WSO Podcast | E161: Private Equity At All Costs? Beating the Odds and Ending Up as CIO of a Family Office
About
In this episode, Kevin shares his rare path of breaking into private equity at a lower middle market fund right after his MBA at Emory after stints in consulting and investment banking. Listen to hear why he took a large pay cut, why he didn't want to go back to being an advisor and how he eventually found himself running investments for a large family office.
WSO Mentor
Want to work with Kevin? Check out his profile here!
Or Listen to the Podcast Here:
Apple Podcasts
Spotify
Stitcher
Resources:
WSO Podcast (Episode 161) Transcript:
Patrick (CEO of WSO): [00:00:06] Hello and welcome. I'm Patrick Curtis, your host and chief monkey, and this is the Wall Street Oasis podcast. Join me! As I talked to some of the community's most successful and inspirational members to gain valuable insight into
different career paths and life in general. Let's get to it. In this episode, Kevin shares his rare path of breaking into private equity at a lower middle market fund right after his MBA at Emory after stints in consulting and investment banking. Listen to hear why he took a large pay cut, why he didn't want to go back to being an adviser, and how he eventually found himself running investments for a large family office. Enjoy. All right, Kevin, thanks so much for joining the Wall Street Voices podcast.
Kevin: [00:00:54] Thank you.
Patrick (CEO of WSO): [00:00:56] It'd be great to here. Thanks. Yes, it'd be great to if you could just give the listeners a short summary of your bio.
Kevin: [00:01:01] Sure, Grip California went to school at George Washington, both for my undergrad and a master's in information security, did a brief stint consulting in New York. We're doing four years in investment banking at a regional bank, went back to school and did an MBA at Emory University. And after that, I spent six years or so in private equity across two different lower middle market private equity firms. And for the last three, almost four years now, I've been working out a family office. Very cool.
Patrick (CEO of WSO): [00:01:40] So let's start all the way back. Well, kind of when I was in school, too. So we're both the same age, just past the big four, where we're both past 40 at this point. So tell me a little bit about just an undergrad. You seems like you. I don't see finite. I guess there are some business. You graduate with the business degree, but was finance ever on the radar when you were consulting?
Kevin: [00:02:01] I mean, I was in the business school but never was on the radar. I was in a program that essentially swabbed out my senior year for the first year of a master's program, and the program essentially was a feeder program for kids and ended up in the national security infrastructure. So think of CIA and I say I'm DIA. So when I was finished with my program, I was supposed to go in that direction, but I just couldn't see myself doing it. So I pivoted quickly and ended up.
Patrick (CEO of WSO): [00:02:34] How did you? Why did you kind of decide against it? You just felt like it wasn't a good long term fit for you or what?
Kevin: [00:02:40] Yeah, that's right. I had a chance to start meeting potential colleagues in different areas, and culturally, it just wasn't the right fit for me. I couldn't see myself in a five year tenure path down that career.
Patrick (CEO of WSO): [00:02:54] Ok, so you're kind of approaching. Is this like junior senior year and you're thinking, OK, this is not what I want to do, and then you just suddenly started recruiting for consulting or how did how did it work? You started networking heavily. I mean, back then, I don't think LinkedIn was a big thing, Or wasn't it? Yeah. So how did you get into to a Accenture?
Kevin: [00:03:14] I think it was just my final year in graduate school, and I started calling around to alumni and there was one guy that we hit it off and over a phone call and then eventually sit down a couple of meetings over coffee. And he was working an Accenture at the time, and he pulled me into the recruiting process.
Patrick (CEO of WSO): [00:03:34] Got it. So it's just good old fashioned dialing. And how many? How many alarming? Yeah. How many albums did you have to talk with before that one kind of came through?
Kevin: [00:03:43] Oh gosh, I lost count. I mean, 30 50.Ok.
Patrick (CEO of WSO): [00:03:50] And so you are doing a lot of phone calls, did you have a lot of like informational meetings? Was this the first person you actually met for coffee and stuff like that? Or were there others?
Kevin: [00:03:59] Oh no, there are tons prior to that. I mean, a lot of I don't know if I can help you, a lot of maybes and your job. And in that in that role is to turn those maybes into guests. And that's the goal.
Patrick (CEO of WSO): [00:04:14] And so were there other ones that were going well or had kind of progressed? Or was this the main lead for yourself? Like, did you only end up? Did you end up with the one offer firm essentially immediately take it? Or were there other potential options for you?
Kevin: [00:04:27] No, I was running out of time. This is the one I had to take it, and it didn't being a great offer. It took me to where I went, where I needed to go, which was New York.
Patrick (CEO of WSO): [00:04:37] Got it. And so was at that point. Did you even know what investment banking was? Did you know? What was your just knowledge base around consulting versus banking versus, oh gosh, private equity?
Kevin: [00:04:47] Yeah. And a lick of that investment banking. And I found out a lot about the industry once I moved to New York and I was in the mix. My project at the time, I'm having me on Wall Street and I was working on a lot of integrations in the back office for different banks as they were getting merged together in the kind of oh five through seven time or four through five timeframe.
Patrick (CEO of WSO): [00:05:14] And so you're kind of there, you're working as a consultant on these integrations at the back office suddenly. How did you learn, OK, I want to get to the front office. You don't want to be M&A. Like, how did you end up there? Because that's not an easy I know there's a lot of consultants that go to banking, but going typically, it's like with an MBA, you didn't do that. It looks like you went straight. So tell me how you pulled that off.
Kevin: [00:05:37] So it's just a lot more networking.
Patrick (CEO of WSO): [00:05:40] So in New York, so there's a huge advantage.
Kevin: [00:05:43] All right. Very much so. And we took advantage of that. So there are a couple of us who were in consulting at Accenture, and we all at the same time discovered that we had more of a passion for finance. So we all huddled together in the corners of Accenture New York office and did the mock interviews made the phone calls shuttling back and forth between all the firms. And it was a great experience, and we're still friends to this day.
Patrick (CEO of WSO): [00:06:11] That's cool. So you kind of found some like minded people within within Accenture who are looking to make the similar transition helped you
practice. So when you're coming up, you know you're only there for around a year and a half a century. So tell me you like year one. Is this whole process start or was it like earlier
Kevin: [00:06:30] And within months of getting there? We just decided that as a small, my small piece of the cohort decided that it just wasn't the right fit for us. Got it. Ok, so I started doing the interview process.
Patrick (CEO of WSO): [00:06:43] And so did you get a lot of interviews or did you strike out a lot? How many? How did you again just dialing mostly or were using any other online resources?
Kevin: [00:06:52] It didn't really exist at the time. It was just a lot of emails and phone numbers that were passed from other people. You always at the end of the call, you would ask whoever you want on the phone with, is there someone else that ought to meet? Can you introduce me to someone else, really at a different firm so I can expand my network? Are there other potential alumni that we can meet and have coffee with?
Patrick (CEO of WSO): [00:07:19] Got it, so was the Group of Friends kind of alums from your undergrad.
Kevin: [00:07:23] So yeah, we all came from different school, different schools. Ok, so you're kind of
Patrick (CEO of WSO): [00:07:28] Starting this process pretty early on, it sounds like, but you're there for another year before making the transition. Tell me, why does it was there? Did you make it to final rounds and strike out? Did you just take a long time to kind of get up the curve with the finance stuff since you didn't come from that background?
Kevin: [00:07:43] Yeah, it took me a while to get to the curve because I just didn't have that focus in undergrad and some of the guys I was interviewing with. They had that traditional finance background, so it was just easy for them to transition.
Patrick (CEO of WSO): [00:07:55] So how did you close that gap? How did you study
Kevin: [00:07:57] Just the last, studying a lot of just materials that were passed on from other people that I knew within my network, all investment banking tutorials from the first years?
Patrick (CEO of WSO): [00:08:08] Got it. Ok, so you finally make it into the process that where you eventually end up? Tell me what that was like. So how many rounds did you? Immediately jump on the offer when you got it, what was the feeling like after working that long for it?
Kevin: [00:08:23] Yeah. So it's multiple rounds and I ended up having two offers, one at Bear Stearns and one at a regional bank, SunTrust at that point. I had my fill in New York and it wanted to see this out. So just pack my bags and moved to Atlanta.
Patrick (CEO of WSO): [00:08:39] So you could have been at Bear Stearns in the collapse. Yeah. If you hadn't made that choice ended up on a different fateful decision because I think a lot of people would have chosen Bear Stearns given its size and its brand name or over SunTrust. That's interesting. So, OK, so you. Find yourself in Atlanta, tell me what was it like the transition culturally from New York to Atlanta?
Kevin: [00:09:00] It was just different. Yeah, space was just enormous. I had a great apartment there that I thought that was just so cheap relative to New York. I walked to work, which drew a couple, raised eyebrows from my colleagues because everyone drives in Atlanta. Yeah, it was just so accustomed to walking and half a mile each way, every day. It was nothing for me. Yeah, that's awesome. But eventually I adopted and ended up starting to drive to work.
Patrick (CEO of WSO): [00:09:32] What was your thought process in terms of like that first few months? Was there like a were you were you starting as an analyst or first your analyst?
Kevin: [00:09:39] Or do they give you any credit? They gave you some credit. Oh, they give you some credit.
Patrick (CEO of WSO): [00:09:42] So OK. A lot of credit. I mean, you basically lost four months, then actually. Yeah. So when you were starting, was it kind of with the first sorry, with the second year analyst kind of going through because you started in August, it looks like were you starting kind of with those second years with the expectation that that next summer would be your first bonus? That's right. Yeah, OK. And then tell me what it was like getting up the curve like, so you had studied all this time? And then what was it like when you hit the desk where you ready to model right from the get go? Or how? What was it? What was it like?
Kevin: [00:10:13] I could, but it was just a very different experience and application versus theory.
Patrick (CEO of WSO): [00:10:20] So tell me, what do you mean by that? Like, did you struggle like the first few months I did? Yeah, I
Kevin: [00:10:25] Don't see a lot of it was in the presentations and getting all those together. There are just a lot of strenuous nights,
Patrick (CEO of WSO): [00:10:35] Like, what would you say, 60 hours, 80 hours, 100 hours?
Kevin: [00:10:39] I worked more than my
Peer group because I was catching up to that. So if they were working 70 hours and a week, I would work 80.
Patrick (CEO of WSO): [00:10:49] Yeah, yeah, it sounds about right. I think SunTrust in Atlanta, it's it's a great bank, but it's not as sweaty as some of the other places in. I think you had a good comp. A lot of poor souls, the analyst souls. Yet they're going through work from home right now, just getting, yeah, getting really abused. So, OK, so you're working with middle market clients, doing M&A. You're there for a really good run for four years and you get an internal promotion to associate. Tell me about kind of how you ramped up and how you feel, why you feel like you got that analyst's promo because I know back then it wasn't. It wasn't as common.
Kevin: [00:11:30] No, it wasn't. Well, maybe it was more common at SunTrust because they liked to grow their own talent. Mm hmm.
Patrick (CEO of WSO): [00:11:39] It was your thought. I'm going to do this for my life.
Kevin: [00:11:42] Actually, at the time, yeah, I did, yeah, and I think at the time, SunTrust didn't really have a MBA pipeline, so they were forced to grow their own talent. Got it. Ok, so I experienced bankers to supplement at the director level.
Patrick (CEO of WSO): [00:11:57] So tell me what happened over the years, because what how things shifted like obviously, is you're an associate. Did you start having analysts under you or just, you know, occasionally? Or were you still doing a lot of analysts work?
Kevin: [00:12:09] And you do some analysts work at almost every project, but yeah, so you end up having two or three analysts on any given project. Got it. Ok, and
Patrick (CEO of WSO): [00:12:18] Then how did how did it progress? So when did you start looking elsewhere? Things, the financial crisis obviously happened. Yeah. Tell me how things kind of what was the thought process there like it did M&A just dry up and then they started letting people go or what happened? Yeah, it dried up
Kevin: [00:12:35] Very quickly, and there was just no business. So at that time, you look for an off ramp and that's. So I was working with a few private equity clients at the time, and one late night I had a phone conversation with them and let them know that I'd be heading off to business school. And he suggested that I should probably get private equity experience prior to business school because if I did end up in the industry, I would have to have some type of tangible experience because it would be a nontraditional. I guess it's great advice, can't. It is, yeah. And I turn it on its head by asking him, well, since you're providing that advice, which you provide that experience for me as well, and he did
Patrick (CEO of WSO): [00:13:26] So you before you even went to to Emory for business school, what gave you an internship of sorts or did he just get that
Kevin: [00:13:33] Summer before business school? I spent three months here in Dallas.
Patrick (CEO of WSO): [00:13:39] Oh, it's awesome. Yeah, it's awesome, and so that's huge, because then you're at least going into recruiting with that kind of at the top of your resumé. That's right. Yeah. Ok, so tell me about what was business school like? Was it a blast? Were you nervous because you thought it's still going to be an uphill battle to get into P.E.? Oh yeah, for sure. Given that you just have that internship, I mean, there's other there's other kids that have done two years. And so what was the thought process going into that hole? Was it immediately, like, very focused to recruiting? Or was it something more like, let's have fun? For a couple of years, I've worked hard.
Kevin: [00:14:12] Yeah, I mean, it was just all about recruiting. It was first, second and third thought when I got up every day how to get into the industry.
Patrick (CEO of WSO): [00:14:24] And so it seemed like you had had a lot of success with networking before, so was that just the same thing? Just dial for dollars more? That's right, yeah. Is that how you ended up blending in in the at the firm? You did?
Kevin: [00:14:36] Yeah, it was just persistent about it. There's just a lot of no's and you turn those no's into maybes and then ultimately, yes. How do you do that?
Patrick (CEO of WSO): [00:14:45] How do you turn them into maybes, first of all?
Kevin: [00:14:48] Well, there are a lot of trips to New York from Atlanta. Yeah. And. Just a lot of hustle. I mean, I'll give you examples, So there is a partner at a middle market private equity shop that I had targeted and he would just wouldn't return my emails and wouldn't return my phone calls. How many? Probably six or seven emails over over,
Patrick (CEO of WSO): [00:15:14] Like four months, over four months or half a year or more. Yeah.
Kevin: [00:15:18] So I had a three hour block of time when I was in New York, so I went to his office and sat in the lobby. And finally, after a couple of hours, his secretary came out and said, You are very persistent. He'll meet you for 15 minutes. And he did. And I didn't get a job.
Patrick (CEO of WSO): [00:15:43] But you met with him. And what was your did you have like a pitch ready? Like, what did you say? I'll work for free. Like, what did you what did you say?
Kevin: [00:15:51] Oh, I mean, it's exactly that. You had five minutes. You have a canned elevator speech. Let me try to highlight why you would work and culturally and how you would have the right experience to set and skill set to do the job.
Patrick (CEO of WSO): [00:16:05] So like you weren't, you weren't closing. New York was definitely on anywhere. I was on the you were willing to move anywhere in the world.
Kevin: [00:16:12] Yeah, I was trying to break into the industry. Yeah. So.
Patrick (CEO of WSO): [00:16:17] Kind of new constraints, and I think it's important for the listeners to listen to no constraints, super hungry to the point where you're like sitting in people's offices uninvited. They didn't call security on you, which is good.
Kevin: [00:16:29] So and we're still friends to this day. That's awesome.
Patrick (CEO of WSO): [00:16:32] That's awesome. So you. You had that. Tell me what was the break finally and a lot of no's? Were there any other type or were there other partners of small funds that were that were kind of a little bit more open to taking calls than they still were? Like, Sorry, There's no room?
Kevin: [00:16:49] Yeah, a lot of them were telling me that just wasn't enough for you. Some of them were in between funds, and some of them were in funds that weren't growing. So you just had to find the right timing where a fund was in fundraise and the aim was growing and they needed another.
Patrick (CEO of WSO): [00:17:09] And tell me about how you found those people just talking, just just dying, there was no database that you use. There is nothing. No. Sounds brutal. Sounds brutally heavy lifting. So at what point were you thinking, Hey, this isn't going to work out? Did you ever have that thought go through and what you were going to do if you didn't bring in a pea?
Kevin: [00:17:29] So I knew that in the back of my mind, I could always go back to Accenture. I had an open invitation to go back to the firm,
Patrick (CEO of WSO): [00:17:36] Not back to back. You would go back to banking
And I would probably end up in consulting for a while and bought out another path to
Kevin: [00:17:42] Get into private equity.
Patrick (CEO of WSO): [00:17:45] Interesting. You're very determined, you're very determined, y p y was p this this almost like the thing you put up on a pedestal. We see it today with a lot of the kids. Was there something about it that you just loved? Was it the upside? Was it just the idea of being an investor? What what was most appealing to you?
Kevin: [00:18:03] It was the idea of being an investor and operationally changing a business and pulling levers that as a banker or as advisor, I could only hear about after the fact.
Patrick (CEO of WSO): [00:18:17] God, I seemed like having that like actual direct impact. I think it's pretty cool, too. It is. Yeah, it's fun. Yeah.
Kevin: [00:18:24] And I like small to midsize businesses. Yeah, yeah.
Patrick (CEO of WSO): [00:18:27] But in the job that you ended up getting, you were working with lower middle market businesses between three and 10 million of EBITDA. And those businesses have a lot typically don't have like the professional, the professional management team or anything running them. So there's a lot of value out of them. So tell me
Kevin: [00:18:44] Where you can pull the generate lift.
Patrick (CEO of WSO): [00:18:47] Yeah, tell me a little bit about like what? What when the big break happened or did it ever happen? You had to. Did you have to grind
Patrick (CEO of WSO): [00:18:56] With no job for a while? Tell me what happened.
Kevin: [00:18:59] So most recruiting happens your first semester in business school or the summer, and I just had to not go down that path and just put myself out there on the line and it didn't really have a a summer internship until maybe the final months of the spring. And I finally got one with the old private equity partner that gave me an internship prior to business school.
Patrick (CEO of WSO): [00:19:30] So he said, fine, you can come back and do a story that you owe this Guy a lot, obviously.
Kevin: [00:19:36] Yeah. And so I ended up post business school working for him and moved out to Dallas in 2011.
Patrick (CEO of WSO): [00:19:43] So tell me, like, it sounds like it's a relatively small fund. Do you mind sharing with Adam? Was at the time?
Kevin: [00:19:49] Sure. It was one hundred and twenty million.
Patrick (CEO of WSO): [00:19:51] So yeah, it's a pretty small fund. How is he comfortable paying you? I mean, were you willing to take really low, a really low salary with with minimal upside? Like how did he get comfortable with it? Because at one hundred and twenty, you know, a post MBA can be expensive, right? Sure.
Kevin: [00:20:10] So I was there first, non-partner higher, OK? And a lot of it was back and waited on the upside.
Patrick (CEO of WSO): [00:20:17] And did you ever get that upside?
Kevin: [00:20:20] It was a fun that did not hit the perimeter.
Patrick (CEO of WSO): [00:20:24] Ok, so you were there for a long time? Yeah. Tell me what your thought. So you were. I mean, the title was kind of whatever they wanted to call you. Senior associate principal doesn't really matter because there's probably only a few of you guys there. That's right. Really, what the thought process was of going to a fund like that where the pay? I was probably a big pay cut compared to what you could have gotten banking or consulting. You were just very like, this is what I want to do, I don't care, it's that the thought process.
Kevin: [00:20:53] That's right. And I just wanted the reps and I wanted the autonomy to figure out a way to grow my career and not be an adviser.
Patrick (CEO of WSO): [00:21:04] Got it. What turns you off so much to being an adviser?
Kevin: [00:21:09] It's just it was two salesmen. Yeah. And you really never. I just fundamentally didn't believe that you. You help the business or changed in any in any manner. When you got your hands at your broker, essentially, yeah.
Patrick (CEO of WSO): [00:21:26] Did you get your hands dirty once you were at this PE fund?
Kevin: [00:21:29] Yeah, I had the opportunity to. It was fun.
Patrick (CEO of WSO): [00:21:33] It's fun. Yeah. So you were right. You're like, This is this is fun. This is
Kevin: [00:21:37] And it was worth it. Yeah, it was worth the trade off.
Patrick (CEO of WSO): [00:21:40] Very cool. So tell me about as things progressed. Was the reason, You know, after four years, were you given like a potential partner seat or was it just the funds wasn't growing fast enough and at that point it was. It was time to start looking. What was that next transition like? I know you spend another almost three years at another Mormon market fund. That's right.
Kevin: [00:21:59] So the partner that I was working with and I both were recruited by the our next employer, the new private equity fund, to start the Dallas office. So I really helped to wind down and still helping wine to wind down the assets from the first private equity fund. And then we hung the shingle out for East Coast based private equity fund that established its Dallas office.
Patrick (CEO of WSO): [00:22:25] Very cool. And so was it just more of the same? So it's really like you were at a new fund, but in reality, you were working with the same partner. That's right. And so were the types of businesses you were. Was it a specific niche or was just it was just lower middle market anything.
Kevin: [00:22:39] We were generalists, but I focused on industrial services and business services.
Patrick (CEO of WSO): [00:22:44] Any crazy stories from any of those deals you did?
Kevin: [00:22:47] Well, there was one business that did a lot of hydro blasting and turnaround cleaning for industrial facilities. We own the business at our fund. But back in two thousand five, I was an advisor for that business when I was an analyst at SunTrust, so I knew the business and knew the owner, and immediately I was able to develop a rapport with them. It was just visiting the old friend again.
Patrick (CEO of WSO): [00:23:15] That's cool. That's cool. So you're it was a great, great, easy way to kind of hit the ground running there, so. Right? Tell me a little bit about kind of theprogress, you know, almost three years with that fund? And was it a similar size, a couple of hundred million?
Kevin: [00:23:30] And you know, I think RLJ at the time was about two hundred and forty million eighty one. It's a little bit bigger, but there they're plenty more employee.
Patrick (CEO of WSO): [00:23:39] So yeah, OK. And so then from there, what was it? What was the next stop at any point where you like? I don't know about this p thing because you know the pay has been greater. Where were you working long hours or was it more like a 50 60 hour week, but you were enjoying it?
Kevin: [00:23:54] The workload varied depending on whether or not we had a deal that was live, right? I was on a partner track, but the firm was really top heavy and just a long. I could see myself being there for a protracted period of time and not getting to where I wanted to be. And so I was trying to figure out ways where I could leverage the experience, a skill set that had developed over the past almost decade. Yeah, and somehow accelerate my career development.
Patrick (CEO of WSO): [00:24:28] And so how did you think about like the different options like you didn't want at that point, go back to an advisory role that was like out of off the table for sure. Or was it anything you ever considered it? Not really. Yeah. So you were just thinking, what? What, what other options are there, right? You've done a bunch of deals at this point. Right? What were you thinking in terms of options? And then, yeah, I'd love to hear about the actual jump you made. Yeah. And how you found that position?
Kevin: [00:24:54] Well, I just had an open mind, and it would just softly inquire with some wealthy families and individuals, whether or not they were inclined to bring on an investor to support their efforts. And one family that I had known and met just for a short period of time that they were looking for someone to start a family office for them and that the patriarch of the family just so happened to previously work within the same network of private equity firms that I worked at in Dallas before heading off and starting his own business and becoming very successful at that business. So there was just a natural network of people that we knew that allowed him to establish rapport and trust quickly.
Patrick (CEO of WSO): [00:25:44] So it's something you kind of pitched or he would looking.
Kevin: [00:25:49] I pitched him and he was looking at the same time, although he didn't let on that, he was interesting.
Patrick (CEO of WSO): [00:25:57] So yeah, but there was some of that trust because you had this crowd that similar connections you said like there was some packaging and stuff like that which always helps.
Kevin: [00:26:05] He worked in the same office that I worked at in Dallas, but maybe 15 years prior. Ok. In fact, it was odd that my first day of work there, there was a picture of him in my office because as he left, he left a picture of himself in the Oval Office and just sat there for years until I showed up.
Patrick (CEO of WSO): [00:26:26] That's so funny. So you as your. Transitioning from. The private equity fund RLJ took to this new family office, what's the concern like? Is there any concern going on? Because I know family offices, they're all very different and you're starting this one like you are at ground zero again, very entrepreneurial. What's the thought process and? Is there a good enough, did you feel like you had to build a lot of rapport early on, like was it a six month courtship before it actually you made the jump or was it like a year was? It took a few months or
Kevin: [00:26:59] It was about a year courtship before I made the shot? Yeah.
Patrick (CEO of WSO): [00:27:03] And tell me about how that how that went down, because I think people are interested in family office dynamic and I know they're all different. But there's something to be said for like building that trust and like how you even went about, how do you even know to pitch to build a family office? And what was the specifically what was like? What was interesting about your background, yeah, you had the connections, so there was that trust element, but was there something you were pitching of like, Hey, I know middle market businesses really well. I can, you know, in the whatever the 20 to 50 million dollar range we can, we can do some great deals together and I can help manage them. And what was that similar to how you pitched them or different angle?
Kevin: [00:27:41] I think a lot of it was timing. I think we're in a period where there's a generational transfer, where a younger set, a family members are now entrusted with the capital and think a lot of families are becoming more aware of load and how it drags performance. And I think the third thing is that a lot of families are starting to realize that they can internally originate deal flow, that once they thought only private equity firms could do,
Patrick (CEO of WSO): [00:28:13] Yeah, they could do the direct deals themselves themselves and have a small team kind of run it, especially if it's at the lower end of the middle market.
Kevin: [00:28:20] And so that was my pitch. You have an allocation to alternatives instead of directing them to mega cap funds that generate suboptimal returns, particularly for the risk profile and being tethered in tenure. In reality, a 12 year fund or more when you can instead direct your capital in lower and middle market opportunities, which I would argue at the time and still do that they provide better risk adjusted return. It allows you to really.
Patrick (CEO of WSO): [00:28:52] What about diversification was not as much of a concern because their alternatives wasn't like a 50 Percent allocation.
Kevin: [00:29:00] That's right. And my position was that you can build a fund directly. What do you mean by that? Build to fund
Patrick (CEO of WSO): [00:29:10] It with his
Kevin: [00:29:10] Role and over five or six investments, you can synthetically create a fund,
Patrick (CEO of WSO): [00:29:15] Right? Launch Direct Invest. Ok, I see what you're saying. Yeah, you're creating a fund, so you're still getting that diversification somewhat. Yeah, interesting. That's really cool. That's different.
Kevin: [00:29:27] So it worked.
Patrick (CEO of WSO): [00:29:30] It worked. It worked. And you had some good, some good investments over at the time.
Kevin: [00:29:34] I mean, it was a short period of time, maybe a little bit over two years.
Patrick (CEO of WSO): [00:29:37] But how many deals did you do for them? Maybe four or five.
Kevin: [00:29:40] The coolest one was a high growth better for you consumer brand that manufactured beef jerky, but did it in a better value manner. Its processing style. It's called biltong, which is a South African way of air drying meat without the use of nitrates and nitrites.
Patrick (CEO of WSO): [00:29:59] Oh, cool.
Kevin: [00:30:01] So located in Plano, so suburb of Dallas. Yeah, and we were able to provide a growth capital in two different rounds, and it recently got announced it's being destocked by
Patrick (CEO of WSO): [00:30:16] Stock. Very cool, so it's basically going public. That's right. And so the family is very happy, very happy. That's awesome. How do you think about going to a family office and being a hired gun of sorts in terms of your pay structure? And do you mind? Let's talk about pay because you know, you took. A huge pay cut going to private equity right out of school to get into the industry. Can you talk about like how pay progress? Was it like something where you were taking super low base because the fund was so small like, you know, 50000, 80000 or was something where like, you're at least paid six figures and just there wasn't a lot of care. How should I think about it?
Kevin: [00:31:00] In my first private equity fund, it was six figures, but I was in it for the carry. Yeah, because I was the only non-partner in the fund. They could allocate significant portion of the carry on to me.
Patrick (CEO of WSO): [00:31:12] Do you mind sharing what that was?
Kevin: [00:31:15] It was double digits, double digit percentage.
Patrick (CEO of WSO): [00:31:18] Yeah, so that's great, and so but did it pay? Did that pay off down the road?
Kevin: [00:31:23] It did not. Ok. Was a debt that did not pay off.
Patrick (CEO of WSO): [00:31:27] Ok, and then how about the second? Did things change? I know the fund got bigger to about 250 million. What did the economics change where there was a little bit of a bonus? Or is this base? And Kerry,
Kevin: [00:31:38] Again, the car became much more market based and so did the Kerry. It was a lot smaller and more market based.
Patrick (CEO of WSO): [00:31:46] A couple of points and one 50 base something like that. Yeah, that's right. Ok? And we're in a couple of years. You were there was where the bonuses decent. Yeah, they were ok. Do you mind sharing what they are? My listeners kill me if I don't ask. You can say, No, I don't want to share, but that's ok. That's fine. So you're so you're kind of like. You're at least you're heading up the right, you're heading in the right direction, at least with pay. And then you're kind of thinking, why even go to this family office? Why not just? It was still top heavy, I guess. I mean, they're still going to take a long time to become partner. Was that the kind of the reason?
Kevin: [00:32:27] Yeah, that was the rationale
Patrick (CEO of WSO): [00:32:28] At the time. Or is it more you just being opportunistic and talking to people and thinking, Hey, this might be more interesting?
Kevin: [00:32:34] Well, I knew that wanted to make a move, but I didn't give myself one year to figure it out. I wanted to make sure that I was running to something instead of running away from a top heavy structure.
Patrick (CEO of WSO): [00:32:47] Got it! Ok, that's fair. So you you're at the family office for almost two and a half years, did four days, which is a lot. Actually, it's good. It's hard to get deals done. So you it sounds like things are going great. What? Why was it pandemic related? What was going on in terms of the latest transition last year?
Kevin: [00:33:10] So it was a
Patrick (CEO of WSO): [00:33:11] Family, by the way. Whatever you're comfortable sharing, Kevin, I don't mean to push you like whatever you know, whatever you're comfortable sharing, you can say, I don't. I'm not comfortable. Fine. Okay. Yeah.
Kevin: [00:33:20] Yeah. So I was working for a family in Houston and my family was based in Dallas and I was commuting back and forth for two years. And when we started along this journey together, we decided that we give ourselves two years before I had to make a move to Houston and my wife did not want to move. So we did it, And after a while, I knew that it would become an issue with the family. So you meaning you had to get away from Houston. I had to move to Houston or there would be an issue with family that could not fix. Got it. Ok, so
Patrick (CEO of WSO): [00:34:01] Tell me a little bit about because I see your I thought, you're in Dallas now?
Kevin: [00:34:05] Yeah, and I've been in Dallas ever since graduate school, so since 2011. But I was working for a family in Houston.
Patrick (CEO of WSO): [00:34:13] And so the commute, just it was just too much. That's right. I got it. And so you couldn't move. The family wanted you there. And so that was it. Tell me a little bit about like. Was it contentious at all, was it like something where? I mean, at that point, two,20, 20 may I mean, it's chaos, the world is in chaos. Why jump in the middle of chaos? Why not, like, keep coming along? Was it like a forced? Was this something where they had been talking to you about moving for a while and then they were like, Do it?
Kevin: [00:34:45] That's right. I mean, and at the same time, a recruiter called probably in the fall a year prior and started introducing me to this family that I work for today. Now, the Dallas based family that, you know, we thought very similar to about how to invest like I do.
Patrick (CEO of WSO): [00:35:05] It's great. It's great. So you already kind of had something where you had you had been talking with this recruiter and with this other family office run. This kind of prompted A, Hey, I think I'm ready to move. Um, that's great. So it sounds like you've managed to kind of piece together. A really nice trajectory for yourself. Thanks.
Kevin: [00:35:29] It's been a wild ride.
Patrick (CEO of WSO): [00:35:31] Yeah, I think you know, what's interesting to me is, you know, the fact that you grind it so hard to get into P.E., but not to. But but we're humble enough to go to a very small a.m. place just to get the reps. I think a lot of people say they want it, but then they don't. They're not willing to do what you did and take a big pay cut to get the reps and then gradually build themselves up from there. So kudos to you. Thanks. That's really cool. Yeah. Before, before we call it like any, any final kind of words of wisdom, how I get. Before we even call it, how is it? How has it been at the new family office in terms of like through the but through the epidemic, the pandemic? How has it been? You know, probably at the beginning there was no deals to be done, but then have things opened up for you guys
Kevin: [00:36:22] At all? You've been real active. I think we've done six deals. Wow. We done seven cents June.
Patrick (CEO of WSO): [00:36:32] That's amazing. Yeah. So how big is the team? How big is the team that you? Is it just you and a couple, an analyst or something like that or?
Kevin: [00:36:39] Yeah. So in the fall, we hired our first associate. We were blessed to have him. Gray background He has a traditional background in barclays in houston, two years at a private equity firm in Houston called First Reserve. Mm hmm. And then he wanted to move back to Dallas, and we found him. That's awesome. I was going to say,
Patrick (CEO of WSO): [00:37:01] If you want applicants, just let me know and you'd get flooded from the pocket eventually, if you need somebody, just let me know. See, these types of jobs are few and far between. They're hard to find and I think they are attractive. Yeah, so very cool. So you guys done a lot of deals. Just the two. Just the two of you.
Kevin: [00:37:19] Yeah, I mean, it's been very two. We've done some real estate, a fair amount of structured debt and then a few deals backing independent sponsors.
Patrick (CEO of WSO): [00:37:30] Let's talk about that. Type kit structured debt like tell me about the types of deals and how you even think about those deals. It sounds cool because you're getting a lot of exposure to different asset classes right and up and down the capital structure. So tell me how you're thinking about that.
Kevin: [00:37:43] So we like to find opportunistic credit where we have some type of collateral, where it feels and looks more like a senior secured loan that we have mezzanine type yield. And so the approach is to work with commercial banks where their lenders find opportunities that don't particularly fit inside a credit profile or the underwriting box where the opportunity might straddle one leg in the box when they are
outside the box.
Patrick (CEO of WSO): [00:38:15] And give me an example of that like of what would be a nontraditional thing. The commercial bank would shy away from, but you guys would be fine with
Kevin: [00:38:23] Sure if there is litigation embedded in the company. A credit officer might shy away from getting the total maximum leverage that in a normal situation might warrant, so we can step in to that situation and take a last piece of the debt, but still have that collateral coverage
Patrick (CEO of WSO): [00:38:43] Enough to get comfortable. That's right. And and still demand a little bit of a still demand, a little of some warrants or whatnot on the back end like a mess
Kevin: [00:38:52] In some cases, yeah, we'll get warrants. In almost every case, we'll get call protection. In some cases, we'll get a fair amount of fluid to juice up the yield.
Patrick (CEO of WSO): [00:39:01] Very cool. This has been great. It's very, I think, one of the one of the more interesting, different podcasts, I guess, because yeah,
I have plenty of guys and gals that have gone through banking traditional p, but not the way you've gone so. Any final words of wisdom before we call? Before we call it, Yeah, I just believe in
Kevin: [00:39:21] Yourself if this is what you want to do. Don't take no as the final answer.
Patrick (CEO of WSO): [00:39:26] Awesome. Kevin, thanks so much for sharing your story. Thanks for the time and thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis and till next time.
or Want to Sign up with your social account?