Tuck Alumni on Building and Managing Enduring Private Equity Firms

BY CATHY MELOCIK
FEB 24, 2022

Four Tuck alumni from four different firms share their insights about what it takes to succeed in private equity.

It’s a cliché in the business world to say that people skills are important.

But their importance might just have been the key takeaway from the four Tuck alums featured during the “Building and Managing an Enduring Private Equity Firm” discussion at the 17th annual Tuck Private Equity and Venture Capital Conference.

The panel showcased the industry knowledge and experience of Rob Morris T’80, managing partner, Olympus Partners; Devin Mathews T’00, partner, ParkerGale; Jeff Kovach D’95, T’01, managing partner and co-chief investment officer, Arsenal Capital Partners; and Mike Murray T’04, cofounder and managing partner, Peloton Capital.

Private equity fellow T’22 Andrew McCaffery moderated the session, kicking off the discussion by asking each panelist to introduce their firm and say a bit about how they found themselves in the managing-partner role. McCaffery then brought questions to the panel overall for discussion.

What is the role of a managing partner in private equity? And how did your role begin and then evolve over time—from working in the business, as employee number one, to working on the business?

MORRIS I was doing transactions, as well as the administrative job of managing partner. That dual role probably persisted for 10 to 13 years, and over that time I did fewer and fewer transactions as we added more people to the team and they grew up in the organization. You want to have a team that stays together for a long period of time and that people stay comfortable with. And today my role is largely asking the questions about why a particular business is a good idea. One also has to think through carefully what you want your investor base to look like: What should be the nature of those investors—will they fit with your firm. In our case, we want to have an investor base that we know well and can scale with. Collage of session participants

Session participants included (clockwise from top left) Rob Morris T’80, Mike Murray T’04, Devin Mathews T’00, and Jeff Kovach D’95, T’01.

KOVACH As you start a firm, everyone does a little bit of everything. As you scale, you end up in more specialized roles. It took us about 15 years before we as managing partners weren’t working on executing transactions day to day anymore but instead were focused on strategy, both for the firm overall and for individual investments. And as we get larger, that gets a lot more complex. One big piece I’ve found about being managing partner is the focus on people—how, in a very complex team, do you create a culture that is consistent with what your investors want, what partners and employees want, what your portfolio of companies wants.

MATHEWS We sit down the first week of January and say, What do you like to to do, what don’t you like to do, what are you good at or not good at. We believe you should put a team together basically like Oceans Eleven: you need the safecracker, the hacker, the gymnast. I’ve seen a lot of bad behavior at firms, and I’ve seen some amazing behavior at firms. And the amazing behavior was when humans could have conflict with each other in a healthy way and work through that conflict. So, making sure you can manage through that is the hardest problem. But that is what we do in business, and in our own businesses we need to invest deeply in our team.

MURRAY We’re very early in our firm, and my time is still largely spent on executing deals and working with portfolio companies. The big challenge in establishing and growing this firm is about its being less and less about me and my partner and more about the team and firm as an organization. And that’s all about people and finding good people who can buy into the vision. One of the first things we did was sit down to talk about our values, to try to be really explicit about them: this is who we are, and this is what we want to build as a firm and how we want to behave. I want to come to work every day with good people who care about their teammates and care about their reputations.

KNOW THAT ALL FIRMS ARE DIFFERENT, NOT JUST IN TERMS OF SIZE OR STYLE OF INVESTING, BUT IN TERMS OF CULTURE. YOU SHOULD PICK A FIRM WITH COMMON VALUES AND A CULTURE CONSISTENT WITH WHERE YOU WANT TO EXIST.
JEFF KOVACH D’95, T’01, ARSENAL CAPITAL PARTNERS

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What would you encourage current MBAs to think about for a career in private equity, perhaps with aspirations of being in your seat?

KOVACH I wouldn’t start by aspiring to be a managing partner, but rather to be a great investor. Most people go into private equity because they like investing—managing partners are still investors, but they have a lot of other responsibilities. To people looking for a p/e career, know that the industry is a lot broader than it was a couple decades ago, and with increasing specialization. So, one, I would think about what type of investing, businesses, control, involvement you like. Two, know that all firms are different, not just in terms of size or style of investing, but in terms of culture. You should pick a firm with common values and a culture consistent with where you want to exist. “People” wasn’t acknowledged in decades past as a core part of private equity, except maybe for the relationship network, and now it’s critical in so many ways.

MATHEWS I think what gets you to managing partner doesn’t necessarily help you be a good managing partner. What is it to be a great associate: you can crank, you’ve got high throughput, and you’re fast and accurate. When you’re a VP or principal, you’ve got to process a deal and be a quarterback and maybe even find a deal. Then you get to be a partner and you’ve got to find deals, manage people, deal with egos across your peer set. And then you get to managing partner—that’s a completely different thing. I was a horrible associate, but what I was good at was telling stories, and that’s made me a good managing partner: I can convince people to come work for me, to sell me their company, and I can convince LPs that I’m a safe place where they can make an outsized return. And if you’re not a good storyteller and motivator of people, you’re not going to be a good managing partner.

MORRIS I would even say that now, people skills are equally material even early on in an organization. We make it a point of not keeping people here—no matter how talented they are—if even as associates they are legends in their own minds, because it just doesn’t fit well with what we do. If you’re truly interested in eventually becoming a managing partner, one of the things that you want to do is get as much access as possible to people who have that job in your firm or elsewhere, and listen to them. You can learn a tremendous amount, and there are people who are generous with their time and their thoughts about how to run an operation well.

MURRAY I think people skills are probably one of the most important things about investing as well. Great ideas are wonderful, but great ideas badly implemented are wasted. If you don’t have good people skills, you shouldn’t even bother with this industry. This industry has evolved, and there are a lot of different ways into it now that didn’t exist 20 years ago. Anybody can do a deal, buy a company, execute a transaction, but what do you do with it once you own it? You’d better have a plan for how you’re going to create value. We have some investment bankers in our firm, but we’re trying to bring on people with operating experience, consulting experience, a different set of skills. I think that’s the future. And I think the industry is better for it because we’re much more value-added, not just capital.

MATHEWS I totally agree that there are a lot of ways into the industry, and our firm also has people with a diverse set of backgrounds. I would encourage people to stay private-equity adjacent. If you’re at Bain, work in the PEG group. Or work for a private equity–owned or –backed company. That’s how you can get invited in—when people see what you’re good at.

ANYBODY CAN DO A DEAL, BUY A COMPANY, EXECUTE A TRANSACTION, BUT WHAT DO YOU DO WITH IT ONCE YOU OWN IT? YOU’D BETTER HAVE A PLAN FOR HOW YOU’RE GOING TO CREATE VALUE.
MIKE MURRAY T’04, PELOTON CAPITAL

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What are your projects for the next five to ten years, and how do you expect life to change at the helm?

MORRIS Regulation, and the role of the regulator, is becoming a big deal, as far as time consumed and cost. And I think what’s going to come over time—you saw hints of it in some recent new proposed regulations—is a formulation where the SEC intends to conform p/e reporting on returns and multiples. Also, for about the last four or five years you’ve had virtually zero percent cost of debt capital or close to it, which has increased the purchase price in terms of the purchase prices on assets, and I expect that to reverse a little bit because we’re in somewhat of an inflationary spiral. Because of that, you’re going to run more risk of problems with the leverage that’s on a lot of these transactions. In addition, specialization and industry expertise will continue to climb in private equity, particularly with software, securities, and crypto.

KOVACH I’m extremely bullish on private equity and the role it can play in the economy and what it can do for businesses. I think it is increasingly going to have a hand in technology and innovation, and the application of technology in the real world. I agree that we’re going to continue to see increasing specialization and it’s going to become an absolute requirement that firms bring more than just capital. They’ll need to bring insights, human capital, the ability to help companies overcome challenges, or operational issues—something that differentiates them in an increasingly competitive world. Because this is no longer a capital-allocation industry and it shouldn’t be—this really is a strategic business industry that happens to bring capital with it.

MATHEWS I agree, we are in a bull market for private equity. When the public equity people figure out that crossover investing is where they want to be, that deluge is going to come our way. And LPs, as we get into high net worth and retail investors and packaging that up into private equity funds—we’re just barely scratching the surface on that. I think private equity is going to be a great place to be for the next 10 to 20 years.

MURRAY I am also very positive on the future. I think the other thing continuing to revolve around us is a sort of “non-private equity” private equity—pension plans building their own capabilities around this asset class, family offices building their own—I think that changes the landscape and makes it even more important for us as traditional p/e firms to be differentiated and have a reason to exist. I think the key to success is to stay on our toes and be the destination of choice for people when they’re looking for a partner. It’s not just about having a checkbook.

McCaffery brought the panel to a close with a “lightning round” of short answer questions, including one prompt specific to Tuck. “What is your favorite Tuck memory?” he asked.

The answers: Spending a great two years at Tuck with a girlfriend-then-and-now-wife; the luck of having John Shank as a professor; the social element of hockey, despite not being a good player; and Morris’s experience of the first class in which he decided to volunteer his opinion on what was wrong with a company…only to have the professor say, “Well, we have the actual CEO in the back row now—let’s see what he thinks.”

An honest recounting of skills and experience, a little self-deprecation, a good dose of humor, and solid advice shared for those wanting to move into the industry—people skills were in full display among the panelist Tuck alums.