Episode 032
Ed Hine, Cold Bore Capital | Breaking the Speed of Sound: Strategic Private Equity Buy and Builds
Ed Hine, an Operating Partner at Cold Bore Capital, shares his perspectives on building great companies in private equity, learned through the lens of a US Navy veteran. Tune in for a great conversation where we discuss:
1:20 - Ed's path to private equity
6:32 - Persevering through challenges in PE
11:31 - Evaluating potential through a value creation lens
16:22 - Lessons learned about integrating companies
20:21 - Common traits of great businesses: talent and culture
23:13 - Essential professional imperatives to keep in mind
26:04 - Ed's advice to his younger self
For more information on Cold Bore Capital, go to www.coldborecapital.com.
For more information on BluWave and this podcast, go to www.bluwave.net/podcast.
1:20 - Ed's path to private equity
6:32 - Persevering through challenges in PE
11:31 - Evaluating potential through a value creation lens
16:22 - Lessons learned about integrating companies
20:21 - Common traits of great businesses: talent and culture
23:13 - Essential professional imperatives to keep in mind
26:04 - Ed's advice to his younger self
For more information on Cold Bore Capital, go to www.coldborecapital.com.
For more information on BluWave and this podcast, go to www.bluwave.net/podcast.
EPISODE TRANSCRIPT
Sean Mooney:
Welcome to the Karma School of Business podcast. In this episode, we have a great conversation with Ed Hine, operating partner with Cold Bore Capital.
This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO. BluWave is the go-to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of proactive companies to the very best service providers for their critical, variable, on-point, and on-time business needs. Enjoy.
I'm very excited to be here with Ed Hine. Ed, thanks for joining us.
Ed Hine:
Yeah, super happy to be here, too. Thanks for having me.
Sean Mooney:
Absolutely. And we're doing this podcast in person. And for all of us who've been kept in little digital boxes, for me this is particularly nice to see that Ed's got feet and legs and-
Ed Hine:
Yeah, yeah. And I'm not just wearing a jacket on Zoom and wearing shorts.
Sean Mooney:
It's exactly right. I usually have my Umbros on during these things. So it's great to have you here, and maybe to jump in, Ed, I'd love to hear your origin story, how you came to be, how you got into the private equity industry, because I think there's more and more unique stories about how people get into this world.
Ed Hine:
Yeah, I'm definitely not the standard path, that's for sure. My first part of my career was in the Navy. So I spent 12 years in the Navy and had just a ridiculously charmed Navy career, unbelievable experience. Get to work with just phenomenal people. I got out of the Navy in 2016, and I jumped right into the smallest, most non-Navy thing I could find. It was a bootstrap startup. We were in the drone industry just when the drone industry was emerging, and we were selling infrastructure inspections to big public companies with big asset problems, so Norfolk Southern, Dominion Energy, Duke Energy.
Sean Mooney:
Yeah, the energy line inspectors?
Ed Hine:
Yeah, exactly right.
Sean Mooney:
Yeah, I've looked at those companies. Those are great.
Ed Hine:
Yeah, no, it's fantastic work. And we were really very early days on that. So about two years into that, I'm doing biz dev work for the company, and I'm negotiating a partnership with somebody to do their training work for them. We start whiteboarding the numbers and we're doing the bar napkin math and all the things. I'm like, look at the guy I'm working with, I'm like, "Tyler, you really ought to just buy this company because I'm going to rip your eyes out over these prices. It's going to be bad." And so then they bought our company. So that was step one of the negotiation. I hadn't even realized what I was doing.
So you fast-forward three months, and it was like, "Oh my God, that was really, really cool. I should do more of that for a living." And so I just started plotting my way towards private equity. I gotten to know our founder, Sergio Zepeda. Along the way, we both worked on a nonprofit together that helped veterans transition into the private sector, and he had a spot on the roster. And so I came over in 2019 as an operating partner.
Sean Mooney:
That's great. As we have these conversations, and it's interesting, and there's all these different paths into private equity now. And very often we were... As I've been talking with even our internal team about these things, it's almost like this serendipitous kind of journey that leads you there in ways that you never would've projected, but somehow it just seems natural.
Ed Hine:
Yeah, 100%. I was vaguely aware that private equity was a thing that existed in the world, but before 20 really 18, if you'd asked me to explain it, I would've said, "Well, it's a bunch of rich people that buy businesses," and that's it, that's all I got. I'm done there. So it took a lot of waking up at 5:00 in the morning and figuring out how to learn about this world and doing the online modeling courses and really stepping up my hard skills game so that I could be ready for it.
Sean Mooney:
So many people, even today, think it's a part of Pretty Women, where it's like-
Ed Hine:
Yeah. Right, right.
Sean Mooney:
But, no, maybe in the '80s it was. It's changed a little bit.
Ed Hine:
Yeah, I don't often find myself at, what's that, the horse event that he goes to, negotiating deals, right?
Sean Mooney:
Yeah. It's like, I was in private equity for 20 years and I drive a pickup truck and more often than not, I was in the last row on the plane, and it wasn't private. Unless Southwest is kind of... I felt very part of the system.
Ed Hine:
As long as you get that A..
Sean Mooney:
Yeah, exactly.
Ed Hine:
That's the key.
Sean Mooney:
My wife has a companion pass, which we're really excited about.
Ed Hine:
Oh, that's clutch.
Sean Mooney:
Which is we save 25% every time we fly.
Ed Hine:
Nice.
Sean Mooney:
I love it. And so I'd love to hear a little more, to drill down on your Navy career, what were some of the things you did there?
Ed Hine:
Like I said, I was just dumb lucky. So I started out flying F-18s. I was Goose, not Maverick. I spent eight years doing that, if you count flight school. So deployed a couple times with VFA-103, which is an East Coast based fighter squadron. And then I was an instructor on the West Coast teaching new pilots how to fly F-18s. And then I went and worked with Navy SEAL teams as a guy that coordinated airstrikes for them.
Sean Mooney:
Wow.
Ed Hine:
Yeah, so that was the last four years of my career.
Sean Mooney:
And talk about flying in F-18s. What was that like?
Ed Hine:
It's really cool, but it's not really cool, at least for me, for the reasons I think most people think it's cool. Breaking the speed of sound, what's that like? You actually don't even notice it. It's super quiet. Now I'm in the jet. I was never a romantic about it. I didn't like flying because I was going to go fly amongst the clouds and do all of these romantic things. What I really liked about it was the people and the sense of mission, and it's really, really hard to be really, really good at. So you end up surrounded by this group of people that's all very motivated. Everyone's moving in the same direction. Everyone's really trying to outdo yesterday's version of themselves and just continually get better. And that's what really I fell in love with there. I got that working in the SEAL team that I did as well. And now I actually find that here as well. So in this world, in the private equity world.
Sean Mooney:
Yeah, that constant search for improvement and enhancement, I think that gels really well with your current role.
Ed Hine:
Oh, a hundred percent. It's never being satisfied with current status quo. It's wanting constant self-improvement or situational improvement. Yeah, it's a hundred percent ties out.
Sean Mooney:
And one of the things, I've had friends who've been aviators, and they all talk about the one thing that they bring up is not everyone has cool call signs like Maverick.
Ed Hine:
That's true. Yeah, especially in the Navy.
Sean Mooney:
It was my friend who was in the Navy and flew, and he doesn't like to share his call sign because usually he earned it certainly for doing something that wasn't phenomenal.
Ed Hine:
Yeah, we've got some gems out there, some of which are repeatable on a podcast, many of which are not.
Sean Mooney:
So we'll save that conversation for a beer.
Ed Hine:
Yeah. Well, that's the thing, is I'll tell you, I went by fungus, but it costs a beer to find out what fungus means.
Sean Mooney:
It's exactly right. It's like if only everyone could be so lucky to be Maverick and Iceman.
Ed Hine:
Yeah. I don't know a single one of those.
Sean Mooney:
That is great. And one of the things that I appreciate from your career and what you've chosen and other peers that I had in the private equity industry and people I know today is that they have a number of defining characteristics, and one of them is smart enough. Another one is they're creative in a business capacity. And then the other one is this idea of overcoming adversity and experiencing challenges and being able to find ways around it. And none of them are easy, but that seems to be a common trait in this industry. So I'd be curious if you've had any kind of examples of things that you've encountered in your life or in work there was kind of a tough time and how you worked through it.
Ed Hine:
Yeah, I've got a couple dozen of those. Everyone experiences challenges along the way, and certainly in the military career the past 20 years, there's plenty of those. I think the best one, probably most salient for this conversation was around COVID. It's like everybody, everyone experienced some level of challenge in COVID. We had a business unit that was in the pet space. It was focused on veterinarian care. But what we were doing is we were planning to buy pet services businesses and then install veterinarian practices within those and develop them that way to kind of avoid buying veterinary clinics at multiples at the time, which are still quite high, actually.
So running into 2020, we've got, see, what was it? Four business units, one in New York, two in Dallas, one in Daytona that are all pet services, doggy daycares, and boarding facilities, businesses that are predicated on people leaving their homes and needing a place for their pet. And all of a sudden no one left their home. And so we took a hard look at it. No one knew how long it was going to last. No one knew what was going on. Our vet programs, we took a 10-day blank while we tried to figure out how do we do this whole check them in at the door thing. And then that went just fine with in-car pickup and that sort of protocol, but the pet services weren't going to work. And so, okay, we got to change our mindset and we got to figure it out.
What are we good at today? What are we not good at, and how can we leverage what we're good at? So we pivoted to a de novo strategy. We felt really good about our systems and processes. We felt really good about our ability to recruit veterinarians in a really, really tough labor market. So if you feel good about those two, well, how cheap can you build a location? And then how quickly can you acquire customers? That's what we went out and did. So we put, let's see, 12 units in the ground in 2021, another one or two that dribbled into 2022, and staffed them up pretty quickly and operate them now.
Sean Mooney:
That's one of these N equals one. This was an N equals maybe not one, but similar event in world history, where everything just comes to a stop.
Ed Hine:
Right. People are going back to the Spanish flu to draw parallel, and well that-
Sean Mooney:
A little different.
Ed Hine:
It's completely different economic environment. We didn't have a globally connected community at that point.
Sean Mooney:
No, not at all. And so when something happens, the world stops literally, and entire supply chains become disconnected.
Ed Hine:
Right.
Sean Mooney:
And there's certainly in March, to me, it's kind of a haze now, but as you go back to it, it's like everything just stopped. How did you go about just understanding what was going on and then revising your strategies?
Ed Hine:
For us, it went just right back to basics. I don't need a fancy model to tell me, okay, if you list out all the things that you need to do to build a veterinarian platform, I got to be able to get doctors and I got to be able to get patients in front of doctors. Well, I feel really good about getting doctors and I feel really good about the work functions that they do to get those patients. So I don't need to go do these things that are no longer viable anymore to go do that. I can just build it. And so it wasn't... There's no fancy heuristic or no major framework, other than a simple SWOT analysis and what do we feel confident in, what do we not feel confident in?
Sean Mooney:
And I think that's a really good mentality and perspective. And I think something that PE does really good is this idea of sunk-cost, and it's this idea of that was then, this is now.
Ed Hine:
Right.
Sean Mooney:
But so often I think you see this a lot with public companies and you see this a lot with just people in life and humanity where you're, and we'll talk about this further, but you're locked into what you did. And that may or may not be relevant to what the world is today.
Ed Hine:
A hundred percent right. The sunk-cost fallacy is famous for that exact reason. And yeah, we bought some pet services businesses and we got a location in New York City, which was probably arguably the hardest hit geographic area, and certainly in the US. Okay, well, next page, what are we doing tomorrow? We have capital to deploy, we need to be good fiduciaries, we need to make sure we deploy it in a reasonable way, and let's get to work.
Sean Mooney:
I think it's a great lesson as you think about the business builders that are listening to this podcast. And that's one of the hardest things to do, is just to let go of what happened yesterday.
Ed Hine:
Oh, my God, yeah.
Sean Mooney:
But one of the simple.
Ed Hine:
It's not easy, right?
Sean Mooney:
Yeah.
Ed Hine:
It's incredibly simple, super not easy.
Sean Mooney:
Yeah. And it's terrifying, right? Losses weigh heavier than gains, and people go to fear first often. And so that mentality and that ability I think is a great lesson really that anyone can do, but it's really hard. So Ed, one of the things I'd really love to get your perspective on is this whole topic of value creation. And I think as you know better than anyone, the name of the game today in private equity is value creation. Anyone can buy a company, and there's a lot of PE firms, there's a lot of family offices, there's a lot of strategics that are trying to buy companies.
And maybe as I reflect back on my career, it was like, we're going to have a great strategy and just see how that goes. And it was just a different time, and there was other things that made it really hard with information asymmetry, et cetera. But now the art of being a successful investment firm is how do you look at something and see not only what it is and validate what it is, but understand what it could or should be. So how is your firm addressing value creation and how do you help your portfolio companies become all they can be?
Ed Hine:
So we run a buy and build strategy at Cold Bore Capital, but it's kind of a twist on buy and build. So we don't go out and knock down the big platform first. What we'll do is we'll acquire multiple more tuck-in sized businesses and then we'll build the management team or corporate infrastructure on top of that. So it's a bit of a twist on the traditional play there. It gets us a lower blended multiple at the end of the day, so that arbitrage a little bit fatter. So that's a great way to win, and there's some value creation inherent to doing that. It also keeps us kind of unencumbered from a incumbent management team so we can build a team that we think is right for that platform.
We spend a ton of time diligencing an industry before we start even looking within that industry. So we really like businesses where payroll is the number one expense, traditionally leads us to services-based businesses, of course. So think about veterinarian platform, which you talked about landscaping, physical securities, our largest platform today. That's where we like to play. And that gives us other opportunities to win as well. So we like, obviously, organic growth wins when we're bringing in these smaller companies. There's some stuff that we can do almost immediately to help them out and streamline things and make them more successful because we're buying in the, let's call it one, two, three million in EBITDA territory. So there's some structural stuff that you can do almost day one. So a couple different ways to win for us, but it's really around that arbitrage on entry and exit multiple that we think is the biggest lever.
Sean Mooney:
And just curiously, when you say you will get going and then you bring in a team, will you literally start making your acquisitions first before you have a team?
Ed Hine:
It's a bit of a question that we're wrestling with now. Previously we found industry executives that we think are really going to run this and do a great job, and that's been successful in the past. We're starting to evaluate does it make sense to maybe go do one or two acquisitions and then as we're doing that build the team. We don't know what that's going to look like quite for fund three just yet, but we're wrestling with that.
Sean Mooney:
So you can almost be an incubator, and then you bring in the right team for what you've learned, but your operational resources can kind of get it going.
Ed Hine:
Right, exactly. If we're going to go do that, maybe we don't integrate the platform right out of the gate. Maybe we do the acquisition a hundred-day plan, stabilize EBITDA, avoid the dip, right?
Sean Mooney:
Yeah.
Ed Hine:
The famous dip, or minimize the dip if we can, and then integrate later potentially. It's something that we're kind always continually working on and continuous process improvement. But it leads us to, you kind of alluded to it, we've got a heavy operations' footprint. So we're mostly made up of veterans, not surprisingly. Our founder was a Navy SEAL, our other partner is a ranger school West Point guy. We've got another SEAL on staff, we've got a couple of Green Berets. It's that kind of crowd that we're pulling from. And what we find is that that group is really pretty highly motivated and is willing to get in there and do the dirty work that it takes to integrate a couple of $1 million businesses, because that's not neat and tidy, as it turns out.
Sean Mooney:
It's fluid situations.
Ed Hine:
That's really well said. Yeah, it's very fluid.
Sean Mooney:
That would be a delicate way. So yeah, it's like I used to do this. So that's a really interesting, I think, approach. And it brings me back a little in time, because I used to invest in industrial technology businesses. They're founded by engineers and they're beautifully overly engineered products in search of markets, but they usually had one little kernel, and you had to start really small because by the time that they would get big enough, a strategic would pick them off. And so we always wrestled with this of do we just start really small and then build from there and overpower it with a team and then grow into it? And it's something I don't know that we ever got, or at least I never got an answer to in terms of the best way.
Ed Hine:
I don't think there's a best way. I think every situation's probably going to be a unique snowflake of some kind, some caliber. And so it's about figuring out this industry lends itself to that. That industry lends itself to this. Our physical security platform, the guys that run that platform, they are sharp as tacks, and they know that industry inside and out and they know their customer base extraordinarily well. If you flip it over and you look at other industries, especially in healthcare, let's say, maybe you've got a doctor operating it and he's a phenomenal doctor and he's built a good practice, but maybe he doesn't quite understand his customer segmentation as well as he might need to.
Sean Mooney:
I'd be real curious, as you think about this integration, you're bringing these in, is there any kind of things you've learned in terms of you're acquiring, to the extent you are acquiring, you're also building greenfield, but when you're acquiring businesses as part of your platforms, how do you think about, you're bringing in very entrepreneurial people who have started a business that in some ways, like any entrepreneur, is extremely precious to them, and they're going to be brought together with a lot of entrepreneurs that are joining to be a greater whole. How do you approach that integration and making them part of the team?
Ed Hine:
One, you talk about it really, really early on, right? They've got to know what the vision is in the very early deal stages, and they've got to know that you're not coming into be the platform. You're coming into a platform that you're a part of, and they got to be okay with that. So it's really, really early conversations, really transparent. I think one of the things that I've been kind of maturing in my thought process and the execution that I think I'll take on the way forward, it's actually a topic I was talking about yesterday, is how do you get better buy-in from that management team, particularly if they're not dropping the keys off pre deal close. So strategy sessions before the deal close, what does it look like helping them be a part of drafting the hundred-day plan, not just saying, "Okay, here's the playbook, I'll be back next week," right?
Sean Mooney:
Yeah. And it's kind of similar as I think about it, the way you're doing it is, yes, you're acquiring their companies, but you're also almost taking them through the hiring process and it's like, this is who we are, this is what our vision is, our values. Do you want to be part of this? It's the same way we, and probably you all, hire people as well. You almost want them to opt out and do a negative sell on joining you.
Ed Hine:
Yeah, no, I think that's really, really accurate. And I think there's probably some weird dating metaphors around all of this, too, that probably play pretty nicely. But absolutely, you really want, I think, a really high-quality relationship there, particularly at this end of the market where you hit it earlier, the nail on the head, this is the third child, this business is their baby, and maybe the favorite child.
Sean Mooney:
Probably.
Ed Hine:
Yeah, so that makes a ton of sense. I never really thought about it that way, but I hear you talk about it. I think your way you're doing it is really kind of thoughtful, insightful, let's put the card's face up. Do you want to be part of this? If you do, you're going to love it. And look, we're not going to be everybody's cup of tea. And that's okay, because one of the most dangerous things we could do in acquiring companies in a buy and build strategy is buy the wrong company.
Sean Mooney:
Yeah.
Ed Hine:
That's a challenge to make sure we don't do that. Of course, no one wants to do bad deals. You do several dozen. One of them is not going to go as well as you want it to.
Sean Mooney:
Yep. And I'm sure that builds you a lot of trust in not only with the one unit that you're bringing into your family businesses, but word gets out that you're a straight shooter.
Ed Hine:
Hopefully, ideally. And we'll also incentivize those sellers on the backside in many cases to go tell their friends, right?
Sean Mooney:
Yeah.
Ed Hine:
And we have no problem with that. We pay a broker, so might as well pay you/.
Sean Mooney:
Absolutely. Incentives and outcomes and they all get aligned. And it sounds like you're being very thoughtful about that.
Ed Hine:
Well, don't look at me and give me credit for all this. I was a wave two hire. Let's be really, really clear about that.
Sean Mooney:
But you're part of it, so I'm also not falling for modesty. I grew up in Texas, so it is a mantra of mine, but in a similar way. But I think being part of this whole business, and as we know, private equity firms are businesses now and they're on these constant evolutionary phases and growth trajectories.
Ed Hine:
I think that's exactly right. And I very much mean it when I don't think we'll ever get the model right. We'll just constantly try and be better than we were last time around. Right?
Sean Mooney:
Yeah. And so I remember as a thing, I always grew up, whenever you get comfortable and think you're a finished product, you're already behind.
Ed Hine:
Yeah, that's pretty fair.
Sean Mooney:
And so you never cross the finish line.
Ed Hine:
I made it. I arrived.
Sean Mooney:
Come on, dad, can I cross the finish line once? Nope. But it is a great mentality to have. And so Ed, one of the things that I know you're really thoughtful about is thinking about imperatives in business and thinking about what are common drivers and certainly custom execution of them, but characteristics that really good businesses have.
Ed Hine:
Yeah.
Sean Mooney:
And can you share about some of those as you've kind of thought about these companies that you work with and what really good companies have?
Ed Hine:
Man, I think it's probably saying the same thing that everyone would say in this scenario. It's talent and culture. Really, really high quality talent, properly enabled by the right culture is pretty damn tough to beat.
Sean Mooney:
Yep.
Ed Hine:
And so it's about finding, retaining talent, enabling talent, training talent, mentoring. That's the important stuff. My favorite thing that I do right now in my role is I run a professional development group, and so it's a small group, it's four people, it happens to be all women right now in our vet platform. Once a month we meet. These are not second tier down, or first tier down, but maybe second tier down leaders in the company, individual contributors at times. And we get together and I walk them through the board deck after the board meeting. I walk them through a monthly financial packages. We talk about why, we talk about what happened. They're from different segments of the business and so they all bring different perspectives. We did a leadership seminar with them and the buy-in and development you get out of that group is, one, it's very, very rewarding to do. But two, you see it in their daily performance and how meaningful that is. And the time investment is minimal and I love doing it, so why would you not do that?
Sean Mooney:
Yeah. And I think that's really thoughtful, and it reflects a lot of what we see. And one of the interesting things about this kind of BluWave engine we've created here is we get to work with all these really great people like you. And the number one trend in PE is human capital and talent, and for good reason. I think a large part because it's the evolution of the operating partner that have come in and brought this sense of... And it's not that the deal teams don't appreciate talent and people and all those things, it's just that they've got a hundred plate spinning and they can focus on what they focus on.
And now that you've got the operational capabilities arising that have risen in private equity in general, it's that focus on people through the ranks of the portfolio company is rising significantly. And I don't think a lot of people appreciate that in terms of this industry that, like we talked about earlier, has kind of a reputation of a 1980s movie. But in fact, what we're seeing is people like you who are really thoughtful, really focusing on the health, wellness, engagement, the efficacy of their teams.
Ed Hine:
Yeah, absolutely. And then you get to it when you do that well, you win twice, right?
Sean Mooney:
Yeah.
Ed Hine:
Because you're building a better business, you're building a more resilient business, you're getting away from fragility, you're helping individual people. It's a good fiduciary move. It's a good move for the people that are working for you. It's fantastic. It's best investment of my time right now.
Sean Mooney:
So one of the things I know that you've done is you've posted on LinkedIn some of these imperatives that you think are really important for companies and you get a good engagement on these things and following on them. What are some of these things that you think are really important that everyone should know?
Ed Hine:
So I've been working on this and it's kind of a collection of phrases that I've picked up along my career. And so some of it's from the military, some of it's from people that have mentored me in the business world. A lot of it is a complete copy from somebody else, but it's just this kind of core values that I think are really, really important. So it's things like transparency and follow through are table stakes. That's the first one. And we were kind of talking about transparency.
Sean Mooney:
Yeah, we just talked about that right there.
Ed Hine:
Another one that I think is particularly relevant in the private equity world is hope is shitty plan.
Sean Mooney:
A thousand percent.
Ed Hine:
If you're betting on hope to pull you out of the situation, it's not going your way.
Sean Mooney:
I bet on hope a lot during my career. No, at least wished. I never said once I wished I waited longer to do something.
Ed Hine:
Yeah, right? Some of it comes from, let's see, people are more important than tools. I like that one a lot. That's right out of Principles of the Special Operations Community. So it's just these kind of rubrics or short phrases, they're not even full sentences or really even full thoughts. But they're ways that I think are important to approach problems, approach business situations, deal with people. And not surprisingly, it's shockingly about having a plan for the most part and humans.
Sean Mooney:
Yeah, it's kind of like this whole idea a lot of time, at least in my life, that I think I made things more complicated and more difficult than they needed to be. And so over time I developed kind of a similar philosophy, which is the name of this podcast, and it's just the Karma School of Business, where if you do good things with and for good people and just focus on that, along with some other things, good things tend to happen. Life just becomes so much easier. And it probably took me longer than it should have in life to figure that out. Not that I was transactional as I grew up, it's just you lose focus on the basics sometimes. And so I think those are really excellent ways and maxims to think about things and it's easy to kind of miss them.
Ed Hine:
What I've found is that writing them down and going through a process where I've probably been through 30, 40 of these things as the list gets bigger and it gets smaller. It's really helped me just be thoughtful and intentional about how am I going to conduct myself. And going through that process of just literally writing was fairly, I think, important in my career development.
Sean Mooney:
Yeah. Similarly, I have a little book I keep in my briefcase and just little nuggets of wisdom and quotes that I'll write down. And probably one of the earliest one, as a good Navy man you'll appreciate, is like make your bed in the morning.
Ed Hine:
Yeah.
Sean Mooney:
Now, my wife will tell you, I don't always do that, but at least I try.
Ed Hine:
No, that's a great one. That's a good speech.
Sean Mooney:
Yeah, it's a great speech. And so I really appreciate that, that you've kind of have these credos and it really helps kind of define focus and appreciation. And so one of the other things that I love with the chance to work with people like you and get to see how you all work and the value and the perspectives that you have is that every day I realize what I don't know, and it's humbling.
Ed Hine:
I feel that.
Sean Mooney:
And so it keeps me on my toes and it keeps you kind of on the level. And every day I send this email out to the private equity world, it's like what I wish I knew before spinning out of private equity. Every day, I'm like, "Why didn't I know this?" And one of my friends, I kept on telling people that you know could do this. And he's like, "Well, could you just write those down and send them to me?" So I started doing this thing, I just sent them out. And one of the things I'm always like, "Wow, I wish I could go back and tell my 22-year-old self some of this stuff." I'm sorry I wouldn't listen, but I wish I could do it. So what would be one of the things that you would go back to yourself and say young Ed?
Ed Hine:
There's so many. So, so many things that young Ed probably should have heard a little bit more clearly that my dad probably tried to tell me, too.
Sean Mooney:
Yeah, probably did hear at one point.
Ed Hine:
Right. Whether or not I listened, questionable. I think if you... Putting myself back in that context now, so I was getting out of school, going into flight school. I think I was incredibly focused at that point in my life of you have to nail flight school because I don't know if you're familiar, the way the Navy does flight school is they don't want to stack the deck in any one community with everybody wants to go fly fighters. So the top 5% go fly fighters, or whatever the number is. I don't know what the math is anymore. What they do is they quality spread it out, but number one in every phase of their class gets to choose what they want.
And you go through these progressive phases, you go through ground school and then you select training location. Then from the training you go helicopters or fixed wing and jets and fighters and all these different phases. And so I knew if I want to go to where I want to go, you have to be number one period. That's the way it is. So I was extremely focused on that, but I think what I missed was that you never get done with that at that time. I learned it later, is that you don't get your wings in the Navy and then all of a sudden you know everything you know about flying. You know nothing about flying, you're remarkably dangerous still.
And you don't get done with the training assignment where you spend a year learning how to fly your particular aircraft, in my case, the F-18. You're very bad at it still when you get done with that. You go through three years of flying in a combat unit and you spend all your time training and some of your time deploying and doing flights over, my case, Afghanistan. And you get back from that and you think, "Am I done learning?" No, man, nope. There's always something next. And that's true now in my career. I got out of the Navy and I spent a ton of time waking up at 5:00 in the morning doing online courses, trying to fill this business acumen that I knew that I didn't have, that I needed if I wanted to be successful. You get into the private equity world and you're like, "Wow, everyone's much, much smarter than I am. I really need to step up my game."
Sean Mooney:
Maybe experienced in that area. I wouldn't buy this smarter.
Ed Hine:
Yeah. But just the concept that you're never going to be done learning. You're going to be a lifelong student. So just settle into it and embrace that.
Sean Mooney:
I think that's great advice. And it's this whole concept, life's a journey. It's not a destination. And every time I thought I got to a destination, here's a bigger hill.
Ed Hine:
Yeah, 22 year old me totally was thinking like flight school's the destination and then, oh, getting out of flight school is the destination. Like, oh, no.
Sean Mooney:
I was like, "I've got an investment banking analyst job out of college, I've arrived." And then the great story is I thought I was such a hot shot right out of college, and then I still had to get my parents to sign for my cell phone and back it because... Humbling. I'm like, "All right, tail between the legs." And then you get those experiences over and over again, and when you get comfortable with that, then it just becomes part of you. So I think that's such tremendous advice.
Ed Hine:
Yeah, I think the tighter way of saying it is just getting comfortable being uncomfortable.
Sean Mooney:
Yeah.
Ed Hine:
It's something I talk with my boys about. I've got an 11-year-old and nine-year-old boys and just talking to them often about just be comfortable being in uncomfortable situations.
Sean Mooney:
I think that's very well said, and I'm going to write that in my book actually.
Ed Hine:
Yeah, should have made the list maybe.
Sean Mooney:
Ed, as usual, and as I expected, I've learned a tremendous amount from you, and thank you so much for investing your time, because I know it's scarce, to share your perspectives and wisdom here today with us.
Ed Hine:
Nah, it's fun. I really, really enjoyed it. Thanks for having me on, and really appreciate the opportunity.
Sean Mooney:
Yeah, likewise. Thanks.
Ed Hine:
Thanks.
Sean Mooney:
Special thanks to Ed for joining. If you'd like to learn more about Ed and Cold Bore Capital, please see the episode notes. That's all we have for today. For more information on this podcast and BluWave, go to BluWave.net/podcast. That's B-L-U-W-A-V-E. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google, and Spotify. We truly appreciate your support. If you like what you hear, please follow, review, and share. It really helps us when you do those things, so thank you in advance. In the meantime, let us know if there's anything we can do to support your success. Onward.
Welcome to the Karma School of Business podcast. In this episode, we have a great conversation with Ed Hine, operating partner with Cold Bore Capital.
This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO. BluWave is the go-to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms and thousands of proactive companies to the very best service providers for their critical, variable, on-point, and on-time business needs. Enjoy.
I'm very excited to be here with Ed Hine. Ed, thanks for joining us.
Ed Hine:
Yeah, super happy to be here, too. Thanks for having me.
Sean Mooney:
Absolutely. And we're doing this podcast in person. And for all of us who've been kept in little digital boxes, for me this is particularly nice to see that Ed's got feet and legs and-
Ed Hine:
Yeah, yeah. And I'm not just wearing a jacket on Zoom and wearing shorts.
Sean Mooney:
It's exactly right. I usually have my Umbros on during these things. So it's great to have you here, and maybe to jump in, Ed, I'd love to hear your origin story, how you came to be, how you got into the private equity industry, because I think there's more and more unique stories about how people get into this world.
Ed Hine:
Yeah, I'm definitely not the standard path, that's for sure. My first part of my career was in the Navy. So I spent 12 years in the Navy and had just a ridiculously charmed Navy career, unbelievable experience. Get to work with just phenomenal people. I got out of the Navy in 2016, and I jumped right into the smallest, most non-Navy thing I could find. It was a bootstrap startup. We were in the drone industry just when the drone industry was emerging, and we were selling infrastructure inspections to big public companies with big asset problems, so Norfolk Southern, Dominion Energy, Duke Energy.
Sean Mooney:
Yeah, the energy line inspectors?
Ed Hine:
Yeah, exactly right.
Sean Mooney:
Yeah, I've looked at those companies. Those are great.
Ed Hine:
Yeah, no, it's fantastic work. And we were really very early days on that. So about two years into that, I'm doing biz dev work for the company, and I'm negotiating a partnership with somebody to do their training work for them. We start whiteboarding the numbers and we're doing the bar napkin math and all the things. I'm like, look at the guy I'm working with, I'm like, "Tyler, you really ought to just buy this company because I'm going to rip your eyes out over these prices. It's going to be bad." And so then they bought our company. So that was step one of the negotiation. I hadn't even realized what I was doing.
So you fast-forward three months, and it was like, "Oh my God, that was really, really cool. I should do more of that for a living." And so I just started plotting my way towards private equity. I gotten to know our founder, Sergio Zepeda. Along the way, we both worked on a nonprofit together that helped veterans transition into the private sector, and he had a spot on the roster. And so I came over in 2019 as an operating partner.
Sean Mooney:
That's great. As we have these conversations, and it's interesting, and there's all these different paths into private equity now. And very often we were... As I've been talking with even our internal team about these things, it's almost like this serendipitous kind of journey that leads you there in ways that you never would've projected, but somehow it just seems natural.
Ed Hine:
Yeah, 100%. I was vaguely aware that private equity was a thing that existed in the world, but before 20 really 18, if you'd asked me to explain it, I would've said, "Well, it's a bunch of rich people that buy businesses," and that's it, that's all I got. I'm done there. So it took a lot of waking up at 5:00 in the morning and figuring out how to learn about this world and doing the online modeling courses and really stepping up my hard skills game so that I could be ready for it.
Sean Mooney:
So many people, even today, think it's a part of Pretty Women, where it's like-
Ed Hine:
Yeah. Right, right.
Sean Mooney:
But, no, maybe in the '80s it was. It's changed a little bit.
Ed Hine:
Yeah, I don't often find myself at, what's that, the horse event that he goes to, negotiating deals, right?
Sean Mooney:
Yeah. It's like, I was in private equity for 20 years and I drive a pickup truck and more often than not, I was in the last row on the plane, and it wasn't private. Unless Southwest is kind of... I felt very part of the system.
Ed Hine:
As long as you get that A..
Sean Mooney:
Yeah, exactly.
Ed Hine:
That's the key.
Sean Mooney:
My wife has a companion pass, which we're really excited about.
Ed Hine:
Oh, that's clutch.
Sean Mooney:
Which is we save 25% every time we fly.
Ed Hine:
Nice.
Sean Mooney:
I love it. And so I'd love to hear a little more, to drill down on your Navy career, what were some of the things you did there?
Ed Hine:
Like I said, I was just dumb lucky. So I started out flying F-18s. I was Goose, not Maverick. I spent eight years doing that, if you count flight school. So deployed a couple times with VFA-103, which is an East Coast based fighter squadron. And then I was an instructor on the West Coast teaching new pilots how to fly F-18s. And then I went and worked with Navy SEAL teams as a guy that coordinated airstrikes for them.
Sean Mooney:
Wow.
Ed Hine:
Yeah, so that was the last four years of my career.
Sean Mooney:
And talk about flying in F-18s. What was that like?
Ed Hine:
It's really cool, but it's not really cool, at least for me, for the reasons I think most people think it's cool. Breaking the speed of sound, what's that like? You actually don't even notice it. It's super quiet. Now I'm in the jet. I was never a romantic about it. I didn't like flying because I was going to go fly amongst the clouds and do all of these romantic things. What I really liked about it was the people and the sense of mission, and it's really, really hard to be really, really good at. So you end up surrounded by this group of people that's all very motivated. Everyone's moving in the same direction. Everyone's really trying to outdo yesterday's version of themselves and just continually get better. And that's what really I fell in love with there. I got that working in the SEAL team that I did as well. And now I actually find that here as well. So in this world, in the private equity world.
Sean Mooney:
Yeah, that constant search for improvement and enhancement, I think that gels really well with your current role.
Ed Hine:
Oh, a hundred percent. It's never being satisfied with current status quo. It's wanting constant self-improvement or situational improvement. Yeah, it's a hundred percent ties out.
Sean Mooney:
And one of the things, I've had friends who've been aviators, and they all talk about the one thing that they bring up is not everyone has cool call signs like Maverick.
Ed Hine:
That's true. Yeah, especially in the Navy.
Sean Mooney:
It was my friend who was in the Navy and flew, and he doesn't like to share his call sign because usually he earned it certainly for doing something that wasn't phenomenal.
Ed Hine:
Yeah, we've got some gems out there, some of which are repeatable on a podcast, many of which are not.
Sean Mooney:
So we'll save that conversation for a beer.
Ed Hine:
Yeah. Well, that's the thing, is I'll tell you, I went by fungus, but it costs a beer to find out what fungus means.
Sean Mooney:
It's exactly right. It's like if only everyone could be so lucky to be Maverick and Iceman.
Ed Hine:
Yeah. I don't know a single one of those.
Sean Mooney:
That is great. And one of the things that I appreciate from your career and what you've chosen and other peers that I had in the private equity industry and people I know today is that they have a number of defining characteristics, and one of them is smart enough. Another one is they're creative in a business capacity. And then the other one is this idea of overcoming adversity and experiencing challenges and being able to find ways around it. And none of them are easy, but that seems to be a common trait in this industry. So I'd be curious if you've had any kind of examples of things that you've encountered in your life or in work there was kind of a tough time and how you worked through it.
Ed Hine:
Yeah, I've got a couple dozen of those. Everyone experiences challenges along the way, and certainly in the military career the past 20 years, there's plenty of those. I think the best one, probably most salient for this conversation was around COVID. It's like everybody, everyone experienced some level of challenge in COVID. We had a business unit that was in the pet space. It was focused on veterinarian care. But what we were doing is we were planning to buy pet services businesses and then install veterinarian practices within those and develop them that way to kind of avoid buying veterinary clinics at multiples at the time, which are still quite high, actually.
So running into 2020, we've got, see, what was it? Four business units, one in New York, two in Dallas, one in Daytona that are all pet services, doggy daycares, and boarding facilities, businesses that are predicated on people leaving their homes and needing a place for their pet. And all of a sudden no one left their home. And so we took a hard look at it. No one knew how long it was going to last. No one knew what was going on. Our vet programs, we took a 10-day blank while we tried to figure out how do we do this whole check them in at the door thing. And then that went just fine with in-car pickup and that sort of protocol, but the pet services weren't going to work. And so, okay, we got to change our mindset and we got to figure it out.
What are we good at today? What are we not good at, and how can we leverage what we're good at? So we pivoted to a de novo strategy. We felt really good about our systems and processes. We felt really good about our ability to recruit veterinarians in a really, really tough labor market. So if you feel good about those two, well, how cheap can you build a location? And then how quickly can you acquire customers? That's what we went out and did. So we put, let's see, 12 units in the ground in 2021, another one or two that dribbled into 2022, and staffed them up pretty quickly and operate them now.
Sean Mooney:
That's one of these N equals one. This was an N equals maybe not one, but similar event in world history, where everything just comes to a stop.
Ed Hine:
Right. People are going back to the Spanish flu to draw parallel, and well that-
Sean Mooney:
A little different.
Ed Hine:
It's completely different economic environment. We didn't have a globally connected community at that point.
Sean Mooney:
No, not at all. And so when something happens, the world stops literally, and entire supply chains become disconnected.
Ed Hine:
Right.
Sean Mooney:
And there's certainly in March, to me, it's kind of a haze now, but as you go back to it, it's like everything just stopped. How did you go about just understanding what was going on and then revising your strategies?
Ed Hine:
For us, it went just right back to basics. I don't need a fancy model to tell me, okay, if you list out all the things that you need to do to build a veterinarian platform, I got to be able to get doctors and I got to be able to get patients in front of doctors. Well, I feel really good about getting doctors and I feel really good about the work functions that they do to get those patients. So I don't need to go do these things that are no longer viable anymore to go do that. I can just build it. And so it wasn't... There's no fancy heuristic or no major framework, other than a simple SWOT analysis and what do we feel confident in, what do we not feel confident in?
Sean Mooney:
And I think that's a really good mentality and perspective. And I think something that PE does really good is this idea of sunk-cost, and it's this idea of that was then, this is now.
Ed Hine:
Right.
Sean Mooney:
But so often I think you see this a lot with public companies and you see this a lot with just people in life and humanity where you're, and we'll talk about this further, but you're locked into what you did. And that may or may not be relevant to what the world is today.
Ed Hine:
A hundred percent right. The sunk-cost fallacy is famous for that exact reason. And yeah, we bought some pet services businesses and we got a location in New York City, which was probably arguably the hardest hit geographic area, and certainly in the US. Okay, well, next page, what are we doing tomorrow? We have capital to deploy, we need to be good fiduciaries, we need to make sure we deploy it in a reasonable way, and let's get to work.
Sean Mooney:
I think it's a great lesson as you think about the business builders that are listening to this podcast. And that's one of the hardest things to do, is just to let go of what happened yesterday.
Ed Hine:
Oh, my God, yeah.
Sean Mooney:
But one of the simple.
Ed Hine:
It's not easy, right?
Sean Mooney:
Yeah.
Ed Hine:
It's incredibly simple, super not easy.
Sean Mooney:
Yeah. And it's terrifying, right? Losses weigh heavier than gains, and people go to fear first often. And so that mentality and that ability I think is a great lesson really that anyone can do, but it's really hard. So Ed, one of the things I'd really love to get your perspective on is this whole topic of value creation. And I think as you know better than anyone, the name of the game today in private equity is value creation. Anyone can buy a company, and there's a lot of PE firms, there's a lot of family offices, there's a lot of strategics that are trying to buy companies.
And maybe as I reflect back on my career, it was like, we're going to have a great strategy and just see how that goes. And it was just a different time, and there was other things that made it really hard with information asymmetry, et cetera. But now the art of being a successful investment firm is how do you look at something and see not only what it is and validate what it is, but understand what it could or should be. So how is your firm addressing value creation and how do you help your portfolio companies become all they can be?
Ed Hine:
So we run a buy and build strategy at Cold Bore Capital, but it's kind of a twist on buy and build. So we don't go out and knock down the big platform first. What we'll do is we'll acquire multiple more tuck-in sized businesses and then we'll build the management team or corporate infrastructure on top of that. So it's a bit of a twist on the traditional play there. It gets us a lower blended multiple at the end of the day, so that arbitrage a little bit fatter. So that's a great way to win, and there's some value creation inherent to doing that. It also keeps us kind of unencumbered from a incumbent management team so we can build a team that we think is right for that platform.
We spend a ton of time diligencing an industry before we start even looking within that industry. So we really like businesses where payroll is the number one expense, traditionally leads us to services-based businesses, of course. So think about veterinarian platform, which you talked about landscaping, physical securities, our largest platform today. That's where we like to play. And that gives us other opportunities to win as well. So we like, obviously, organic growth wins when we're bringing in these smaller companies. There's some stuff that we can do almost immediately to help them out and streamline things and make them more successful because we're buying in the, let's call it one, two, three million in EBITDA territory. So there's some structural stuff that you can do almost day one. So a couple different ways to win for us, but it's really around that arbitrage on entry and exit multiple that we think is the biggest lever.
Sean Mooney:
And just curiously, when you say you will get going and then you bring in a team, will you literally start making your acquisitions first before you have a team?
Ed Hine:
It's a bit of a question that we're wrestling with now. Previously we found industry executives that we think are really going to run this and do a great job, and that's been successful in the past. We're starting to evaluate does it make sense to maybe go do one or two acquisitions and then as we're doing that build the team. We don't know what that's going to look like quite for fund three just yet, but we're wrestling with that.
Sean Mooney:
So you can almost be an incubator, and then you bring in the right team for what you've learned, but your operational resources can kind of get it going.
Ed Hine:
Right, exactly. If we're going to go do that, maybe we don't integrate the platform right out of the gate. Maybe we do the acquisition a hundred-day plan, stabilize EBITDA, avoid the dip, right?
Sean Mooney:
Yeah.
Ed Hine:
The famous dip, or minimize the dip if we can, and then integrate later potentially. It's something that we're kind always continually working on and continuous process improvement. But it leads us to, you kind of alluded to it, we've got a heavy operations' footprint. So we're mostly made up of veterans, not surprisingly. Our founder was a Navy SEAL, our other partner is a ranger school West Point guy. We've got another SEAL on staff, we've got a couple of Green Berets. It's that kind of crowd that we're pulling from. And what we find is that that group is really pretty highly motivated and is willing to get in there and do the dirty work that it takes to integrate a couple of $1 million businesses, because that's not neat and tidy, as it turns out.
Sean Mooney:
It's fluid situations.
Ed Hine:
That's really well said. Yeah, it's very fluid.
Sean Mooney:
That would be a delicate way. So yeah, it's like I used to do this. So that's a really interesting, I think, approach. And it brings me back a little in time, because I used to invest in industrial technology businesses. They're founded by engineers and they're beautifully overly engineered products in search of markets, but they usually had one little kernel, and you had to start really small because by the time that they would get big enough, a strategic would pick them off. And so we always wrestled with this of do we just start really small and then build from there and overpower it with a team and then grow into it? And it's something I don't know that we ever got, or at least I never got an answer to in terms of the best way.
Ed Hine:
I don't think there's a best way. I think every situation's probably going to be a unique snowflake of some kind, some caliber. And so it's about figuring out this industry lends itself to that. That industry lends itself to this. Our physical security platform, the guys that run that platform, they are sharp as tacks, and they know that industry inside and out and they know their customer base extraordinarily well. If you flip it over and you look at other industries, especially in healthcare, let's say, maybe you've got a doctor operating it and he's a phenomenal doctor and he's built a good practice, but maybe he doesn't quite understand his customer segmentation as well as he might need to.
Sean Mooney:
I'd be real curious, as you think about this integration, you're bringing these in, is there any kind of things you've learned in terms of you're acquiring, to the extent you are acquiring, you're also building greenfield, but when you're acquiring businesses as part of your platforms, how do you think about, you're bringing in very entrepreneurial people who have started a business that in some ways, like any entrepreneur, is extremely precious to them, and they're going to be brought together with a lot of entrepreneurs that are joining to be a greater whole. How do you approach that integration and making them part of the team?
Ed Hine:
One, you talk about it really, really early on, right? They've got to know what the vision is in the very early deal stages, and they've got to know that you're not coming into be the platform. You're coming into a platform that you're a part of, and they got to be okay with that. So it's really, really early conversations, really transparent. I think one of the things that I've been kind of maturing in my thought process and the execution that I think I'll take on the way forward, it's actually a topic I was talking about yesterday, is how do you get better buy-in from that management team, particularly if they're not dropping the keys off pre deal close. So strategy sessions before the deal close, what does it look like helping them be a part of drafting the hundred-day plan, not just saying, "Okay, here's the playbook, I'll be back next week," right?
Sean Mooney:
Yeah. And it's kind of similar as I think about it, the way you're doing it is, yes, you're acquiring their companies, but you're also almost taking them through the hiring process and it's like, this is who we are, this is what our vision is, our values. Do you want to be part of this? It's the same way we, and probably you all, hire people as well. You almost want them to opt out and do a negative sell on joining you.
Ed Hine:
Yeah, no, I think that's really, really accurate. And I think there's probably some weird dating metaphors around all of this, too, that probably play pretty nicely. But absolutely, you really want, I think, a really high-quality relationship there, particularly at this end of the market where you hit it earlier, the nail on the head, this is the third child, this business is their baby, and maybe the favorite child.
Sean Mooney:
Probably.
Ed Hine:
Yeah, so that makes a ton of sense. I never really thought about it that way, but I hear you talk about it. I think your way you're doing it is really kind of thoughtful, insightful, let's put the card's face up. Do you want to be part of this? If you do, you're going to love it. And look, we're not going to be everybody's cup of tea. And that's okay, because one of the most dangerous things we could do in acquiring companies in a buy and build strategy is buy the wrong company.
Sean Mooney:
Yeah.
Ed Hine:
That's a challenge to make sure we don't do that. Of course, no one wants to do bad deals. You do several dozen. One of them is not going to go as well as you want it to.
Sean Mooney:
Yep. And I'm sure that builds you a lot of trust in not only with the one unit that you're bringing into your family businesses, but word gets out that you're a straight shooter.
Ed Hine:
Hopefully, ideally. And we'll also incentivize those sellers on the backside in many cases to go tell their friends, right?
Sean Mooney:
Yeah.
Ed Hine:
And we have no problem with that. We pay a broker, so might as well pay you/.
Sean Mooney:
Absolutely. Incentives and outcomes and they all get aligned. And it sounds like you're being very thoughtful about that.
Ed Hine:
Well, don't look at me and give me credit for all this. I was a wave two hire. Let's be really, really clear about that.
Sean Mooney:
But you're part of it, so I'm also not falling for modesty. I grew up in Texas, so it is a mantra of mine, but in a similar way. But I think being part of this whole business, and as we know, private equity firms are businesses now and they're on these constant evolutionary phases and growth trajectories.
Ed Hine:
I think that's exactly right. And I very much mean it when I don't think we'll ever get the model right. We'll just constantly try and be better than we were last time around. Right?
Sean Mooney:
Yeah. And so I remember as a thing, I always grew up, whenever you get comfortable and think you're a finished product, you're already behind.
Ed Hine:
Yeah, that's pretty fair.
Sean Mooney:
And so you never cross the finish line.
Ed Hine:
I made it. I arrived.
Sean Mooney:
Come on, dad, can I cross the finish line once? Nope. But it is a great mentality to have. And so Ed, one of the things that I know you're really thoughtful about is thinking about imperatives in business and thinking about what are common drivers and certainly custom execution of them, but characteristics that really good businesses have.
Ed Hine:
Yeah.
Sean Mooney:
And can you share about some of those as you've kind of thought about these companies that you work with and what really good companies have?
Ed Hine:
Man, I think it's probably saying the same thing that everyone would say in this scenario. It's talent and culture. Really, really high quality talent, properly enabled by the right culture is pretty damn tough to beat.
Sean Mooney:
Yep.
Ed Hine:
And so it's about finding, retaining talent, enabling talent, training talent, mentoring. That's the important stuff. My favorite thing that I do right now in my role is I run a professional development group, and so it's a small group, it's four people, it happens to be all women right now in our vet platform. Once a month we meet. These are not second tier down, or first tier down, but maybe second tier down leaders in the company, individual contributors at times. And we get together and I walk them through the board deck after the board meeting. I walk them through a monthly financial packages. We talk about why, we talk about what happened. They're from different segments of the business and so they all bring different perspectives. We did a leadership seminar with them and the buy-in and development you get out of that group is, one, it's very, very rewarding to do. But two, you see it in their daily performance and how meaningful that is. And the time investment is minimal and I love doing it, so why would you not do that?
Sean Mooney:
Yeah. And I think that's really thoughtful, and it reflects a lot of what we see. And one of the interesting things about this kind of BluWave engine we've created here is we get to work with all these really great people like you. And the number one trend in PE is human capital and talent, and for good reason. I think a large part because it's the evolution of the operating partner that have come in and brought this sense of... And it's not that the deal teams don't appreciate talent and people and all those things, it's just that they've got a hundred plate spinning and they can focus on what they focus on.
And now that you've got the operational capabilities arising that have risen in private equity in general, it's that focus on people through the ranks of the portfolio company is rising significantly. And I don't think a lot of people appreciate that in terms of this industry that, like we talked about earlier, has kind of a reputation of a 1980s movie. But in fact, what we're seeing is people like you who are really thoughtful, really focusing on the health, wellness, engagement, the efficacy of their teams.
Ed Hine:
Yeah, absolutely. And then you get to it when you do that well, you win twice, right?
Sean Mooney:
Yeah.
Ed Hine:
Because you're building a better business, you're building a more resilient business, you're getting away from fragility, you're helping individual people. It's a good fiduciary move. It's a good move for the people that are working for you. It's fantastic. It's best investment of my time right now.
Sean Mooney:
So one of the things I know that you've done is you've posted on LinkedIn some of these imperatives that you think are really important for companies and you get a good engagement on these things and following on them. What are some of these things that you think are really important that everyone should know?
Ed Hine:
So I've been working on this and it's kind of a collection of phrases that I've picked up along my career. And so some of it's from the military, some of it's from people that have mentored me in the business world. A lot of it is a complete copy from somebody else, but it's just this kind of core values that I think are really, really important. So it's things like transparency and follow through are table stakes. That's the first one. And we were kind of talking about transparency.
Sean Mooney:
Yeah, we just talked about that right there.
Ed Hine:
Another one that I think is particularly relevant in the private equity world is hope is shitty plan.
Sean Mooney:
A thousand percent.
Ed Hine:
If you're betting on hope to pull you out of the situation, it's not going your way.
Sean Mooney:
I bet on hope a lot during my career. No, at least wished. I never said once I wished I waited longer to do something.
Ed Hine:
Yeah, right? Some of it comes from, let's see, people are more important than tools. I like that one a lot. That's right out of Principles of the Special Operations Community. So it's just these kind of rubrics or short phrases, they're not even full sentences or really even full thoughts. But they're ways that I think are important to approach problems, approach business situations, deal with people. And not surprisingly, it's shockingly about having a plan for the most part and humans.
Sean Mooney:
Yeah, it's kind of like this whole idea a lot of time, at least in my life, that I think I made things more complicated and more difficult than they needed to be. And so over time I developed kind of a similar philosophy, which is the name of this podcast, and it's just the Karma School of Business, where if you do good things with and for good people and just focus on that, along with some other things, good things tend to happen. Life just becomes so much easier. And it probably took me longer than it should have in life to figure that out. Not that I was transactional as I grew up, it's just you lose focus on the basics sometimes. And so I think those are really excellent ways and maxims to think about things and it's easy to kind of miss them.
Ed Hine:
What I've found is that writing them down and going through a process where I've probably been through 30, 40 of these things as the list gets bigger and it gets smaller. It's really helped me just be thoughtful and intentional about how am I going to conduct myself. And going through that process of just literally writing was fairly, I think, important in my career development.
Sean Mooney:
Yeah. Similarly, I have a little book I keep in my briefcase and just little nuggets of wisdom and quotes that I'll write down. And probably one of the earliest one, as a good Navy man you'll appreciate, is like make your bed in the morning.
Ed Hine:
Yeah.
Sean Mooney:
Now, my wife will tell you, I don't always do that, but at least I try.
Ed Hine:
No, that's a great one. That's a good speech.
Sean Mooney:
Yeah, it's a great speech. And so I really appreciate that, that you've kind of have these credos and it really helps kind of define focus and appreciation. And so one of the other things that I love with the chance to work with people like you and get to see how you all work and the value and the perspectives that you have is that every day I realize what I don't know, and it's humbling.
Ed Hine:
I feel that.
Sean Mooney:
And so it keeps me on my toes and it keeps you kind of on the level. And every day I send this email out to the private equity world, it's like what I wish I knew before spinning out of private equity. Every day, I'm like, "Why didn't I know this?" And one of my friends, I kept on telling people that you know could do this. And he's like, "Well, could you just write those down and send them to me?" So I started doing this thing, I just sent them out. And one of the things I'm always like, "Wow, I wish I could go back and tell my 22-year-old self some of this stuff." I'm sorry I wouldn't listen, but I wish I could do it. So what would be one of the things that you would go back to yourself and say young Ed?
Ed Hine:
There's so many. So, so many things that young Ed probably should have heard a little bit more clearly that my dad probably tried to tell me, too.
Sean Mooney:
Yeah, probably did hear at one point.
Ed Hine:
Right. Whether or not I listened, questionable. I think if you... Putting myself back in that context now, so I was getting out of school, going into flight school. I think I was incredibly focused at that point in my life of you have to nail flight school because I don't know if you're familiar, the way the Navy does flight school is they don't want to stack the deck in any one community with everybody wants to go fly fighters. So the top 5% go fly fighters, or whatever the number is. I don't know what the math is anymore. What they do is they quality spread it out, but number one in every phase of their class gets to choose what they want.
And you go through these progressive phases, you go through ground school and then you select training location. Then from the training you go helicopters or fixed wing and jets and fighters and all these different phases. And so I knew if I want to go to where I want to go, you have to be number one period. That's the way it is. So I was extremely focused on that, but I think what I missed was that you never get done with that at that time. I learned it later, is that you don't get your wings in the Navy and then all of a sudden you know everything you know about flying. You know nothing about flying, you're remarkably dangerous still.
And you don't get done with the training assignment where you spend a year learning how to fly your particular aircraft, in my case, the F-18. You're very bad at it still when you get done with that. You go through three years of flying in a combat unit and you spend all your time training and some of your time deploying and doing flights over, my case, Afghanistan. And you get back from that and you think, "Am I done learning?" No, man, nope. There's always something next. And that's true now in my career. I got out of the Navy and I spent a ton of time waking up at 5:00 in the morning doing online courses, trying to fill this business acumen that I knew that I didn't have, that I needed if I wanted to be successful. You get into the private equity world and you're like, "Wow, everyone's much, much smarter than I am. I really need to step up my game."
Sean Mooney:
Maybe experienced in that area. I wouldn't buy this smarter.
Ed Hine:
Yeah. But just the concept that you're never going to be done learning. You're going to be a lifelong student. So just settle into it and embrace that.
Sean Mooney:
I think that's great advice. And it's this whole concept, life's a journey. It's not a destination. And every time I thought I got to a destination, here's a bigger hill.
Ed Hine:
Yeah, 22 year old me totally was thinking like flight school's the destination and then, oh, getting out of flight school is the destination. Like, oh, no.
Sean Mooney:
I was like, "I've got an investment banking analyst job out of college, I've arrived." And then the great story is I thought I was such a hot shot right out of college, and then I still had to get my parents to sign for my cell phone and back it because... Humbling. I'm like, "All right, tail between the legs." And then you get those experiences over and over again, and when you get comfortable with that, then it just becomes part of you. So I think that's such tremendous advice.
Ed Hine:
Yeah, I think the tighter way of saying it is just getting comfortable being uncomfortable.
Sean Mooney:
Yeah.
Ed Hine:
It's something I talk with my boys about. I've got an 11-year-old and nine-year-old boys and just talking to them often about just be comfortable being in uncomfortable situations.
Sean Mooney:
I think that's very well said, and I'm going to write that in my book actually.
Ed Hine:
Yeah, should have made the list maybe.
Sean Mooney:
Ed, as usual, and as I expected, I've learned a tremendous amount from you, and thank you so much for investing your time, because I know it's scarce, to share your perspectives and wisdom here today with us.
Ed Hine:
Nah, it's fun. I really, really enjoyed it. Thanks for having me on, and really appreciate the opportunity.
Sean Mooney:
Yeah, likewise. Thanks.
Ed Hine:
Thanks.
Sean Mooney:
Special thanks to Ed for joining. If you'd like to learn more about Ed and Cold Bore Capital, please see the episode notes. That's all we have for today. For more information on this podcast and BluWave, go to BluWave.net/podcast. That's B-L-U-W-A-V-E. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google, and Spotify. We truly appreciate your support. If you like what you hear, please follow, review, and share. It really helps us when you do those things, so thank you in advance. In the meantime, let us know if there's anything we can do to support your success. Onward.
THE BUSINESS BUILDER’S PODCAST
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.
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.
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