From Turnarounds to Growth: Ben Gaw on Building High-Performing Teams in Private Equity

[00:00:00] Sean Mooney: Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and real-time trends. I'm Sean Mooney, BluWave's founder and CEO. In this episode, we have a fantastic conversation with Ben Gaw, partner and head of portfolio operations with Cross Rapids Capital.

[00:00:26] Enjoy.

[00:00:34] I'm super excited to be here with Ben Gaw. Ben, great to be here with you.

[00:00:38] Ben Gaw: Thank you. Same here.

[00:00:40] Sean Mooney: This will be a fun one. I've been looking forward to this for a while here. I'm eager to get your thoughts, your perspectives, your wisdom into the world here. But before we go there, I'd love to start to share more of the story of you with our listeners.

[00:00:53] And so Ben, could you give us an insight into kind of how you grew up, some formative experiences, first job outta college, path to pe, all that kind of fun stuff?

[00:01:03] Ben Gaw: Yeah. I'm actually a first generation immigrant. I came to United States when I 19 after high school. It's okay, you're off and then immigrated here.

[00:01:13] I'm actually a first gen immigrant, came to the US by myself, first generation in our family to go to college, so neither of my parents finished high school. Even my dad was born during World War ii, so it's a whole different time then I'm from the Philippines and it was occupied by the Japanese at the time, so my dad recounts how he grew up in the mountains, uh, hiding from Japanese forces.

[00:01:37] It was a whole different experience for them and very grateful for their hard work and giving me opportunities that they themselves didn't have. That, in essence, sums up my background. I studied chemical engineering in college. My first job out of college was in sales. I worked for a steel company out in, uh, California, went to B and from there went into consulting where I was for almost 10 years.

[00:02:06] First at Carney. I was there for four and then, uh, Alex Partners for five did some pretty cool and interesting assignments, especially at Alex turning around distress companies. I was actually part of the team that did still considered today one of the largest corporate bankruptcies of all time, and that was Dana.

[00:02:26] We took them in and out bankruptcy, so that was pretty cool, a very good learning experience. My introduction to private equity was when I was at Alex. Because I did a couple of PE Porto performance improvement work. They were both in trouble and before then, I frankly, even when I was in B School, I never paid much attention to private equity and didn't really know what it was.

[00:02:49] But at Alex, I got introduced to that world of investors and rapid turnarounds and performance improvement from. I joined a company out of Dallas called Brazos. That was around 2008, what we call GFC now, the great financial crisis. And so it was pretty interesting, informative, pretty hard and fast entree into the world of private equity from Brazos.

[00:03:18] I was there for a couple of years and then worked for Platinum Equity. I was there for seven, again, did some pretty cool assignments while I was there for about a two year period. I was also head of. Asia portfolio ops and helped build the team, the portfolio operations team that we have there today. And then from platinum, I went to Advent.

[00:03:38] I was there for a little over a year before my current colleagues and co-partners and co-founders called and just like I made a big career change during the GFC, I did a big career change during COVID because they called me around 2020. We were all still quarantined and stuck at home and said, we're thinking of starting a private equity firm and we need a critical third piece that's missing, which is the portfolio operations side.

[00:04:06] And so it took about six to 12 months before I, uh, wrapped my head around leaving, uh, a bulge bracket private equity and joining what essentially as a startup where I've been since our firm is called Cross Rapids Capital. So that's a quick synopsis of my evolution. Into private equity. Equity, which is a pretty circuitous because I never planned to be in private equity and a lot of it was just circumstance and good fortune and working with very good mentors, but that's where I'm now.

[00:04:37] Sean Mooney: I mean, it's a great story of life so far. Right. Starting off, I'd love to hear a little more, you first generation immigrant, you mentioned you came here by yourself, so was it kind of. Here's a bag and some money and come, go to college, or what was the story behind that story?

[00:04:53] Ben Gaw: Pretty close. I had an uncle who lived in LA so that's how I wound up when I first came to the US I lived in Chicago now where I've lived for over 20 years, but I had an uncle who gave me a roof over my head.

[00:05:06] Really? It was during a time when, uh, the cost of state universities was still affordable and you can actually pay your way through college if you work full time. It was a different era than the state schools. Now I don't know how, I have three daughters and none of them could have paid their way through school, so to speak.

[00:05:25] It's just the cost is so prohibitive. I remember working for a metal plating company back in those days, and I would wake up at three or 4:00 AM and go to work, and then after work I would go to school. So I did that for several years. That was part of my formation. The school of hard knocks, and knowing the value of hard work.

[00:05:46] Sean Mooney: It's tenacity, grit, resilience, you know, from day one. It's one of those things, thank goodness we have the renewal that occurs every time when people come in who wanna do the extra, all the opportunity that it's here. The other thing I love about your background is the whole turnaround background, because I think it really is, you know, one of the best backgrounds you can have going into private equity because you get to see a, the multiplicative power of leverage, both positive and negative.

[00:06:13] You understand deeply what cashflow actually is, and you can see companies really at their worst. And so you know how to keep them from going there and getting to that point, you know, avoiding it. But if they do get there, you know what to do to bring 'em back up.

[00:06:26] Ben Gaw: And you learn the importance of speed because in a turnaround situation or a distress situation, speed is the most important.

[00:06:31] It's not even about getting it right, it's about even if you get it half right, but if you do it fast, that makes a world of difference.

[00:06:37] Sean Mooney: That's a great point. My first job out of college was Houlahan Loki's restructuring group, the Alex folks that were there, the old school Alvarez and Marsal groups.

[00:06:47] There's this whole kind of like club of people that have a built these amazing world-class consultancies and B investment banks that came out of it. You know, Blackstone that used to be their big practice was their restructuring group, and so, so many great investors and operators and people kind of came out of that ecosystem.

[00:07:05] The things they had me doing as a 23 and 24-year-old were just like mind-boggling, as that market was nascent and oversold.

[00:07:14] Ben Gaw: A and m might have a problem with this statement, but I think Jay, Alex almost invented the modern bankruptcy, the whole turnaround in crisis management. He was definitely one of the pioneers

[00:07:25] Sean Mooney: a hundred percent on that Mount Rushmore.

[00:07:27] Just seeing that hole come through. So we've learned a lot about you here, Ben. What's maybe one more thing we'd know you better if we knew this about you.

[00:07:36] Ben Gaw: It's probably that I value physical health a lot and believe it's critical to having mental and even psychological health. So I take fitness seriously and I exercise regularly.

[00:07:48] I think it's kind of funny when I think about it when I travel with my team, cross Rapids team, when we visit companies for example, or attend board meetings, I regularly schedule. Workout sessions. I send them calendar invites at the hotel gym early in the morning before the day starts and workout with my colleagues.

[00:08:08] It's probably easier though, to peer pressure, our younger colleagues than it's on the older ones. I get better turnout from our younger folks. It's an important piece that a lot of people tend to take for granted, but you gotta be healthy to do this kind of work.

[00:08:22] Sean Mooney: It's so important. It's one of those things that I go in like streaks on, right?

[00:08:26] Get in good shape and then I decline and get in good shape and. But now I'm proud to say I've crossed the chasm into the fifties right now, and so now I really have no choice to keep it up because there's just so much evidence and data and research that shows if you can keep up the muscle mass and the health and the cardio, the rest of your life is gonna be infinitely better.

[00:08:49] So. Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get. We often get people who show up at our website, call our account executives and say, Hey, I'm not private equity. Can I still use BluWave to get connected with resources? I. And the short answer is yes.

[00:09:08] Even though we're mostly and largely used by hundreds of private equity firms, thousands of their portfolio company leaders, every day we get calls from everyday top proactive business leaders at public companies, independent companies, family companies. So absolutely you can use this as well if you want to use the exact same resources that are trusted in being deployed and perfectly calibrated for your business needs.

[00:09:31] Give us a call, visit our website@BluWave.net. Thanks. Back to the episode,

[00:09:40] Ben. If we were gonna maybe turn the page here and get into some of the ways you look at business. I mean, you've seen businesses across the globe in the good times, the bad times, everything in between. And no doubt you've got this strong perspective of. Here are kind of the key elements of value that you understand and probably look for when you're assessing a new portfolio company opportunity.

[00:10:03] So what are maybe some of the key things that you look for when looking at a company in terms of, is this company a real good company, or probably more importantly, can it be a really good company?

[00:10:12] Ben Gaw: We do lower middle market. We do industrials, and we define that as manufacturing, specialty distribution, and blue collar industrial services.

[00:10:22] So we know what we're not. We don't pursue any deal that doesn't fit sort of that criteria. But the running theme is we look for companies that are undermanaged or mismanaged, even if it has that element and it plays in a defensible market. And this company has a right to exist, meaning it's been around for a while.

[00:10:41] They have solid customer relationships. There's a high switching cost. Probably doesn't matter how broken the company is, as long as it has those elements that we can then go in and address.

[00:10:56] Sean Mooney: How do you determine those? Are you looking at these and through investment banker processes? Are they more special situations?

[00:11:04] What's the lens with which you're looking at these opportunities or all of the above?

[00:11:08] Ben Gaw: Yeah, so we look at all of the above. There's banker led processes. We have two of our ports are proprietary, brought about by preexisting relationships. We have. Your former CEOs, for example, our CFOs are good referral sources.

[00:11:23] They'll give us a call and say, Hey, I stumbled upon this company that may be interested. So we, we have a couple of those. We work with a few special set bankers as well. We're looking at one right now. We did one, actually, one of our porticos is sort of what I would call a distress sort of carve out. So we've done all the above.

[00:11:44] In some cases you replace the management team. In some cases it might be just one or two positions where needed with a goal of building a high performing team that can address issues and grow in a rapid manner.

[00:11:56] Sean Mooney: And so maybe if we take that further. So you've seen a company, now, it's got the elements of value that you think, give it the raw stock to do something with and kind of create a new version of itself.

[00:12:10] What resources does your firm then? Bring to support the value creation process. As you're kind of going through this kind of metamorphosis.

[00:12:20] Ben Gaw: We're playbook driven, which means we rely on pattern recognition to find opportunities and to develop our, our value creation plan. The type of resources you bring depends really on that specific portfolio company, and so you assess different levers.

[00:12:39] Whether it's pricing or manufac four wall plant productivity or procurement, strategic sourcing, or whatever the case may be, and you determine what are the specific initiatives that need to happen in order to drive value, and then you first determine whether the management team is capable of executing.

[00:13:02] If it's yes, then great. Right. Then they go ahead and do it. You build a project plan with deliverables and all that stuff, and then good hygiene stuff, like weekly steering committee sort of updates. If the management team is capable, but they've never done it before, I can provide coaching. So it's management team with coaching from our side and support.

[00:13:23] If they totally don't have the bandwidth, then we'll bring in third parties, whether they're consultants or independent contractors that are sort of part of our network. So we tend to use the same folks. Because there's a trusted relationship,

[00:13:36] Sean Mooney: so as I understand it, you've got kind of your assessment at the beginning.

[00:13:39] You're going to then look at do you have the capability of the team to execute on that? And then when you have that, you'll give them either some sort of resource, be it internal or external, and the act upon it.

[00:13:52] Ben Gaw: Ultimately, even if you're bringing in third parties, ultimately management needs to execute as well.

[00:13:57] At the end of the, if. You bring in lean consultants to make the plant more efficient, the plant manager's gonna have to own it at some point in the process. And so usually that's sort of the weak link, right? So you have to make sure you have the right team that's in there that can take over and sustain and obviously continuously improve, right?

[00:14:18] Because even if they sustain what's been done, they need to continuously improve going forward.

[00:14:23] Sean Mooney: I'm so glad you said that, Ben. Someone who's in the business of kind of super connecting resources for value creation. One of the things where you see it most often go wrong is this idea that you're gonna bring in a third party and it's kind of like magic fairy dust.

[00:14:38] And it's just the idea that no, any kind of resource, whether it's full-time or a fractional or a third party project based, have to be managed just as if they were almost a full time no matter what. And you gotta own the outcome. It's not just delegating and.

[00:14:54] Ben Gaw: Any project where you think the consultant's gonna hand you something that's tied in a bow and that's it.

[00:15:01] That's basically where things fail.

[00:15:03] Sean Mooney: Yeah. You're not delegating thought and execution. You're delegating resources that are tied to your plan that you own.

[00:15:10] Ben Gaw: Yeah, and probably one point that I didn't touch, which is just as critical as the importance of management buy-in, and so value plan. As an operating partner, your, your biggest job is to ensure that the management team buys in because there's no continuity if there's no buy-in, 'cause they're gonna own it.

[00:15:28] So they need to believe in it and they need to be able to resource it afterwards.

[00:15:32] Sean Mooney: Share that process. Ben, how do you think about getting buy-in on these?

[00:15:36] Ben Gaw: I think a large part of it is really feeding ideas and ultimately making them feel like it's their idea. Our management teams are experienced, they're senior, they're high performing.

[00:15:48] They generally don't have pride of ownership, but they're very capable people, right? That's the kind of executives we hire. So sometimes it's really just planting a seed or two and you let it sort of germinate and then it, it's their idea. They own it, and you're just providing the resources to support it.

[00:16:04] Sean Mooney: And I think that's so right in almost anything, you're in this collaborative process. You have perspectives. They have perspectives. Ultimately you have the vantage of seeing thousands of companies over time, like you've seen these movies before and you can kind of lead 'em to water. And if you have the right ones, they take to it and get going.

[00:16:21] Right. And I'm sure in all cases they also like, Hey, but there's also some water over here. And you're like, yeah, go get that too. I'm sure that's part of the assessment you go into is like, are these teams kind of agile and coachable and able to. See the opportunity when it's kind of unveiled and then just go get it.

[00:16:38] Ben Gaw: That's right.

[00:16:40] Sean Mooney: Hi, karma School of Business listeners, Sean here, wanted to shine another spotlight. In one of the most important ways PE firms assess opportunities, they are the most active users of a product called commercial due diligence, also known as market studies. Why? Because they know the market always wins.

[00:16:59] And if you're confident that you have a good market. A solid strategy combined with a good team that can execute. The odds of success go way up. They also understand that specialized insights from focused providers are critical. 'cause beta and average insights aren't good enough anymore. As a result, top P firms call us pretty much every single day to get connected with the best of the best right fit providers in the world.

[00:17:26] This product is not just for those who do m and a. One source of Alpha and Edge is to do a commercial due diligence, including a growth strategy assessment on your own company, and you'll be amazed how much your insights and go to market plan will improve. Give us a call or visit our website@blueap.net and we can give you excellence and alpha with ease back to the show.

[00:17:49] Maybe With that in mind, we're in this kind of. I keep on calling it a washing machine world that we're living in where you're just kind of like agitated back and forth, but at the end of the day, I think there's more good than bad in the cycles of this washing machine. What are some of the top pieces of advice that you and your colleagues are offering your portfolio companies today to kind of successfully manage through this period of time?

[00:18:13] It's

[00:18:14] Ben Gaw: a recurring theme of items that I've already mentioned. First and foremost, I can't underestimate the importance of building a high performing team. If you get that wrong on year one, you're gonna spend the next two to three years trying to fix it. The CEO has to make sure he has the best team possible for his business.

[00:18:33] That means having the right CFO, which probably secondary to the CEO's the hardest job because the CFO's the one that talks with the private equity guys the most, right? Weekly or more often. You talk about liquidity and covenants and everything else, that's a constant. CFOs have to juggle, not just his relationship with the CEO and his relationship with the PE sponsor.

[00:18:56] He is also managing a lot of third party financial relationships. Head of sales, obviously very important. Head of ops important, that kind of stuff. The second one is speed to execution. I think my comment earlier around, even if you get it half right, but if you can execute at speed, that's a win.

[00:19:15] Because you don't get the strategy right. Nobody says, I have the roadmap for the next five years, and I know exactly which markets we're gonna go after and how we're gonna do it, and this is how we're gonna build the business.

[00:19:27] for 99% of us, it's not that perfect. And so if you're implementing fast, and even if you get it wrong. The first time you can still course correct, right? But if it takes you three years to implement something and then you realize it's not really working, then you're kind of late in the game and suddenly you're in trouble.

[00:19:46] So speed to execution is probably the second most important. If I were to think of a third, I would say growth, right? So we can get bogged down trying to fix whatever that means, right? Fixing the sales force, fixing the plants, fixing the network, doing network rationalization on a multi-site operation.

[00:20:10] You can spend all that time doing that and neglect to grow, right? You need to actually start growing on day one, post close, meaning ideally you have the right head of sales in place. Maybe you don't have the right BD team yet or the right sales team, but you're spending the next six months building the right sales team.

[00:20:30] But you gotta start thinking and planning for growth on day one, because I think it's the hardest thing to do. I view fixing ops as it can be challenging, but at the end of the day, with enough time and money, everything is fixable. And I say that almost categorically. There's nothing that cannot be fixed with enough time and money, but growth.

[00:20:51] I mean, the best laid plans can be laid to waste, right? Customers may not like a product or. Salespeople are not as effective as you thought they were. Or your competitor does something, drops their price, and all of a sudden you're in trouble. So growth is hard. And so we need to resource that accordingly, even as you are doing transformational things that would position the company for success, whatever that may be.

[00:21:17] Sean Mooney: Yeah, I think you have a book in there, Ben. It's, I mean, it's this whole idea that that's so foundational. Get the right people in place. Move fast. Course correct quickly. And if all of that's not leading to growth, which is the end of the game and what's gonna create the value, you're doing it wrong. So start over, bring your OODA loop all the way back and begin again.

[00:21:37] Ben Gaw: Well said, well said.

[00:21:39] Sean Mooney: I think you just summarized so much of what matters really elegantly in a succinct and great way. So Ben, one of the things that I'm also a. Is kind of other people's hard-earned wisdom because if I had to come up with things on my own, I'd be in a lot of trouble. Whatever modest success I've had in life has been mostly through just like copy pasting what other people do.

[00:22:05] And I think a lot of top business builders, there's, every once in a while there's these luminaries that just spend space and time, but so many of us are passing books around and borrowing other people's advice. And so if you could go back in time and meet your 22-year-old self. What might be one of those top piece of advice that you would give yourself that you kind of wish you knew then?

[00:22:27] Ben Gaw: It's two towards soft skills or a bedside manner. It's something that I learned the hard way. The issue with a lot of consultants, and I can say this because I was a consultant for a long time, is you go in thinking you're the smartest guy in the room and you have all the answers. I've been a private equity now for over 15 years, and I would say the first 40%.

[00:22:49] To 50% of my PE career outside of consulting PE career was spent thinking I had all the answers, right? And interacting with management teams as if I had all the answers. And that's a recipe to failing. And so where people don't wanna work with you, ultimately they'll get to the right answers too, but there's just so much pain and unnecessary grief over that approach.

[00:23:18] My boss at the time at Platinum took me aside and he actually had me work with one of his friends who's the head of a search firm to work on my soft skills. It's probably made the biggest difference in my career. People have to enjoy working with you. It's a tough game, right? And if you think about the private equity hold period, it's not that long, but it's intense, right?

[00:23:39] It's dog years, and if people don't enjoy working with each other, then what's the point? Every day is a slog. You wake up not wanting to talk to this person, but you have to. And so if I could talk to my 22-year-old self, it would be that, right? It's developed sort of those softer skills, which I can't underestimate because that's ultimately the key to being effective.

[00:24:00] Sean Mooney: It's another great piece of wisdom and as I reflect back on my younger heart charging days and probably even today is something you're always working on. Particularly, I think people who have this kind of like. Charging achievement oriented people who are willing to take on big challenges. Sometimes that means at least if I reflect on myself, I could be a bit of a so-called bull in a China shop.

[00:24:22] You know, running around and knocking things over. And part of it, I think you're right, is like you felt like is either I, I thought I knew everything or I felt like I was expected to. Yep. And so not only did I probably move too quick at times or, or ruffle feathers. But also with complete candor. I had complete imposter syndrome for a large part of my career.

[00:24:44] I was coming up, I was like, I don't know what I'm doing, but I'm expected to know everything. So I got ready to go figure it out in secret.

[00:24:49] Ben Gaw: That's right.

[00:24:50] Sean Mooney: When I finally figured out to let go of that, it was just like a relief. But your point also became a lot more effective and it wasn't just the, like you felt like you had to know everything and you're not gonna get promoted unless they do.

[00:25:01] Candidly, that's kind of like east coast private equity, or it was back in the day. I think it's come a long way, but it was, that was kind of it. Yeah. So what'd you say resonates a thousand times with me,

[00:25:12] Ben Gaw: it's the old cliche, right? You don't need to know everything, but you just need to know how to find the answer.

[00:25:18] That's what's important, and nobody expects you to know everything.

[00:25:21] Sean Mooney: Were there any kind of mechanisms that you used to kind of get through it as you were like first learning it? Kind of like a framework in your mind that you were able to kind of structure this evolution.

[00:25:32] Ben Gaw: It's like suggesting instead of telling is one.

[00:25:36] The other one is giving people a chance. You can't give them too long of a chance, but you gotta give people a chance. It's those kinds of things, right? Inserting a bit of patience and humanity into the process because people got to where they were because of their own experience and skills and accomplishments.

[00:25:52] Right. The people we deal with in private equity are, for the most part, people in their A game already. And so they're on top of their game, and I think it's a matter of creating conditions or situations where their best selves can shine. And I think ultimately the best operating partners are those people, right?

[00:26:12] Where I don't have to take credit for everything. In fact, I don't need attribution. My success is contingent on. And my portfolio companies. And so if they're successful, then ultimately I'm successful. And we all know right, what drives it and you just have to create those conditions and situations where people can thrive.

[00:26:35] Sean Mooney: I think that's so well said. And it's also, you brought in kind of this whole concept of servant leadership, right? Like you're gonna make other people successful, which is ultimately gonna make you and your team successful. And so there's this like. It's altruistic, but it, there's a selfish altruism to that that makes everyone better.

[00:26:53] I loved how you weave that into it as well. So, Ben, this has been really delightful and for me, instructive conversation as I constantly try to get free advice from you all. And I really appreciate you kind of a telling your story. B, kind of the lens with which you build businesses so well, and then some of the wisdom that you've learned along the way.

[00:27:14] And so I've learned all sorts of things that I wish I knew before and that's just a tremendous gift. So I appreciate it.

[00:27:19] Ben Gaw: Thank you. Time flew. I had fun. So thank you very much.

[00:27:34] Sean Mooney: That's all we have for today. Special thanks to Ben for joining. If you'd like to learn more about Ben Gaw and Cross Rapids Capital, please see the episode notes from links. Please continue to look for the Karma School of Business Podcast anywhere you find your favorite podcast. We truly appreciate your support.

[00:27:51] If you like what you hear, please follow five star rate, review and share. This is a free way to support the show and it really helps us when you do this. So thank you in advance. I. In the meantime, if you want to be connected with the world's best in class private equity grade professional service providers, independent consultants, interim executives that are deployed and trusted by the best business builders in the world, including many hundreds of top PE firms and thousands of their portfolio companies.

[00:28:18] And you can do the same whether or not you're in the PE world. Give us a call or visit our website at BluWave.net. That's B-L-U-W-A-V-E and we'll support your success onward. The views and opinions expressed in this program are those of the individuals presenting and do not necessarily reflect the user positions of any other persons or entities, including those referenced here in. No representations, warranties, financial, legal, tax, or other advice are made herein. Consult your advisors regarding any topics discussed during this episode.

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

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