell, what does that mean? He always hear new buy-how. People are getting laid off and, you know, anxiety can be a little bit high and obviously I'm being dramatic here, but this is really good. And that makes me wonder though, because in founder run companies, culture can be both a moat and a land, and a landmine. So how do you underwrite culture risk in your due diligence? And what are your top early interventions on making sure that that goes smoothly? 'Cause I remember, side note context. I remember in grad school learning about how culture, believe it or not, not financial statements. Culture is the leading cause of acquisitions and mergers to not work, to fail. And you never think, is your finance school, or do you think it's all spreadsheets and three financial statements? And that's all there is to it. And then you actually get to grad school and you're like, well, hold on, there's culture, there's people, there's pulses. There's things that you actually have to pay attention to. So with that, how do you underwrite that due, that culture risk? And what are some of those early interventions? - Yeah, that's a great question. I remember in business school, we had a class on operations. And our professor had been a CEO of a very large multi-billion dollar electronic distributor. And he would talk about operations through the lens of being a CEO. And he used to say, I know this, we're talking about operations and engineering and lean, but it's really this kind of, we do a mushy kind of leadership stuff. This is important, right? It's easy to just write it off, it's kind of touchy feeling, you know, I want to know how to be a leader. Well, to be a leader, you have to create that culture and you have to be sensitive to the culture and the people that are there because people make the culture and time solidifies the culture. And so based upon what that company is used to doing and those people, the way they communicate and enough time going by, culture can seem like a very stable solid artifact, something that just doesn't change. We do it this way. We've never done that, right? And these are said like definitive reasons. They're not really, they're more observations. We haven't done that before. Well, we should be open to trying something new. So to understand culture again, you have to be there in person, you have to be listening, you have to be walking in the hallways to the extent we can, we'd love to meet everybody in management. We'd love to meet as many people as possible before we acquire a company. The reality is, usually don't get that opportunity, right? Because that news is a little more confidential as hell works closely. So it can be difficult to judge culture and underwrite culture as you were saying before an acquisition. I think it's a critical question. We have several tools we use. We will do a culture survey of the company. And when I say to company, it's as many people as we can. It's not just a suite, it's not just a senior leadership team or even mental management. We like to go down to whatever the entry level positions are if we can because we're trying to understand how does communication happen at the company? How well do people understand the company's mission and the value that they're delivering? They're the reason for being, how well do they understand the vision and where they're going? And what the strategy is to get there. And so the only way to do that is to have a blind survey of as many folks as you can. And then we can slice it different ways by location, by job title, by functional vertical, right? We will invest in doing a team culture before hand if we can. And then at the leadership level, we like to start at the top and understand role definition and personality or behavior type. And again, there's some subjectivity to these things. And there can be false precision when you take a test and you're like, oh, but so on. So it says here is, you know, four out of five or it's 10 out of like, this is subjective. We're trying to put complex people into a personality type or abbreviation or something. But we've actually had great success using those tools both to help us understand better who we're dealing with and how people receive good news, bad news, how they communicate and also to help the strength and relationships within the team and help all of us learn. And we communicate, deliver feedback, right? How can we function better together on each other accountable? And there's a number of different systems that I've actually used before over time. What we've found to be important is to have that shared vernacular where when I'm talking now, whether it's the anyogram and this is a eight or two or whatever, we have a call it framework, right? Whether it's Myers-Briggs and kind of ENTJI and TJJ, like if you know what those mean, that can be very helpful if you use it consistently. So it helps us understand going in kind of who we're dealing with and how to deal most effectively with each other. And then we can use that and have coaching sessions for how does that team also grow together by using those same tools? - Yeah, that's brilliant. I know building a team, especially at the executive leadership level or ELT as I like to call it the executive leadership team. You can have a lot of big personalities that are rightfully earned. Usually when you're at that level, it's you're a force to be recognized. And you try to fill a room with all kinds of people like that. It could be amazing or it could be a lot of work. And so having, I think what you're saying is having a lot of those tools in places like Myers-Briggs or anyogram or other tools that you may use might help to figure out how do we turn a lot of big, successful people into a functioning team where they move as a single unit. Would you say that's inaccurate, Ruby? - That's exactly right. And to really be able to prescribe that as a solution, we have to understand it ourselves, right? So our team has gone through days and days of training on different predictive indices that you can use on the anyogram. We participate at the company level on different operating systems, lean implementation. We're there with them going through it. Not to monitor it and not really even to instruct, but to share examples and to be a participant. And the more that we're supposed to at the more we learn, the better we can help explain and implement, right? But these are important tools that we all need to embrace because it does help us be one. That the more that we can eliminate misunderstanding, miscommunication, presumed intentions that weren't accurate, the more that we can understand each other, right? The better that we can move forward. - Hey, thanks for listening to Making Billions. If you liked this episode, could you do me a huge favor and go leave a review? This helps us to get the podcast to more ears, to help people raise capital, learn fun management strategies, and serve our mission to help fund vendors and deal syndicators to gain greater hope and focus as they build their own product. All right, let's get back to the show. - I've often found that the conflict on an executive team, our own teams, it's not so much about people not caring. It's really a misunderstanding. It's really, I thought I heard this, but that wasn't what she thought she was actually saying. And so how do we understand how to communicate better, use some tools for listening, use some tools for our expectation setting for deliverance feedback, and then I can hear you better now because I know more about what makes you today. - Good, brilliant. I've been in a lot of those ELT meetings myself and I can tell you they can be pretty spicy sometimes, not in a horrible way or no disrespect to anybody, but they, I would agree with what you said is, if anything, executives care too much, and they defend their turf not in an ego way, but I mean their team, they're all the stuff that they're responsible for doing, and they go hard on some of that stuff in a good way, and that's what got them there is to be, then they don't punch soft up for sure. So moving on, I'd love to know just, how do you guys define broadwing strike zone today? And like where do you believe that you guys have a durable edge versus other lower middle-market sponsors? - So our strike zone is in the lower middle market, like we talked about, there's a size consideration, but this is a pretty wide zone that gives us some space for the throughout. We also look at certain sectors and found that our experience and where we see a lot of opportunity is in manufacturing, domestic manufacturing, service distribution companies, where the base of operations is in North America. So we acquired, as you mentioned, I've acquired companies in multiple different countries, but those were always add-ons, those were growth investments in Europe, or Asia, or South America, where we could, Central America, where we could grow outside of a base in North America. The reason we like to be in US, Canada, or Mexico, is so that we could be a person, right? When we're investing, we talk about a partnership period, not an investment period, because we're not passive investors, we're active partners, collaborating with management to create value, and that's easiest, this best done for people we can get there in person. But there's a lot of sectors inside of manufacturing, services, and distribution. So we spend time becoming sector experts and looking for opportunities where we think there's the best chance of value, right? So we're looking for where it's value out of favor sectors. Not necessarily contrarian, but just not the flavor of the days, but we can look at something ideally with somebody in our network who's either been an executive and operator there as invested in that sector before, ideally run a company there. So that gives us insight into what we want to build. It also gives us credibility when we speak to sellers, and we develop these things a couple of times a year, but we're going deep on a sector, developing the proprietary approach methodology to call on companies to meet companies, meet with sellers, and see who wants to be part of the vision that we have to build a platform. And a lot of times, the types of opportunities that would be first time institutional capital, this open to an operational approach, we talk a little bit about improvement opportunities, and we've got different ways we think about them, but we build a list of operational improvement opportunities. There's multiple things on the list. Other people grow as avenues, there's multiple operational items that we can proceed together. And we can have this partnership over three, four, five, six years together where management says yes, we want this type of scale. There's some companies and teams that are very comfortable where they are and that's great, 'cause they're doing a really good job doing what they've done all along. But if you want to scale, if you want to go from local to regional, regional to super regional or even national or international, that's where Broadway can be very helpful to get that foundation in place that's a scale. - So that list that you guys have is that like a pre-built list of areas that you can draw on, almost like a Wikipedia that you've internally built, or is this list an output from a review? So is it somewhat of a list that you say, actually these five areas that we've already had, like a pilot, you have this checklist, or do you go through and do a custom list on each deal? - So what we're sourcing and thinking about teams is kind of both. We look at areas where we've invested before, where we revisit those and take, a third portfolio company is an automotive aftermarket supplier. We've invested in automotive tier one suppliers, we've invested in automotive aftermarket services. And so as we thought about automotive, for that point in time about a year and a half ago, we were trying to say where is the value or are the least risks? Where did we see the most opportunity? And that's how we came across the sector that we liked. It went beyond that. But when we think about scanning and screening companies that come into our funnel, we have a checklist. And there's a standard one where we kind of assign a score, almost, right, red, yellow, green, we've got different criteria that we're scoring against, whether it's things like customer concentration, a supplier mix and supplier power and input volatility, market growth and size and profit marketing. So we score all these things out. And sometimes it's an okay score and you're like asked to want to learn more, there to be an angle here. In other times, it's a great score and it's very clear, let's try and learn more about the situation. >> Yeah, brilliant. So with higher rates, and even now, some frothy choppy markets, how are you guys thinking about capital structure, hold periods and some exit optionality? >> I think our first thing is looking at the debt flow. And we're in the business of leverage buyouts, we've got to have an L, the have an LBO, we've got to have the leverage. But rates are high. And so if we can underwrite today's rates and maybe even slight rate increases, then we feel pretty good about the next five years where we would expect to see rates continue to drop over time based on the strength of the economy. You know, as it continues to prove that it's a durationally significant structural strength, we would expect to see rates come down. And if so, then that's just upside to our capital structure. But we wanna make sure we're levered appropriately for that industry, which might have some ups and downs for that company, which might have some ebbs and flows in terms of sales or products or profitability. And as we do, we talk about over-equitizing. So upfront, we would rather put more equity in from a total capital stack. And then over time, use the balance sheet to finance growth as we can or return to our shareholders as we can. But that way we don't have as much pressure from the leverage load. - Got it, okay. Do you notice that valuations have come down a little bit because of the higher interest rate or what are you seeing on a price strength standpoint? - Yeah, I did see valuations over the last year have been down. The last year or four months, seems like valuations have been ticking up a little bit. There's been maybe a lot of capital sitting on the sidelines ready to get back in, right? So that could put a little pressure up on valuations, which seem rates come down a little bit. And I think there may be some optimism around rates coming down. You know, a complexity factor that arose though was really on the terrorist side of things and how does that play out? And a lot of different supply chains and industries and that may have caused some folks either to sit out or to pull processes. We've seen processes get pulled where initial impact from food terrorists weren't that big. And then now six months into it, five, four, six, anyway, we're starting to get more and more data points. But terrorists actually may have had a latent impact but delayed impact. And that could affect processes that are in market now as well as going into the new year. But a lot of times we'll see processes get ready to launch in January and February. And I would expect next year to be pretty robust from a, from a volume standpoint. Maybe a little bit of looking around, seeing, you know, is this, are we ready to go? Like is it the robust M&A market? But over time in the spring, I think we'll see a lot of processes launched at a lot of M&A activity in the market, you know, while closed. - All right, from lowering rates and you think that's gonna spur a lot of, a lot more activity. - Yeah, lower rates, it continued strong, relatively strong, autonomy from a macroeconomic standpoint and visibility around terrorists, right? I think if anything, the perceived terrorist risk, maybe it's just the terrorist uncertainty, we'll continue to come down as well. Either because things get worked out and terrorists go down or because people adjust to the new normal. And they can start to price in that risk with a little more certainty than what we've been dealing with the last few months. Or it's okay, since you kind of wondered, wait, you're gonna be a new terrorist and two more weeks, right? At least know what we're dealing with. And once we know what we're dealing with, then you can start to structure around it, right? So I think that added certainty coming into 26 where we'll be, you know, by April, May, you'll start to be a year in on some of these terrorists. I think that also kind of helps lower the blood pressure a little bit. - Got it, yeah, we actually, I just did an episode talked about balance of payments, tariffs, global trade, foreign currency. It was pretty heavy. So for those who actually made it through, good for you, that was a pretty dense breakdown. But the macros, it seems like you're seeing that macros are really starting to take a front seat and a lot of M&A and business activities. Would you agree? - Yeah, I think there's definitely a ripple effect where even at our end of the market, yes, some, if, you know, for a while there, the IPO market seemed a little stronger this fall when there's a good IPO window that provides exit opportunities, which means that investors are getting their cash back, which then allows them to reinvest and some of their investing in funds, the co-investing, investing in debt securities, which all of that helps push M&A activity forward. So I think there is, I think there's a strong element of that where a strength in the stock market matters. We're private equity and yet the stock market still trickles down to affect us. And strength on the interest rate, unemployment, terrorist ability, economic stability, all matters to us as well. We're kind of the tale, right? On the big dog of the economy and the megafares, but it still matters. - Yeah, brilliant. And, you know, speaking about funds, or you wouldn't have a lot unless you had some deal flow. Now, everybody claims proprietary deal flow. What is your sourcing engine actually look like under the hood and how do you guys defend that? - So our approach is, we talk about being somatic and proactive. And so I'll share a little bit of the secret sauce on the approach here. We talked to some about the somatic. I think from our size, right? We're in the lower end of the middle market. We've been fortunate to raise a lot of capital in the last three years to be able to start to build out our first funds portfolios. So we're very thankful to that. But we're still a pretty lean team, right? Everybody's wearing a lot of hats and carrying a lot of water. And so we want to focus our efforts. And that's where the somatic, the somatic focus helps. It's not necessarily a specialization, right? We don't just invest in franchisees, or restaurants, or financial institutions. They use SAS tech, you know, something like that. We're a little bit broader. And so this allows us to have, at least for a time, six, 12 months, a real focus on a sector where we can get our name out there and we can develop a pipeline of opportunities. And then the second part of it is being proactive. That means we want to pick up the sum. That means the outreach that is so easy to do on e-mail, if you can find it, but really trying to get in person to focus. And so how do you do that? It's getting the first meeting through a call or an e-mail. It's going to trade shows and walk in the floor, meeting companies, and developing a dialogue that might last for years. We've acquired, I've acquired companies that have been talking to for over two years, not even as a courtship, just as a relationship build. And over time, as somebody moves to a place where they're thinking, now's the time for me to exit. Now's the time for me to sell my company. Who do they know? They know somebody that they've been in conversation with for months or maybe years. And there's a level of trust already. There's also a level of understanding. So it just won't be as painful a process. If you're dealing with somebody that knows your industry has gone deep on your sector, and maybe visited your production facilities before understands a little bit about your financials, and met a couple folks on your team. That's a lot easier, more comfortable transaction. And so we like to be in-person proactive, outreaching to get folks on the phone, get to the right person, get folks on the phone, and develop a relationship. Maybe before they're not even ready to sell. - I'm playing the phone. - Brilliant. This brings me to something that's interesting is a lot of times, especially in the lower middle market that you operate in and myself included. A lot of times in the lower and middle market, you have founder and family transactions that are happening. They're dealing with not someone this company is in a pancake that's been flipped five times, or whatever metaphor you want to use. You deal with a lot of the original founders, and they have legacy and they're heart and soul, and it's like taking one of their daughters in the handed marriage, and it's not an easy thing to do, and I am terrified at that moment, side note. So how do you balance legacy identity and control while still installing governance at scale for the companies that you buy? - That's a great question. That is an insight in a very important question. What we do, and a lot of it starts with a conversation out front during even that courtship period, during that get to know one another, what could a transaction look like? We spend time with sellers trying to understand, and sometimes trying to help them articulate what a success looks like in a transaction. What's their goal? What are their intentions? And there's different things that people care about. Just because you've had a company for 34 years, doesn't mean that everybody cares if their name is still on the door, or that everybody's trying to maximize the value that they sell it for, or that everybody is very wouldn't about, like people have to stay in place. They may have created their own bonus structures and a success incentive programs for their employees where maybe they could transition out, and they can retire as well. So we want to understand kind of what is important from a legacy standpoint, from a company culture and identity standpoint to that sounder, into their team important. And sometimes it depends if it's a first generation, a founder themselves, or if it's a second or third generation in the family. I think I've seen, and I haven't done a study on this, but I think the further away it is from the founders generation, the more the legacy owners care about the name on the door, the family name, or the historical name that their mother or father, grandmother, grandfather, break up, start, right? Whereas if you're talking to a founder themselves, or an entrepreneur that started the company, they make care less about their name. They're more interested in what they've built, and taking care of their people, or maximizing value. And that might not be right now. That might be taking the right partner, the right for like a broad wing, to help drive growth for the next five years. And they want to roll over a lot of money to do that. We've had folks, when we acquired companies from founders and families, we've bought folks out completely, if that's really what they wanted. And we've had folks say, I want to roll over 49, I want to be 49% of the new company going for it. You guys get 51, Broadway, I get 49, because that's how excited I am about the future. We really, it really is owner-specific, but I think aligning those expectations up front is a key marker for success down the road, because nobody wants to look at post-close and realize that the private equity firm wants to change the brand-empts, and the founder really value it, just as soon as it would always be on there. Or that the private equity firm is now bringing on new people and that culture is changing, and the founder really wanted that team to stay in place and didn't want any changes to it. So we have to align expectations up front. And I think another thing that we use to work with families is to understand how do we take care of the people and their community legacy, right? All of these companies have a legacy and a reputation in their industries that means trade associations and industry organizations, co-ops and cohorts within that industry, and also the community, where very often they've been involved in a pillar of different civic activities or nonprofits. And we want to honor that to be said we can as well. We will work with sellers to create legacy funds, to create legacy organizations, or to ensure that the practices that have mattered to them and their employees continue. - So with that, a lot of this, what we're talking about is internal operations and personalities and those do matter, for sure. But what about in the community? So I'm curious of how is it when you guys are acquiring a business, how do you integrate workforce development and say community impact into the value creation without deluding any of those returns? - Yes, it's actually a key part, I believe, of building a competitive differentiator, particularly in skilled labor, skilled trade companies, because it's so hard to find great people today. And it is difficult to find trained great people, whether or not you have to be licensed by the state or by an organization, even just being trained already is hard to find. We have fewer vote text schools, high schools, don't typically have vocational programs now. And so we've found that we need to create it. And if we create that internally, that's a source of competitive differentiation down the road. It ensures that we have the level of technical skill we need internally. And it also can help, and in this constant flight wheel of recruiting, of trying to find talent. So we have partnered in different companies in different states. We've partnered with the state before. And we've partnered with vocational schools or junior colleges to create our own universities, our own academies for our mechanical, electrical plumbing company, for our specialty emergency vehicle upfitting business. As we look at other companies, where we're seeing this opportunity as well in different industries, where we can partner to bring folks in, give them that training program so that they emerge from the program skilled with a job. There's oftentimes certain recognition or incentives that go along. And ideally, the end goal is to chart a path. So if you enter here, not only do you leave with skills like you would at school, and if you enter here, not only do you leave with a job like you would through a job placement firm, but you're going to skills a job and a career path. A future here with a company, where you become part of the team, part of a family, part of a company team identity that's driving towards something bigger. And you're part of that now and you're helping make that a success. And here's the future. And so we talk a lot about the strategy where we're going, but also kind of what the day-to-day looks like, that could include getting some tools along the way, some success bonuses along the way during the training. The goal and the ideal is that then, they have a reason to stick around more and won't just leave at the next opportunity, but have a dialogue where they say, "I want to grow with you guys, what's my next step?" And we're investing in our own future that way. We're creating our own competitive barriers by training up folks within our companies to where our logo on their shirt, but also to be part of something bigger. - Yeah, I love that. Training is one of those very important things. I think was it Richard Branson? Something's a story about what if we train all of our people and they leave and his responses, or what if we don't train them and they stay? And you know, that's a very interesting business paradox, for sure, is what if we don't train them and they stay? So we're gonna get our butt kicked. So investing in training, I love it. It's an absolute value creation. And it's fun when people feel like they're being invested in by the company that they work for, it feels good. I think that boosts morale and engage, but that's just a theory, Matt. So, I love that. - Thank you, yeah. So you've watched a lot of cycles over your career, you built firms and you even launched your own. What are three strategic mistakes that you see emerging managers making today and how should they correct course? - Well, that's a great question. I'd say the first is being willing to take your own medicine. We alluded to it a little bit earlier, but it's easy when you're investing in companies when you see so many different businesses and models, cultures, to identify what works well, what doesn't work and coach your companies on that, right? Bring it up at the board meetings, implement it as strategy and tactics at the companies. But as a firm, we need to be investing in our own growth and taking strategically about how can we be successful? How do we invest in our culture? How do we invest in our own people? So when we're doing personality tests or behavioral assessment or for a team culture survey, we do the same thing ourselves. And we measure it, we monitor it, we have a stakeholder impact plan and nonprofits here locally that we're involved with. We invest a lot in team training, as well as in the communication and reporting cadence that you would want to see from a portfolio company. And so we're big on our own systems and processes and training. So there'd be number one, take your own medicine, right? If it's good for the goose, if it's good for the gander, or something, or it's nothing out there. The second I would say is, it's really hard, right? We're excited to invest. We're excited to find a great opportunity and to build a portfolio of those. But it's worth rating for the right opportunity. For the right structure, the right alignment with the sellers and with the management team, you can only, you can kiss a lot of frogs, which is important. But you can only go deep on so many companies because it gets expensive, right? And so really being disciplined about what you want to spend time on and invest your time resources in, can be almost as important as what you want to invest to your financial resources. So I'd say, be patient, take your own medicine. And then the third is, people are the deal. That is a mantra that I've become more and I've become more and more convinced of every day. People are what drives the value. People are what make up companies. People are worth investing in. I take a reason why we do what we do. It's to strengthen communities by investing in companies that employ people. Not just AI, they employ people and those people go home and have a family and they invest in their community. They get back to their community and we want to provide as many jobs that help people flourish as possible. So people work is better than just financial modeling and paperwork. We want to be working with people and valuing them and not treating people as a transaction. The deals may be the transaction, but people are not a transaction. And so it's important to enjoy the journey, to enjoy the value creation. It's not just about the exit. It's about celebrating the little wins along the way. We do that internally every week. We start off every Monday morning meeting with discipline and gratitude. What are we thankful for? What are the wins we can celebrate? Bigger small app work, outside of work, right? Not everything important in our employees' lives is all about Broadway. And so what are the things that we can be grateful for and let that trickle over to how we think about our companies? So that's right. I say become a medicine, be patient, celebrate the wins and value people. I love that. Often in my firms, I believe celebration, it's a whole thing, neuroscience and all that, but what I say quite a bit and implementing culture as well is when we celebrate, we accelerate or what we celebrate begins to accelerate. Either way, there's so many versions of that. What it does is it too often, especially as high achievers as we maybe some people might, our moms might tell us that we are, but very often we will see this and we'll say, yeah, okay, raise to a million dollars, but it's not a hundred million. So I'm not really going to celebrate. Or I raise a hundred million, but it's not a billion. And often high achievers in business, whether it's a fund or an operating company that got bought by a fund, either way too often, we see not enough celebrating, but the thing is celebration releases a lot of good brain chemicals and it can make you addicted to winning. And that's the point. And so that's why I said, I don't care if you just finally add someone, get your call and maybe it was an investor that you've been chasing for five years and they finally took your call. Whatever it is, please celebrate because when you celebrate, you accelerate, it teaches your brain to be like, this feels good. I like celebrating and it's all because I had a small little win and little by little, you train your mind to be addicted to winning. So don't be afraid to celebrate, I love that. So as we wrap things up, is there anything else? Any ways people can reach out to you guys or anything at all, final remarks? - Yeah, look, we have our website is broadwingcaf.com, broadwingcaf.com, you can always reach out to us at info at broadwingcaf.com. We love getting feedback, we love hearing investment ideas that might be in our sweet spot. We'd love to partner with you on pursuing them. And I'd say, you know, for the first 50 folks, then reach out and mention something interesting about what they learned here, 'cause these are always very educational. If you live and found something and email us, we've got a little broadwing gifts. We'll show you your way to say thanks. But most importantly, Ryan, thank you for having me on. This has been a very thorough dissection of how to approach lower market private equity. I appreciate it. - I appreciate you coming on, man. So just to summarize everything that Elliot and I spoke about, don't overlook culture for companies that you acquire. This is a really key part and it can make a break a deal. It's that potent. The second one is watch for the macro landscapes to master private equity in today's market. Third is be patient, take your own medicine and remember, people work is greater than paperwork. And finally, don't be afraid to celebrate. When we celebrate, we accelerate. You do these things and you too will be well in your way in your pursuit of making billions. (upbeat music) - Wow, what a show. I hope you enjoyed this episode as much as I did. Now if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode where we dive even deeper into the people, the process, and the perspectives of both investors and families. Until then, my friends, stay hungry, focus on your goals, and keep grinding toward your dream of making billions.