YouSaid · the spoken record

Chris Michalik

lines on the record: 60
first: 2024-11-11
most recent: 2024-11-11
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“We were very fortunate to start Kinderhook when we were relatively young. We were 33, 34 years old when we decided to try our hand of starting our own firm. And I think in hindsight, fortunate because life moves fast. If you're going to bet on yourself, bet on yourself. And I think about young people today, and it seems like adolescence extends later and later and later in life. But you're not young forever. So I encourage young people to believe in themselves and bet on themselves. I think it's a great thing.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“High school football coach was a great communicator and he would come up with expressions and themes and one of the themes I always remember is there's magic in believing and it's one of those you got to believe in yourself you got to believe in the people around you you got to have faith and I think it's been a great lesson”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“We went to Catholic High School and it always set up on the side of the gym. God's gift to you is who you are, your gift to God is what you make of yourself. And it's somewhat cliched, but ultimately, you're responsible for yourself. We all face adversity. We don't achieve the things we want. But ultimately, if you have a positive attitude and you continue to think, what am I trying to achieve, you can be successful and persevere. And so I think that just having that in the back of your mind saying, hey, what can I do to be more successful? I think it's just there that you have to think about that all the time.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a good answer. Thinking about people outside of the family, a gentleman named Jeffrey Keenan has been a mentor to Rob and I. Rob worked for him back at UBS 30 years ago. And Jeffrey's been a consistent voice of reason and someone that has clarity of thought and has been willing to do things for us professionally, step into operating roles, step into all kinds of situations to be helpful. So Jeffrey's truly been a great business mentor. And the other person, our partner Tom, it's a unique person to say they want to be partners with identical twins. And we all have strengths and weaknesses. But Tom had the vision, the courage. Tom said, hey, I want to be partners with these two guys. And that's led to our collective success amongst the three of us. So Tom's been a great partner and someone who has a lot of foresight and character to be.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“I love to fish and fishing is fun. It takes talent. It's a little bit mysterious. You don't really know what you're going to pull up. You don't know if you're going to be successful. You don't know what factors affect your success. Is it weather? Is it me? Is it the bait? So do a fair amount of fishing, both fly fishing, saltwater, and freshwater and offshore fishing as well, but really enjoy the fly fishing and casting for fish trolling for fish can be fun, but it's really more fun to actually fish and be out there. And it gives you time away. You're on a river, you're out on a boat. you're away from your phone you're away from a big group of people so it's a real change from what we're doing or i'm doing every day same answer”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“20 years, just like building our own team, we need to bring in new young, talented operating partners. We're doing that, but it's very important. If you want to continue to deliver value, you have to have CEOs and waiting, so to speak, people that you trust to step in and lead the businesses you buy.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you're not growing, you're dying. So we need to continue to grow our firm. We need to continue to grow our fun size. We need to continue investing in our people, our infrastructure. We continue to develop our young talent. So create an opportunity for the team. What people don't feel like they have opportunity, they go elsewhere. And there's been a lot of investment into this team and organization. So that's probably the most important thing because of the talent that we've been able to foster within our firm or less several years. I think we have the opportunity to continue to spread our wings. We did a lot of environmental services. We now do industrial services. And that's become very powerful additional within that vertical, but it could be a vertical in and of itself. And our industrial services business has been very successful. We continue to develop our organization in these areas of expertise. And it helps us leverage our operating partners. I think the other thing is, quote, old guys, look for all of our operating partners that have been with us for.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Contribution to the team. And if you carry your water and trust the other people, getting that word trust, then you're going to have success. And it gets back to you can't blame. So when you're an offensive lineman, you go to the line, you got to make your block. If you don't make your block, you have the lookout block. Somebody gets hurt behind you. But it requires everyone to be coordinated and move as a unit. And there's going to be weaknesses and failures. And if you go back to the huddle and you start fighting, you're not going to succeed. And if you go back to the huddle and say, we got this. and we work together. You're a servant to your teammates. That's what leads to success. And I think that's what I learned being a player and in particular a football player is that you are there for the team. And when you're there for the team, the team succeeds.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Retrospect as a parent and as a coach, what I learned is that parents who care, coaches who care, get better outcomes from their players, from their children. So being private equity investors who care, being a manager of a firm who cares about its employees, we ultimately get better outcomes from our team, from our executives. It's almost human nature. I never thought about it when I was a child. I never thought about it when I was a player. But I sit here today, the fact that my coaches cared about me made me feel compelled to want to do better for them. The fact that my mom and dad cared about me made me want to do better by them and make them proud. So that, like I said, I believe it's human nature, but I think it gets lost. I would say the beauty of team sports is that you have to play your responsibility and you're accountable for your individual kind of.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have left and chose to leave stewardship because of the leadership bankruptcy, whatever. Our success will be growing that network and having people be choosing our business going forward. So those would be the metrics of success and it'll be tangible in patient experience provider satisfaction and ultimately the financial success of the business.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, success here will be one improved quality scores. So we will drive up the heatest score, star scores across our network that will be tangible and it'll be seen. It's one of the metrics. These are the state, local, federal government standards where they measure quality. And our goal always starts with quality. Two will be patient population growth. So census growth for our providers. If we can get their census from taking care of, I'm just making up numbers 100 patients to 150 patients on their patient panel. That means we have a broader reach and broader access to the community and then growing those providers because ultimately, again, it's a free market. Providers choose. Providers that are with us, they can quit. They can go across the street and if you're in Massachusetts and go work for Beth Israel or Mass General. They don't have to work for stewardship. They choose to work with stewardship because of being good partners. So that network in the last 18 months says shrunk.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“The position and think about primary care where you're trying to make sure that the patient is taking care of themselves before there's a billable event. So sharing in the savings of that cost is what value-based care is. It creates an economic alignment between the patient's health and cost containment that allows providers, doctors to make more money. And those shared savings go across the network that allow us to invest in the growth of the networks. And the more of those networks grow, the more power they have in negotiating provider rates with the payers.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great question where the leverage in the business comes from is from scale. So where the incremental margin is what's known as full risk contracts, this value-based care. People have heard this term floated around. The reason that value-based care works, it's because it provides alignment between the patient and the provider. So that's the purpose of value-based care. It's something that the government has talked about accountable care organizations. That's a government incentive program to create patient provider alignment. MIPS was another one. DCE was another one. There's multiple programs or the last 15 years that the federal government CMS has implemented to create patient provider alignment. Very few of them have succeeded. Value-based care is the effort really of the market to do exactly that. And the reason it makes sense is because ultimately as a provider, by taking risk, you put yourself in.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Massachusetts is the biggest South Texas Arizona in Florida, the four largest markets that Stuart had, will stay in those markets and grow density in those markets. And ultimately, look, we are private equity, part of what private equity does. We buy businesses. We build, prove, and grow those businesses, and we sell them. We're passing the baton to the next buyer. We believe when we invest in and grow this asset, there'll be many interested buyers, including hospital systems, HMOs. maybe this company's of scale could have public market access at some point, but our job is to buy improve growth. How do you”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“This has been a very underinvested group of providers. So these providers, because of the financial constraints that Stuart had, did not hire new staff. They haven't done anything to improve the environments that their physicians are working in. So the first thing we're going to do is invest into the business infrastructure, signage, reception rooms, medical product. So we'll restash the closets for band-aids, so to speak, because in the primary care, it's shocking where these businesses have come to. We will bring in new technologies to help electronic medical records share records amongst the providers and amongst the health systems that service the patients and the specialists that service the patients to create efficiency. We'll invest in mid-levels, capital to bring in people and staff and look to open new clinics. Ultimately, growing populations, you want to have new clinic growth and expand service. We will do it in the markets that we currently serve. We have enough footprint in medicine.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“The acquisition of healthcare investments in the state of California. So the pendulum swings, it swings back and forth, but ultimately patient satisfaction, success by delivering high quality businesses, I think is what will stem this pendulum, which I think is swung in a very negative direction right now to come back to a center where you see people confident in the ability to grow, value, deliver service to members in the support of these governing programs. At the end of the day, it may sound cynical, but politicians are there to serve their voters and voters aren't going to be happy when they don't have access to health care.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great question, Ted. And government programs, healthcare stroke of pen risk, as it's called, is something that people are very concerned about and have been concerned about. We've had success building companies in hospice and home health, in government, Medicaid, and Medicare HMOs. We've been in the clinical research space. Clinical research, as you might imagine, if you think about it, most new drug development is paid for, obviously, by drug companies, but those drug companies are supported by the high demand for new pharmacies that are paid for by government programs. So our whole ecosystem in the healthcare is really driven by government demand and government intervention. If you're going to be a participant in healthcare services, I would say you have to be comfortable with that risk. And it comes back to delivering high quality care, the stroke of pen risk or the noise. I think it's interesting Gavin knew some recently vetoed legislation in the state of California to put further oversight.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“They closed two hospitals. Those communities are going to have less access to health care, maintaining their providers in those communities could be very important and having a network of providers that continues to exist there. So that's what we're excited about. We were surprised to be the only bidder. There's been noise recently since we bought it that maybe private equity is not the best buyer or Kinrick's not the best buyer. I think that's unfortunate. It lacks substance in fact, but it is something that we believe will overcome and we're very confident that our management team and the providers that we've met with and spent a lot of time are highly supportive of us coming in and helping them. We've had near universal support from the over 300 employed providers in the state of Massachusetts that they want rural health groups slash kindergart to be the acquirer of these assets. So we feel very good about where we are.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Recruit new providers into their practices. So a lot of opportunity to stabilize the system and grow it. Ultimately, we ended up being the only bidder. So much to our surprise. And I think we were the only bidder for one reason. There's a lot of negativity in the things associated with private equity owning healthcare right now. The centers from the state of Massachusetts have been vocal that private equity should not own healthcare. And I think a lot of people just shied away from the opportunity we leaned in. We think that this is the right thing to do. This is the right set of doctors. We have the right leadership. So we signed a purchase agreement in August of 2024 to acquire the assets of stewardship, publicly announced $245 million. So a much reduced price from what, at least at one point, United seemed interested in paying and will have a great group of people and providers that are going to serve the communities that they're in. It's been announced that Massachusetts on August 31st.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ownership called stewardship within Stewart and tried to sell it. We looked at that opportunity, we bid to acquire those assets, united healthcare, ultimately agreed to acquire those assets for $850 million. And in May, Stuart filed for bankruptcy. Everyone thought that United was going to proceed with the acquisition of the stewardship hospitals at this $850 million. And right around Memorial Day, it began to leak through the system that maybe United wasn't going to be there. We got called back in early June of 2024 if we were still interested in acquiring the provider group out of stewardship. We said, yes, we see it as a great opportunity. These are primary care doctors in low-income communities serving patients. And it's an opportunity where we can continue to do the things I said in terms of investing in technology, investing in mid-levels, helping these doctors extend their careers, bring them capital to.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stuart Healthcare was a company acquired by a private equity firm in 2010 or 12 called Cerberus. They acquired a group of struggling hospitals and through a series of acquisitions over a 10 or 12 year period, built up a multi-state hospital, private for-profit hospital company. And while they were doing that, like many health systems, they also acquired the providers in those communities as part of their ownership. So they had both a hospital system, Florida, Arizona, Western PA, Massachusetts being the biggest, where they had hospitals and a network of providers over the course of the last several years, Cerberus sold the business through a leverage recap. And that leverage on the businesses with a lack of reimbursement ultimately led the business to file for bankruptcy. In December of 23, Stewart, prior to bankruptcy, looked to sell their provider group. So they took all of their providers, put them under a basket of”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Market of today is really around providers because it gets back to there aren't enough doctors to service all the patients that now have access to health care. So introducing technology to help scale what a doctor can do by freeing up their time to focus on patients as opposed to paperwork is part of what leverages cost, as well as what people call mid-levels, so nurse practitioners, PAs, physician assistants, people that are not trained to hold a medical degree, but have training to deliver basic healthcare needs and conserve patients so that doctors can stratify their delivery of healthcare by hiring mid-levels and they can see the sickest patients in triage. In bringing those resources and scaling doctors is a great”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Provide access to hospitals. They're negotiating to bring in as many patients as they can and get the highest prices they can to cover their fixed cost in their own minds. And then doctors. Are the delivery of care who The weakest member in that three person negotiation. And we helped the doctors. Get better contracting with United or with the hospital system, which provides more access, lower cost, and better health care. No system is perfect. Everyone behaves accruing their incentives. I could spend a long time talking about the poor incentives that are created by our healthcare system, mostly created by government programs. But ultimately, private equity is part of the solution, and we help invest in and bring additional resources to communities, to low-income neighborhoods and the like.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Living doing that, so he or she needs to scale their business and put in back off his billing people. So now imagine as an individual operator, that's not realistic. So now they have to be part of a group or part of a system. And that's where private equity comes in. When a doctor sells to a hospital system, an HMO or to private equity, they're in a free market system, they're doing what they think is in their best interest to manage the best for their patients. And they're focused on patient care. What we do and our private equity brethren as well is that we provide these doctors now an opportunity to do what they've been trained and desire to do, deliver high quality healthcare by bringing in infrastructure, software support, EMR, billing systems, leverage and collections with contracting, bringing in contracts. If you think about the big three forces of healthcare, these HMOs negotiating to keep rates down.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“People pay for healthcare with cash, but in most markets you collect from insurance as much as the we as individuals want to complain about insurance not paying, doctors complain more about insurance than patients because you have a runny nose and you come in to see your doctor and you think that doctor visit is $120, but that doctor is being reimbursed $20 by United Healthcare to tell you you have a runny nose. The doctor can't make”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Either an individual operator or a partner with my fellow doctors. Unfortunately, the dynamics in the market have changed that that's very hard to do today. One, as I stated, doctors come out of school with very high debt load in almost all cases. They then spend four years in a residency and then especially training where they make really no money. It's indentured servitude. They come out and they need to get a job and they can't hang a shingle and put on a lease because they're structurally bankrupt the day they walk out of medical school. Number two is the burden to provide care is not just about seeing a patient after I'm done doing that. I need to now put all that into a system and government mandated electronic medical records from patient files a long time ago. These systems still don't talk to each other in most cases. Long story short that doctors burdened by paperwork. The cost of their rents going up, the cost of their staff is going up. Now they need to collect money to have it be paid for. And in a few markets.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Such that there's more access for patients. If you just take providers, Or four years, there's been a rapid consolidation of primary care as well as especially providers of healthcare services. And it's been done by private equity. But it wasn't led by private equity. People forget that the big buyer of providers is health systems. The health systems have consolidated. Hospitals are mostly not for profits, but they need to put people in beds. Their asset is a bed. They get reimbursed to have people in that bed. They're like a hotel or an airplane. If they're empty, no money's coming in. That's not very good for their business. So to make sure that they can control the volume of a patients, they try to buy providers. A lot of providers don't like to be managed. Doctors don't want to be managed by anyone. They have a mission and a purpose, which is to care for patients. In their perfect world, I think doctors would say, I don't want to be owned by a hospital system. I don't want to be owned by a HMO, a health maintenance organization, and I don't want to be owned by private equity. I want to be.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“So despite the fact that even after the passage of the Affordable Care Act, most people have access to health insurance, it does not mean that they have access to health care. It's become popular to look for someone to blame. And unfortunately, I think that blame has went an easy target is private equity because they want to look to someone who maybe say, oh, they're rich, their incentives aren't aligned with the delivery of good health care. That's a much maligned perspective. I'm never going to say there's no bad actors, but by and large, 99% of private equity professionals in healthcare are looking to invest in businesses, grow those businesses, provide opportunity to the caregivers and the patients so they have broader access to healthcare. What we do in healthcare service investing is look at either commercial pay or government programs and say, how do we participate in these programs to create efficiency and to drive growth?”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“He had the nicest house, had the nicest car, went to the country club. Today, doctors work very hard. And make more of a middle income salary and the burden on them to deliver healthcare has increased exponentially because of the paperwork, because of the bureaucracy, because of the cost, and because of the fact that many of them now step out of school with very high debt. So there's all these factors that go into healthcare in the United States that are very complicated. And it's not a great system today.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“I appreciate you asking the question. It's unfortunate, but our healthcare system in our country is a very complicated one. And I've been investing in healthcare for over 25 years now. I made some early investments in hospice care in 1998, was introduced to government pay. As you look at what's happened over the last 30 years, over 55 to 60 percent of all healthcare in the United States is paid for by federal and state programs. That's a result of both demographics and the fact that politicians will continue to support healthcare in our country and lead to drug development. So that's the first overlay I think you have to understand what has happened as part of that is that you've had consolidation. And because the margins are very low in healthcare services, I think people forget that hospitals don't make a lot of money. They've never made a lot of money. HMOs don't make a lot of money. They've never made a lot of money. Doctors used to make a lot of money in the 70s and 80s. The doctor was the pillar of the community.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“And now, back to the show. So I'd love to dive into one of the examples of the businesses. I know Chris, there's a lot of buzz, not positive buzz, about the healthcare sector and private equity. Before we jump into this recent interesting example, we'd love to just get your impression. Of all this noise.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ultimately, you can't blame the other person when things don't go well. And at Kinderhook, I believe one of the biggest reasons we've been successful and had the stability of our team, we've done bad deals. We're not immune from bad deals. It's because we have done the bad deal, i.e. the firm, and it's our responsibility to fix it. If there's a pattern of laziness, a pattern of lack of concern, a pattern of just poor decision-making over years, we have fired some people over the 20 years that we've been doing this. But from a culture of accountability, hey, we're accountable for the deals. And when the investment committee, which is Tom, Rob, and Chris, but it's the firm because we all have ownership, we all have Carrie. We make the investment. We own it. And it's our job to make sure we have the best outcome. We grow the business. And I think that mentality of shared responsibility, shared accountability that Rob and I, that's our life. Like it or not, judge it or not people.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Allow them to recap their business, put money in the bank, secure the trust in the family and retirement, and take risk again to build and grow their businesses. So that's really been the model of success for us.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rob will say it all the time it's unleashing the American dream for a lot of these people. This comes back to the focus on growth, low leverage going in. We meet with and talk to the teams about where they want to go and what the opportunities are. And then we ensure that they're capitalized to execute on those opportunities. A lot of it is consolidation led growth, specifically in the environmental and industrial services arenas that I invest in, in the healthcare services side, it's new locations, new facilities, new offices and new teams. So there's a J-curve effect of investing in those types of facilities and growing those markets. But it's the orientation toward growth and driving returns through growth as opposed to financial engineering and the families that built companies that get to a point in a stage where they know they could grow, they know they could maybe buy a competitor, but they don't want to take that risk on their own balance sheet. We become great partners for them to”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“75, 70% of the time when we buy a company, we're putting in one of our operating partners, the CEO, the other 25, 30%. We're back in the incumbent management team. We will put our existing operating partners onto the board. We want to make sure there's that continuity and that training and that stability. And one of the great successes that we have had is that we have been able to keep our operating partners with us over multiple deals, multiple companies, multiple funds. Over the course of our 20 years and eight funds that we've been doing this, we started inviting our operating partners who had some success to invest in our fund. If you look the last two funds, operating partners invested $100 million. They're paying full fees, full carry. They believe in what we do and they love being a part of our organization. So this is a real strategic asset. And I think a real difference maker in how we drive success.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the United States, in the industry looked at buying this company from private equity firms to United Healthcare to Molina, Humana, and they all passed. And we bought the business in 2021. We actually signed a letter of intent to acquire it in the fall of 2020 during COVID because we saw value that other people didn't. We believe that we could step in by that company, create value, and grow. And then the last leg of that stool is operating partners. And operating partners is the most important of those three legs because ultimately they're the people that drive the value. They're the people that create the company's success, drive the growth. Private equity is a governance structure. We're not public company board or family-owned business or not-for-profit. Our value is bringing governance alignment of interest and incentives with our management teams to grow. So value is about the combination of those things and then ultimately driving growth in the business and creating companies that”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“The thing I think we're most proud of is that our team has been built from within. So everybody that's a managing director today has been with the firm and started as an associate has been promoted internally. We don't bring in lateral hires over 21 years that we've been in business. Anyone's made vice president above has never quit the firm. We have a wonderful culture, but we also have a culture how we compensate our team, how develop our team where we're sharing the wealth with our team. So very important part of our strategy, creating consistency. When we talk about the three segments in deal flow, deal flow in 20 plus years ago, and we started small deals. You can hustle and find different things. But deal flow comes from being an industry expert. When you think about buying value, values in the eye of the beholder. So it's really about knowledge that gives you the ability to buy value. Some of the companies that we've bought in the healthcare services space, we own medical card systems. It's a Puerto Rican Medicare Advantage HMO.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“We definitely want to buy value, but I would say it's more about buying good platforms. And as Rob continues to reiterate, invest in people. So we always say that we invest in people, not in companies, and we don't buy companies that we don't believe we have a strong executive to lead and utilize our operating partner. When you think about private equity broadly, and it's a very competitive market, there's now tens of thousands of private equity firms in the United States. And everybody does, just like we talk about investment banking or anything else, the same thing. It's about the team, the general partner, who's the team, how do they build that team? It's about deal flow. How do you find deals, opportunities to invest in? It's ever more competitive. And it's about operating partners. And every firm has operating partners and operating partners strategy. And Kinderhook's success from our vantage point is that it's how you operate in those three legs of the stool and how you be very successful with each of those legs of the stool and it's intentional. So our team, a lot of great things about our team.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“You in a private equity portfolio. And so we quickly honed in on where we had the most experience, the deepest bench of executives in relationships and focus on three core industry groups, and that's healthcare services where Chris leads the effort, automotive, aftermarket, and light manufacturing, where Tom leads the effort, and then environmental and industrial services, which is what I do.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“So when we raised the first fund it was really buy value back great managers and grow when the great financial recession hit in two thousand eight a lot of companies went through some very hard times. We had a portfolio of companies that also had some bumps in the road we have never been big users of financial leverage. Our strategy has been to give our executive teams the flexibility to grow and invest. So as a result, you leveraged at three times, you lose half of your EBITDA, you're at six times and you can survive. If you leveraged at six times and you lose half your EBITDA, you're at 12 and you're bankrupt. So we started taking advantage of those over leveraged situations to strengthen our portfolio and came through the great financial recession with some very strong companies. And that led to a focus on consolidations. But just as importantly, we learned that you really needed to be experts in industries to be able to add value and create value.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a softball. Our partner, Tom, grew up in Kinnerhook, New York. Kinderhook is famous for a couple reasons. One, the legend of Sleepy Hollow. Washington Irving happens to be buried on Tuttle's family farm in Kinrook, New York. And then our eighth president of the United States, Martin Van Buren, he hated Washington, D.C. So you have to go up to Kinderhook to get him to sign off on legislation. And he would sign it Martin Van Buren OK for Ole Kinderhook. And the punchline is that when he had his presidential campaign, his campaign slogan was, you're okay with Van Buren. That's Kindrook's history. And we did choose industries over partners or capital working with people, working with executives. We did not want to be just another private equity firm with our name on the door. It wasn't named Tom Robin, Chris Capital, or Tuttle Mahalak and Mahalik. So we went with Kinrick Industries.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the executives. And we've prided ourselves on being great partners. And being great partners has led us to many acquisition opportunities, many referrals from the executives we partnered, our operating partner network is full of executives who we have now built and sold multiple companies with at Kinderhook. That's the genesis of how we started our firm.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“And Tom pulled together a couple of small transactions in the late 90s. He bought the fire troll aerial fire retardant business from early industries. Small deal, he passed the hat around his friends and family, raised two million dollars of equity capital to buy that business in nineteen ninety eight. Chris and I collectively put seventy five thousand dollars into that, which was all the money in the world for us. And it turned out to be a home run. Tom had over the next three, four years, put together four more small transactions, and that ultimately became the basis upon which we launched Kinderhook. Tom had great deal flow small market value. Chris and I had great executives and personal relationships and industries that we could bring to bear to those types of companies. The key to success in private equity is the executives who build the companies and the partnership between the owners.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“The conduit in this was our Harvard Business School sweet mate Tom Tuttle, who's our third founding partner of Kinderhook and has been a great friend for 30 plus years now. Tom was an entrepreneur as well, started a group called Global Emerging Markets. They were a broker advisor, early days of the pipes business. And Tom found a number of small investment opportunities as a result of his business model of looking to find small cap public companies to make private investments in. Some of those public companies had subsidiaries and divisions that ultimately were worthy of acquisition. And Tom called Chris and I and said, hey guys, I have an opportunity. What do I do? You're in private equity. Help me figure out how to buy this business. That was the genesis of Kinderhook. We lend Tom some relationships on the lending side, on the legal advisory side.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Young people that he brought in to work for him had great perspective of the industry that I still think about a lot today. It didn't raise a lot of money, but Frank would always say, make money, have fun. And you look back, Frank let us run. He let us go out as young early 30s team of professionals, find deals, meet people, deploy capital. He kept reins on us, but he was willing to let capital seek opportunities because ultimately Frank taught us a simple point, which was you can only lose one time your money. And in our business, we're looking to make three to five times your money. So if you're afraid to shoot, you're never going to score. So it was a great environment to learn and to build businesses and to get your footing in industries. It's helped create a foundation for our career. And good people that then supported us when we left to start our own firms as well.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“We were really hands on in working on those transactions at a very young age, and it put us in a position to really accelerate our learning, but it also accelerated our networks. My brother and I always thought we were going to work together at some point. Within years of being at there, writing a business plan about what we thought we wanted to do in the private equity business. Colony Capital, good firm, nice people. I moved over from colony because I didn't really want to be in real estate. Once I got my foot in the door, I said, hey, what's the next step up? Capital Resource Partners was a growth mezzanine shop in Boston spent two years there and then was fortunate to be able to join the SORS organization. The other thing I'd mention in addition to entrepreneurial situations, good mentors, Fred Danforth, the wonderful man, was the owner and founder of capital resource partners. He came over and created what was Soros Private Equity Partners in 1998. Frank was generous to the”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would almost say a loss leader to bring leveraged loans and advisory and other services that UBS was looking to build at that time. Several of those partners that I worked for decided to leave. So I decided to leave and ended up at a firm called Thera Capital Partners in Washington, D.C. I was on the ground and I think Chris will have similar experiences from capital resource partners going into smaller new firms like my brother and I did when we started in the investment world really made us entrepreneurial. We were not in environments where it was put together a certain type of model to put together a certain type of presentation for Monday morning committee meetings. We were in environments where it was find an opportunity, get to know people, smile and dial, meet with bankers, meet with managers, meet with anyone, and look at opportunities and when transactions occurred”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Begin my career, so yes, what private equity, any private equity. I started in UBS Capital as a group that I met while at Morgan Stanley, interviewed, got a summer internship between first and second year business school, went back after business school. Very interesting opportunity because you were working with other private equity firms. We had a committed pool of capital.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“Good question. Any aspect was probably my answer. This comes back to lessons learned in retrospect. I spent the better part of my first year at business school trying to get a job, literally sending out resumes. This is before email. So it's not just send an email. This is go to the research library, try to identify companies, find their names, figure out who the people are. And then you have to call them on the telephone, got an okay summer job when I was in business school, did not get an offer to return. And then spent my entire second year of business school interviewing, not exaggerating, probably had over 100 phone interviews, 50 interviews graduated from Harvard Business School without a job. And ultimately in the late August of 1995 got a job in real estate, private equity with a firm called Colony Capital out in Los Angeles. So a great opportunity hadn't been to Los Angeles once in my life, said yes, took the job and moved out to Los Angeles.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source
“To fill the hours or maybe create overtime and do things, it became obvious that making money by being an owner was really interesting and having the good fortune to have one out to Yale and be exposed to Wall Street and be exposed to the capital markets. I think there's a great opportunity to find the situation to be an investor. It wasn't obvious when I was 20 or 22. But by the time I was 24 and had that exposure, you started to appreciate that being an owner was a really nice thing. And private equity 25, 30 years ago was not mature. And there's a great runway ahead of us that we were able to take advantage of.”
2024-11-11 · Capital Allocators · Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416) · IDENTIFIED FROM THE TRANSCRIPT · source