Private Equity Innovator of the Year: Kevin McAllister, Access Holdings

[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, BluWaves founder and CEO. In this episode, we have a fantastic conversation with Kevin McAllister, the founder and managing partner at Access Holdings.
Access Holdings was recently named BluWave's 2024 Private Equity Innovator of the Year due to their strategic and holistic approach to private equity firm operations, proactive due diligence practices, transformative value creation, and commitment to corporate citizenship. Today we have a special episode where we're going to dive a little deeper into the Access Holdings story.
And understand how they've set a new standard for innovation in the private equity industry. Enjoy.
I'm super excited to be here with Kevin McAlister, Founder and Managing Partner of Access Holdings.
[00:01:13] Kevin McAllister: Well, thank you. I'm really pleased to have you here today in the Access Holdings A2C, our Access Acceleration Center for value creation.
[00:01:22] Sean Mooney: So for our listeners here, you won't really see this obviously on the podcast.
But this is 1 of the really most amazing private equity offices I've ever been to in terms of. The facilities, the purposefulness, the technology, the data and the analytical visualization. And a really cool podcast. And I'll tell you that our producer Brendan is leaving our visit here with a really long list of things he wants.
I'm sorry for that. So Justin, our head of finance bid, just sorry. Our budgets can probably change a little bit this year.
[00:01:57] Kevin McAllister: It's all for the good. It's all for the good. It's all about the future. It's all about being contemporary.
[00:02:01] Sean Mooney: Absolutely. And I'm really pleased to also share that. Kevin, your team, your firm have been named the private equity innovator of the year through this really comprehensive and analytical program that we do that celebrates and acknowledges the top innovators in private equity.
So wanted to just acknowledge that.
[00:02:19] Kevin McAllister: Well, thank you. And it means a lot to us because that is our aspiration is to be. An innovative private equity firm, a contemporary private equity firm is the term of art. We use a lot around here, but it's ultimately one of our missions, which is we want to build enduring businesses.
And our belief here at access is we do that best when we're extraordinary partners. And we have our own definition for partnership when we help scale our businesses in organically or organically, and when we help innovate our businesses. And that's really our opportunity in the middle market where those innovative capabilities are those scaling capabilities.
Aren't necessarily requisite and a lot of the wonderful entrepreneurs we have the privilege to partner with. That's where we find a lot of common ground when we're out in the market having conversations in an industry we've identified or a specific within that industry's value chain, a specific business model where we choose to want to participate.
It's the opportunity to share our analytical research and our data about their industry that they may never have seen before. And then talk about what could great look like in five years if we partnered and came together and how do we take. Your great business that you and your family have built over generations and help advance that so that you can become the category winner with the most contemporary technology and tools or scale and more distribution.
So that's a fun thing to show up to work every day and do as a team is to work to build these great businesses. And we really think about taking a business and using that as a platform and bringing all these tools, lifting and shifting these tools there to help them scale the business. So you got to like what you do.
And I am fortunate that we've Got a team here that loves supporting our companies. And I love
[00:03:59] Sean Mooney: that perspective. And one of the things that I've learned since. Starting a company is that it's a journey and you come into your facility here right now and you can see these flywheels just spinning at a rapid pace.
But anyone who started something knows that that flywheel does not start easily and it's a journey to get there. So I'd love to hear a little bit about. Your origin story and what led to you kind of jumping off that same proverbial entrepreneurial
[00:04:28] Kevin McAllister: cliff. Well, like any good origin story, it starts with underestimating the complexity to begin with, but I think it starts with a clear vision and an aspiration.
And so our aspiration was always to buy businesses that we wanted to own versus those that were for sale. And I've spent my entire career. I started in the late nineties in private equity. I was fortunate enough to see quite the evolution. I worked at a firm called American Capital where we were investing up and down the balance sheet.
And I would say we were very good at buying things that were for sale, getting the book and synthesizing the book really rapidly because we were up against some timeline that a banker had articulated. Sounds familiar. Yeah. It's what, it's what most people do. I'd say it's the vast majority of private equity firms buy what's for sale.
It was always uncomfortable for me, truth be told. And then I had the opportunity to go to business school and study under Steve Kaplan. And he did some research, which I've worked with him on an independent study for two years, which was quite a privilege. And I had the ability to kind of go in and see his research and understand it.
And he had this famous paper called the horse and jockey, and it was really about what's most important when generating return. Was it the market and business model, or was it the executive and like any good academic paper? And I joke with him on this. He said, they're both important, but if you don't have a good market or business model, it doesn't matter how good your jockey is.
It's very true. And what's interesting about that is we as investors get the opportunity to select three distinct areas. We could select the market, we have to select the business model, and we get to partner with the team. Well, once you make the market selection and the business model selection as private investors, we own that.
Right? It is very difficult if you figure out after the fact, you didn't like it to change it. There's no hitting a
[00:06:10] Sean Mooney: button on your Bloomberg machine to say exit,
[00:06:13] Kevin McAllister: unfortunately there isn't an obviously betting around the industry as long as I have, there's days I wish that we could have done that. And so the buy what you want to own philosophy really anchors against this.
Let's be researched first. And so let's go do our homework. That's why we have a library here, which is just the whole manifestation of let's constantly be educating ourselves, reading and consuming knowledge. And then what's so amazing about the modern world we live in is the ability to scrape data.
There is this massive amount of digital exhaust. And I think it's really incumbent upon us as investors synthesize as much of that as we possibly can. And so when we started the business, I don't know that we had exactly the detailed version, but along that journey, I think we learned a few things that we've really taken to heart.
One is I think we're very empathetic to how hard it is to build a business. I know you built your business and you've done an amazing job. But I think we can sit across the table as a team to that entrepreneur and say, Hey, we've stared at the ceiling at three, four o'clock in the morning. We've looked at our families and said, to some extent, like, what did I do?
Right. Cause we obviously left reasonably good positions. And I started this firm as a funnel sponsor. And I think the reconciliation we had was that when you buy what you want to own, you're able to sit across the table from a perspective investor and say, we like the market because of these reasons. We like the business model because of these reasons.
And then we can go hunting. Right? We can go figure out. Hey, we want to be in these geographies because I'm not a mega cap sponsor. I love the middle market. I love Main Street America. It's the bedrock of our economy. We need more folks focused on supporting that end of our ecosystem. But to be able to say, Hey, we want to go help build a large funeral services provider in the markets where guess what?
There's gonna be more tailwind in the next 20, 30 years. That's discoverable information. We know where the better markets going to be. And then you can go have the conversations and you present your research, which we've taken the time to put together. So when we tell someone, hey, we are interested in your domain, there's a lot of colleagues and peers out there that will say that.
And then they show up and they start asking a bunch of pretty basic questions. We feel like we've got to have done our homework in advance. And we actually bring materials where we've done customer surveys. We have our own capabilities here to do that. We've integrated Qualtrics into our systems. And so we can present materials and information that they go, well, you've done your homework.
And I think that's been part of the mantra of the firm, which is respect all the hard work that these entrepreneurs have done to get their business to where they have respect that they acknowledge as we do as entrepreneurs, we have gaps and they're looking for partners, but those partners have to show up to the table with real demonstrable resources and value that are demonstratable.
And that's really why we built this facility, which is so often we all in our industry talk in the abstract, but we're going to be great partners. We're going to bring you value creation. You're an entrepreneur that runs a 30 million, 50 million revenue business. What does that mean? And so if we can get people here to Baltimore, we love Baltimore.
It's a good town. I think it's very representative of the communities in which we invest and the entrepreneurs and where they come from. And so we get them here and show them what we've built. And I always use this word. I don't even know if it's a word that we're efforting towards being an accretive partner.
Yeah, it goes away and we're not done efforting. Right. And I was, you plod along left foot, right foot every day trying to get a little better. And what's interesting is if you ever think about, and this is part of messaging and having discussions with executive teams is in the present moment. Like if you think about things in just a week's timeframe, it doesn't feel like you're making a lot of progress, but if you measure your objectives and you set those objectives, you measure them over longer periods of time, you make real progress.
So I sit here today, almost 10 years from the time we made our first investment. We've come from filing cabinets and doors for desk to this place, and I don't know that we could have ever imagined it. But if you set your objectives and you move towards those. And you surround yourself with great people and great mentors and make reasonably good commercial business cases for why you should invest here or there.
We run a private equity firm. Like we would ask anybody that we partner with to run their business.
[00:10:28] Sean Mooney: I love all of that. And a couple of things that really resonated with me is one, how intentional you've been since you started while treating your business as a business. You can see the strategy unfolding so much of strategy is the art of making choices and doing fewer things better.
And you talk about how you wanted to already know the companies that you wanted to invest in before they show up and not just be a passive recipient of Sims that come across the desk. And then you can really tangibly see when you walk the halls here and created this community within these four walls and eight floors.
You can see how not only have you made choices about who you want to be, but it's the allocation of the resources and the construction of your team that symbiotically work well together. So can you talk about how you went through that decision making process and how you evolved from a fundless sponsor where you've got your filing cabinet is your desk and the neon lights and that was probably better than our first office when I would have people trying to sell us stuff in our office all the time and they thought we were a chiropractor or some sort of like FBI like hideout.
I can tangibly feel those first days. But like, how did you think about this is how we're going to build this organization and match the resources to this vision that you had 10 years ago?
[00:11:54] Kevin McAllister: I think we always framed private equity is a handful of discrete activities that have to be kind of, it's like a quartet.
They have to be executed and played together. And obviously let's put fundraising aside because you don't exist if you don't do that. But let's presume if you get the flywheel operating that that comes along naturally. The first is you need to be good at originating deals. So the predicate is, okay, well, what do you want to originate?
And then the second is, you'd be good at executing deals. You have to be good at creating value with deals. And then be good at exiting. And so our workflow started as simple as those four nodes. And we've subsequently like deconstructed those down to very nuanced levels. We need to be good at buying businesses.
Well, what does that entail? Well, let's go buy businesses and markets that we think have persistent kind of essential demand characteristics. Let's focus on markets where we think there's business models. That we can most positively affect with tools and capabilities in our capital, right? Okay, so then how do we do that?
Well, we've got to really good at research. We've got to sort thousands and thousands of data points, okay? Let's think about how we think about data. And so, about three years ago, we started even framing data. Because everybody talks about AI and machine learning and how great it's going to be. And I believe it will be.
The first predicate. Is, is your data well organized? I don't know if you're a first principle thinker. Elon Musk is a first principle thinker. I love studying and reading. Yeah. When you go down to this, like, what is the bits and bytes to do this? And so the first thing we said is we've got to ingest data from all these exogenous data sources.
So now our team is ingesting data whatever production velocity of that data comes with persistently. So we have all this exogenous data. It's market level, demographic level, weather related. And then we go down a double click and we have a data architecture that's written out like this. And then you think about the industry level data.
And then you think about all the different subsequent layers. And then you start bringing in your endogenous data. Well, that has to be organized. So we started producing an exogenous data pack for all our companies, because when we sat in a boardroom meeting, I wanted to make sure that they were quoting a labor statistic or they were quoting a wage inflation statistic.
So we weren't getting kind of pencil whipped with bad data. So I think we're starting on that journey. I think we're way down the road on it. We're not where we need to be always. You never cross the finish line. This is like, it's like the journey to Narnia. It is a never ending journey and we're on it.
And like anything, you know, this, you built a great business. We've hired some, I'm from New England, so we hired wicked smart, uh, and, and we've kind of empowered them with the state of visualization laboratory we created and the Microsoft Power BI, and they're all coding Python and you kind of give them a problem and, Hey, could we build market prioritization maps?
Absolutely. And we figure out what volume one of our competitors might be doing and something. Sure. We can take our incumbent locations, understand their volume. We can look at our web traffic. We can look at any publicly available data around number of employees and we can build a equation that will predict with 85 90 percent confidence.
What the volume of the competitors doing. That's cool. Yeah. It's usually
[00:15:08] Sean Mooney: it's game changing in terms of actually understanding market share and velocity of market share. And one of the things I really love that you started first with is from a first principles perspective is the data and. It's interesting.
It's probably pretty much on a weekly basis. We get a call or a request from private equity firms that start with, we want to do AI and kind of what you're talking about is that, well, let's talk about your data first and let's talk about, are you visualizing it? And then if you're visualizing it, are you analyzing it?
And then we'll talk about neural networks. And then to every one of the credits, they're like. That makes sense. But it's this, you've done that hard work that is so important to do anything else. It's the first principles of any kind of subsequent value stream downwards is you got to get that right. And That's something that I know that we embrace it at our company as well.
It's like, if you don't have the data, you can't do anything or you're just taking shots in the dark, right? You can use this concept of expected value to make the margin by which you're off so much smaller and the percentage with what you're right. So much higher, but it all starts with your data. And I would always talk to their team.
It's like I started in industrial private equity. And so I became a huge fan of Lean Six Sigma. And so one of the things we knew with rotating equipment cam shafts for the auto industry, anytime there's rotation and force in a machine or really any process, it wants to lose calibration and businesses are the same way.
And data is the same way. And so the focus and attention that you're bringing to your data is really, I think, unique and innovative in ways that I think the private equity industry is going to have to go to, but you're already there.
[00:16:50] Kevin McAllister: Yeah, we've got a duty as investors to make the best decisions we can.
And stating something obvious, like you do that when you have better data. And so our consciousness around organizing, not that we're getting it right all the time. We're learning a lot. We're failing a lot. I think we're failing fast and we're getting better. But we've re indexed on how do we even talk about it.
And not just here at Access, but across the portfolio. And because we've had so much success early. With each of our portfolio companies, and they've all been here and seen the power of that ecosystem. Now, for us, it's beyond just the integrity of the data and the tools to analyze it and come up with conclusions.
It's actually about how do we deploy that? And that, to me, is the most exciting thing about where we're moving in 24 and beyond, which is we talk about our three, four things for each of our companies and how we add value. We want to bring digital excellence. We want to bring functional excellence, we want to bring programmatic excellence.
Well, programmatic excellence is really about bringing the talent, the musicians to play the instruments, so to speak. And so when you're starting with a 5 million EBITDA business and you say, Hey, let's implement data science, digital lead gen capabilities. And of course, everybody affirmatively nods and says, that would be cool.
And meanwhile, panic, like, how are we going to do this? Well, in panic, I think the benefit is you can say, we gotcha. Yeah, we gotcha. Which is, I think is affirming and it's really important. And then we can lift and shift the tech stack we've built here. And then what we're doing is we're bringing people in.
We're recruiting them ourselves. We have a full time programmatic recruiter and we'll bring in folks. We call them our aces. Call it access creating executives. One of my observations over the last 20 years of business is we've totally under invested in middle management, right? And as a result, we're not training and developing talent with the functional skills and knowledge they need.
Because a lot of companies think in reasonably short bursts. And so, we'll bring someone in here and train them for six months. They know they're going up to Philadelphia to work at Zeus or to work at PlayFly or to work at ASTP, our yellow school bus business. But they'll come here and they'll train with our BDRs and we'll certify them on Salesforce.
We'll certify them on Pardot, ZoomInfo, RocketReach, and all the other tools. And we even give them what we call our Access Lead Laboratory. We'll even give them our own certification that they've been vetted. And then they're part of the ecosystem here because everyone's using the same digital workflow.
We're learning faster. We're A B testing. And so the power of not only the individual operator, but the wisdom of the effect of the crowd. The 8 other platforms that are doing the same thing and getting them together here in our plenary and talk about what's working, what's not, what's the right voice for a digital campaign?
What's the right content to support a digital campaign? So I think we're advancing down the curve on that stuff in a way that. The results are phenomenal. You
[00:19:48] Sean Mooney: went from your original quartet to a symphony. There's multiple instruments playing together and they're filling the whole stage versus the corner.
So
[00:19:58] Kevin McAllister: I love that. It's exciting to see. And I think this is a big year for us. We have our annual leadership summit, which amongst the big events that we do every year at access, it's my favorite. We go to the Salamander resort, bring all our seats. It is. And it's great. It's awesome. We have some great social, but we all get together.
Talk a lot this year about digital. And we'll bring our ACEs in as well. So they get more exposure. ACEs come in two days early. They get training from University of Chicago Business School professors on project management or business case development or any kind of thing that's germane to supporting their growth.
But ultimately supporting the business's growth, double benefit for us. I
[00:20:38] Sean Mooney: think that's amazing. And as I think about what you are doing, when we go through this private equity innovators program, and it was really this idea of like, how do we shed a light on an industry where the first word in the name of the industry is private?
So, The industry doesn't really describe itself very well. And we thought, well, why doesn't someone shine a light on the really good that people are doing? And then we said, okay, well, kind of those four principles that you have, like, well, what makes an innovative PE firm? And we said, well, they run the business of private equity like a business.
We see that up and down every floor in your building. And then we talk about how their diligence and their value creation are really kind of a flow of one informs the other it's not, or it's, and, and then we talked about how you're good corporate citizens, knowing that being good for the world and good for the business can be an R1 in the same.
And then we saw examples of PE doing this over and over and over again. And so, as we looked at you all, we're like, wow, they're running their PE firm, like a business. And then their diligence is really about not only trust, but verify like it was when we started in the late nineties, but really informing what the company can and should be, and having a preordained perspective before you even meet the people.
So can you talk a little bit about that middle part of this program where you talk about, here's how you approach diligence in here, how is informs value creation, and then how it's just more of a continuum versus two distinct
[00:22:05] Kevin McAllister: phases. Yeah. I think the first predicate on diligence is. We spend time selecting a market that we understand has persistent tailwinds.
It doesn't mean it's growing at five or 6 percent annually, but that it's persistent and we can actually get comfortable to that industry is going to be stable. So before we even start diligence, you're making purposeful market and business model selections. You're understanding the value chain of an industry and you're being deliberate about where you participate.
And then we always joke here, get a lot of ex consultants, reforming consultants. If you understand your market. You understand your competitors, you understand your customers, you understand the technology forces with you or against you, you understand the regulatory forces with you or against you. Well, strategy is pretty self evident, right?
And then it's constructing what strategy is the deployment of capabilities and resources. How do we help companies work on the business versus just in the business and working on the business is building capabilities that allow you to create competitive advantage and asymmetry where I get so excited.
I think the rest of the team does here is we're doing this for American middle market businesses. These are main street businesses. These businesses, if you look at the statistics and we shared this at our annual meeting, These are the businesses that create jobs. They actually have lower levels of volatility than larger enterprises.
They can be a great source of innovation. I do worry where we are, and this is kind of a moment in time. I think we have a little bit of a localized banking construct. And you look at all the mega cap banks moving up market or candidly, the private lending community coming into the market, you look at capital raising this past year, 23, the preponderance of it went to some of the largest firms in the world.
And it went largely to the credit funds. You and I have conversations. I'm a lot of friends at those places are great firms, but they won't get out of bed unless they're writing 150 million check. So tell me how that supports Main Street. It doesn't. I love like some of these trade rags that we have and say, what's middle market?
And they'll say it's 5 billion funds. Wow. Writing a half a billion dollar check. Now, over time, if you write that half billion dollar check, you can build a really substantial firm. And that's one of the things we do, is we index our capital in over time to establish a market leading participant. But I think that's the opportunity is when we go out and we do this American Entrepreneurial Survey, which we launched this past year, because we said, Hey, we got to really understand what is the issue set that's against our customer?
Our customers, how do we go support the American entrepreneur? We want to be buying non institutionalized businesses because we can take them and help them institutionalize. We can take them and bring them capabilities that we know will create alpha, because it will create competitive advantage. And so how do we bring those businesses in?
It was interesting when we did the survey. Sometimes it's the question you ask that matters. What are your biggest issues? And obviously we've known these for years. It's a succession. That's been in every survey for the last 20 years. Succession. Capitalization. I think that's more acute today than it has been in the last 20 years.
I think the community is moving away from a person that needs 20 to 50 million dollars of debt. But the biggest one is this tech gap. And we have all become so facile with the Amazon and we know as it arrives at our house three times a day or whatever it is, it's kind of scary. All sorts of things to talk about on that more socially.
We see when the package is going to arrive at our home. So if you're now running a home services company or a pest control company, and they give you that, I'll be there between 10 AM and 4 PM, we lose our minds. So being able to bring those types of capabilities creates meaningful alpha for those firms, and that's really our opportunity.
And you think about how do you get an organization excited about what they're doing? That's why we get excited every day here is because we can show up and line up alongside these great entrepreneurs who I think and everybody here at Access believes are the bedrock of the American economy. The statistics would tell us that that may be getting underserved just because it's easier to write a bigger check, right?
Ironically enough, we talk about all the ESG and corporate social responsibility and then we do what's economically most advantageous to us. That's where we're going to participate. That's where we're going to build our organizations. We're going to stay squarely in the middle market, and we're going to create alpha by taking these smaller firms and turning them into market winners.
That's empowering to us and the team here. It's also a lot of fun. I think
[00:26:39] Sean Mooney: you raise a great point about the industry at large, but also what you're doing in support of business building and job creation. And I think there's this perception that the vast majority of private equity are these very large cap that kind of make the headlines.
But if you look at the 6, 000 P firms in North America, the vast, vast majority of them are middle market and lower market building businesses for main street, not wall street. And it was interesting. We were curious. So we did a study breaking down the ink 5, 000 last fall, 2023. And we looked at the data and it was quite different than I would have thought.
And so if you look at America's fastest growing companies, you would have thought that the vast majority would be kind of BC backed companies. Which they were. So, 11 percent of the Inc. 5, 000. How
[00:27:31] Kevin McAllister: profitable was that, Greg? That's a separate conversation. It's exactly,
[00:27:35] Sean Mooney: and we'll see how many of them are still around this next Inc.
5, 000. And so, if you look at the, only about 11 percent of the companies were private equity. But when we looked at the job creation over a three year period, They accounted for 60 percent of the jobs added over that period within that group. So 11 percent creating 60 percent in a persistent and sustainable way, based upon this thing called cashflow.
That is the fuel to a company that enables them to go through these kind of dips and waves and ups and downs that survive over
[00:28:09] Kevin McAllister: time. Unequivocally, we step back and as a firm, we have over 11, 000 team members. Out in our portfolio. I mean, we're a small firm. We manage about 3 billion of capital. We're on our second institutional fund and we're midway through the deployment of that fund.
So we have eight platform companies and scraping towards 4 billion of revenue and 800 million of EBITDA. And it's the power of capital. I know it's sometimes a dirty word, but it's a very good system. I don't know any system that's better than what we have. It's not perfect, but I think we're endeavoring to use it to kind of build some great businesses that are going to create jobs that are great, better customer experiences.
And because they're successful, they're going to give more back to their community. And hopefully they can be an example and a leader. I was love the idea of companies being net exporters of talent. So can not only access over time will be an export of talent. I think all great businesses are in our operating companies.
And can they spur kind of innovation beyond just the platform we own? That's probably one of the hopefully positive unintended consequences of everything that middle market private equity is doing. I think
[00:29:25] Sean Mooney: that's extremely well said. And Kevin, I'd be curious to kind of double tap a little further on this idea of like you're doing a lot of interesting multifaceted things to help in partnership with your teams to lift revenues, optimize their cost structures.
Get the right people in place, get the right strategy in place, get the right tech in this kind of holistic way. Talk a little bit more about what's your approach and some of the levers that you're able to kind of uniquely pull here. That help differentially support the success of these entrepreneurs that you're partnering.
[00:30:01] Kevin McAllister: Yeah, I think the part of any evolution of any businesses as it scales is to some extent job specialization, right? So as you scale a business, we have these conversations all the time with our executives that, Hey, today you might do 10 jobs. Tomorrow you might do five. Well, that plays through up and down the organization.
So we can saw it at the pet cremation industry. And when we would buy operators in a particular market, we would have the opportunity to optimize. And that would create improved profitability, which then we turned around and invested in digital tools, serve the customer better, give them more visibility.
We created web capabilities that would allow them to kind of buy pet aftercare memorabilia. And we were able to create, because the consumer wanted it, physical locations that were pet funeral homes. So, when you create profit, you have a choice. You should reinvest that profit, some portion of it, back into advancing the technology, advancing your compensation for your team, giving some of that back to the community.
And I think success requires that. That's one of your duties. There is a virtuous circle when you do that. One of the core capabilities we have here is we think about scaling. And we really obviously dimension that to obvious buckets. There's the inorganic and the organic. And with our digital lead tools, we're able to take businesses that in the ordinary course might be growing at three or 4 percent and overlay that purposeful customer acquisition activity and accelerate that.
And when you're growing, you're scaling. And you're consuming more resources and you're creating jobs and you're creating in this world because of all the technology, a lot of the traditional jobs, there's a huge opportunity to automate, but that allows you to pick that consumer and create more of that personal interaction and experience.
And so many of our businesses rely on that, that creates alpha. We all talk about AI and talk about disintermediation of labor. Well, interesting enough, the thing that you can't disintermediate. Is that human interaction and the opportunity to convene I sat in a room. It was funny. We had a bunch of interns last summer and we obviously have our own AI, our own chat GPT.
We call it Alice and I said to the group, what do you guys think about it? I said, well, AI is no Shakespeare. Is anybody in this room? Shakespeare, you can, I thought it was, it was too, you know, so past that funny moment for a second, yeah. I said, the ultimate asymmetry that all of us have as humans is there is this sixth sense of intuition.
And ironically enough, stop looking at your phone and spend more time with your peers and understand that emotion at a visceral human level. And so I wonder, and I think you're seeing some of the statistics in the youngest generation are spending less time on their phone, right? And I think I'm hopeful.
That we realize that the only alpha we all have is each other and all these other tools are just to give us more time to spend with one another. So we'll see, these are bigger philosophical conversations. But I think
[00:33:14] Sean Mooney: it's an interesting aside, and I try to simplify things as much as possible as I think about my worldview.
And mostly that's because there's only so much that my brain can comprehend. So let's keep it simple. And as I think about at least the big shifts that we've seen during our careers and lives, The first was probably the biggest one was the internet in 1995 and everyone was a blaze when Netscape came on suddenly you could use this worldwide web and everyone's like, Oh my God, it's a strategy.
You get an MBA in the internet and there were internet investment groups and like, this is our strategy, right? That doesn't seem like a strategy. It's more of a tactic. And then sure enough, it was really good at disseminating information and making the delivery of goods and services and connecting the world more efficient.
Yes. And then these little devices started showing up in our hands. The iPhone shows up, or even before that, it was the Palm Pilot and people like, Oh my gosh. And this little device now is stronger than the most powerful supercomputers, the Cray computers when Clinton was president, this is going to take over the world.
It's like, no, it's just going to let us do more in our time and probably make the world a smarter place. And now AI comes out in a big way, or at least revealed itself this spring with chat GPT. And I was like, the robots are taking over. It's like, no. It's just going to make, it's not a strategy, it's a tactic.
It's going to make the analysis, the consumption, the distillation of data faster.
[00:34:43] Kevin McAllister: Absolutely. It inures to the consumer. When I was fresh out of undergrad and I was at Carney, the econ strategy group there out of undergrad, I wrote a white paper with one of the individuals in the econ department about pricing.
And what was the internet going to do with pricing? Well, duh. It made it very transparent. Well, what did that force all of those service and product companies to do? Well, it forced them to make a better product, to provide a better service, and it forced them to compete on other attributes of value, convenience, speed, quality, and it forced them to then backend integrate, how do I build a better product for a lower price?
So all it did was it's kind of sped up the treadmill, so to speak of innovation. And so I think all of these technology tools, I think. Will help the consumer will force. Folks to be more competitive and that's the business we're in. We've got to learn how to compete. And part of competing is balancing that being on the precipice of innovation.
You don't want to be the pioneer. It's a really good
[00:35:50] Sean Mooney: point. And we're going down a side road here that I think is really interesting in that the world's always changing every time. And the question is, how do you go with it? Or do you fight it? And we're seeing what you all are doing here in a way where you're embracing it.
One of the things that I've spoken a lot about this on our podcast here is this. Great book that you may have read. It's like who moved my cheese. Oh, yeah. It's just a quick little parable about micing change And it's just so true and we gave it to everyone in our team Well, everyone gets it when they started but we actually made everyone read it this year That's good.
And then we all talked about it. It's this idea that you can fight the change Or you can go with it, and if you go with the flow, life is more easy, it's more fun. And the technological advances that are coming through right now, they're letting us do more of the human things that we find satisfaction in, versus the like, jamming in data and looking at a thousand websites.
It's the fun stuff about how do we use our brains.
[00:36:46] Kevin McAllister: And using our brains is the ultimate edge, right? It's creativity. Creativity can be just embracing technology. More quickly and figuring out how to adapt it to your daily challenges at Fort Otterson. I always kind of coach them like, I know some obviously concerned, like a couple in college and some behind them.
What does the world look like for you? And how are you going to compete and win and how to show up virtually, physically? Like what are all these challenges? And they kind of, I'm sure they, they roll their eyes at me and say, sure dad, your daughter's listened to you. How'd you do that? They're great.
They're great.
[00:37:23] Sean Mooney: Let's talk about this.
[00:37:25] Kevin McAllister: There's a little eye roll. I think it's funny. College age kids. They came back, I think. Last year after their freshman year, and I think they were like, you're not as dumb as I thought you were. Oh, so that happened. I'm like a duck.
[00:37:38] Sean Mooney: Duck kids are, you know, 13 and 16, so that eventually
[00:37:42] Kevin McAllister: happened.
Yeah, I think it does. You know, I think they might have just been humoring me, but I think there was a positive correlation like, You're not as awkward and foolish as I thought you would be.
[00:37:53] Sean Mooney: Okay. I hope maybe one kind of topic we've touched a little bit about this is kind of the fourth pillar of this program that we put together, recognizing top innovators and you all as the innovator of the year is this idea of corporate citizenship.
And maybe as a quick story to kind of inspire this is I remember I was involved with raising a prior private equity fund called a DDQ and due diligence questionnaire. And this was early on. I go, what is your corporate citizenship policies? And I go, what? I don't know. And then we spoke with our advisors and they go, Oh, this was what that means.
Cause it was really the beginning. I go, wait a minute, where are we doing most of this stuff? We just never really organized it and put it in columns. But yeah, of course, because what's good for the world and good for business are more often than not kind of one in the same and they're symbiotic with each other.
So I'd like to know a little bit about your ethos and approach
[00:38:48] Kevin McAllister: there. A hundred percent. Well, to build a modern business, you need to have a comprehensive view of all your stakeholders and giving a business a soul and a purpose has a lot of multiple kind of double bottom line benefits. You attract better talent, you serve your community better, and you build more of a brand.
As we started to institutionalize, we got the same question. And I went to Google and I Googled ESG policies. This is 10 years ago. Yeah, I just think I did the same thing. I think it was one of the mega cap funds that showed up. It was a one pager. Yeah. That somebody had put out on the internet. And so I went to the team here and I said, look, we need to really understand this.
And this is the benefit of having a research first mindset. What does this all mean? And they came back and said, there's actually 500 at the time. I'm sure there's more now, 500 consulting firms that all have their own framework. Yep. Um, we then interviewed the, and had a conversation with the head of UNPRI and all the requisite parties, like you said, most private equity firms are.
Getting a number of these. They're thinking about diversity, equity, inclusion, and their employment ranks. They're charitably giving back to the community. They're creating jobs. Because it's good business, they're very conscious of the environment and moving to electric buses or what have you. So naturally doing a lot of things, not very good, as you said early on, private equity is terrible at telling its story and its power.
So we did all that and we ultimately came to the conclusion, Hey, we're going to create our own core impact factor. And so we have 12 core impact factors and we ask every business to pick three. And then we track those three core impact factors. Order after quarter, and there are quarterly valuations for our LPs as to how we're actually measuring and making progress.
And we've won a lot of awards for our approach and model and more than just having a model and approach. We created a whole ecosystem inside of our portfolio company. So, at each company, we have someone who's responsible. And championing the activities that are supporting us driving those core impact factors and all of those.
Professionals convene quarterly as part of the kind of the alignment. And knowledge sharing that's so important. And we bring in third parties to talk more about, Hey, where are these trends going and how do you engage and talk to your employees about it? How do you share the success stories? How do you elevate the purpose of why we're doing these things?
Like all of these things, they're all part of contributing towards building a winning enterprise. I think it's table stakes.
[00:41:22] Sean Mooney: I think once again, that's a really thoughtful and practical approach that also drives impact. Versus just trying to fill columns and not just, but it's just, how do we create results?
What you've described there is a way that is creates that win win that I think everyone's in
[00:41:40] Kevin McAllister: search of it's funny the biggest compliment we get And I think this is hopefully be a catalyst for our long term successes. Hey, you guys do what you say you're going to do now. We don't get it right all the time, right?
All trees don't grow to the sky forever or whatever that old energy is. But like I said, we're efforting towards trying to build something we can all be proud of and do it in a way that we can be proud of the way we're doing it. And if we tell someone we're going to do something, we may not get all the way there, but we're going to try our darndest.
And part of trying our darndest is. bringing the resources to bear that give us the potential for the greatest probability of success. And so that's why we started framing our value creation in a very demonstrable way. We started talking about the arc of development of a business that what you need at 5 million is different than what you need at 10 is different than what you need at 50.
Created this destination planning process to just anchor all of these, whether it's corporate social responsibility, or it's the build out of capabilities, they're all indexed in a very detailed, definitive way. Along that horizon. And so what that creates is a benchmark. It creates a conversation. Hey, we said we're going to do this by this time.
We're not here. Why? Sometimes it's adding leadership, right? Changing resources. Doubling down. I think part of advancing any organization is knowing where you want to go with it. And then ruthlessly try to track and measure where you are on the milestones, waypoints, whatever type of navigation you want to use.
Yeah, I think it brings
[00:43:15] Sean Mooney: us back to kind of full circle. It's like this idea of the art of strategy and knowing what you're trying to solve and then thoughtfully allocating resources around it and then measuring progress and holding yourself accountable.
[00:43:28] Kevin McAllister: Having been around this industry for a minute, as you have.
It's being transparent. It's also. Being accountable. Yeah. Right. I don't know that we're always universally great at that. I was, when I
[00:43:39] Sean Mooney: was in private equity, I was much better at saying than doing. It's been a journey, not a destination phrase I use too often. I'm getting better. That's, you know, every day it's take one step forward.
I
[00:43:50] Kevin McAllister: hope I'm evolving. And I hope my wife believes that towards a better end. I don't know what that is. Kids are now finally
[00:43:56] Sean Mooney: giving you credit. So that's what I like to hear. And it gives me hope. I
[00:43:59] Kevin McAllister: think I'm drafting off my wife, but uh, yeah, they're giving us Both credit, we're more similar
[00:44:04] Sean Mooney: than different.
I think this is fantastic, Kevin. One of the things that's really clear is, you know, at the risk of continuing to probably uncomfortably flatter you all, but doing so with a thousand percent purpose and really believing all of this is that another thing I found really impressive, just visiting your team and your offices, kind of the veracity with which you all read.
And you have this library, which is this other kind of great collection of wisdom. and kind of multiple books that are favorite. And I understand that you all kind of also came up with An idea or a book that you thought was particularly a standout within all the stuff that all of your team members are reading this year.
So, can you talk about your kind of approach to collecting wisdom, but also this one book that kind of stands out? Yeah,
[00:44:49] Kevin McAllister: appreciate all that. Thank you. Part of what we're trying to do at Access and our companies is to create this idea that we want to continuously be learning. And part of the idea when you're continuously learning is that you're open.
The challenge when you're a CEO or a C suite executive, it gets pretty lonely pretty fast and the predicate is you must know everything. Yep. We had this nice discussion last year at our leadership summit at the Salamander, which is no, you don't need to know everything. You need to actually know what you don't know and you need to know how to go source the knowledge to go attack the problem versus.
Pretending like you know what you don't know. There's a lot of this presumption that because you have the title, and I said this would go from even our analysts sometimes presume that they need to know something. I'm like, no, just ask the question. And I think it applies to anyone. So what we're trying to do is to create this idea that there's knowledge that none of us have a complete grasp on.
Not us at Access. We're not the source of truth. We're a source of perspective. And so we asked everybody in the firm to put one of their three favorite books. And some of them are Catcher in the Rye, and some are Federalist Papers. I don't know who that was, but It's like, whoa! So, we've got a lot of interesting intellectuals around here.
So, but what we do is we ask, every year we do a survey of our executives and our ecosystem. And we ask the question of, hey, what are your recommended books? I believe in that little book, Wisdom of the Crowd. So we're going to ask the crowd what their favorite books are, and then we're going to, as a team at Access, read those, uh, recommendations from our ecosystem, and then we're going to recommend one book, and we give it out.
And so this year was the age of AI and our human future, and we actually, as you saw from our annual meeting, we actually had our avatar, Alice, present some market research to just articulate that the here and now is now. AI is here. And I think Henry Kissinger and Eric Schmidt are two of the authors on this book.
And they obviously have a world of knowledge and perspective as to how these tools and things will change the market. So this is our attempt to kind of make sure we're just amplifying perspective and content always. If you have the idea you're learning always, then it hopefully gives you a little more comfort to say, I don't know.
Ironically enough, that's kind of what we're trying to go for. I had one of our executives, you're comfortable if I don't know everything. I'm like, yeah, because otherwise that means you're just faking it. And I know we're asking you to do stuff you've never done before. And I think when you rate that, you create a culture that allows more convening and allow them was more partnership.
[00:47:28] Sean Mooney: I love that perspective as well. And it kind of hits home on a number of fronts. And one of the things is I think I achieved like a modest level of success. In an industry where I was always with the smartest people in the room, knowing that I was smart enough, but not the smartest. And so I developed this philosophy in life that I call the Walmart form of innovation.
Walmart never really innovated anything, but they figured out what worked in combination and liberally borrowed it. And so that was my kind of careers. I'd see how someone else would do something and like, I'll borrow that and I'll borrow that and I'm going to Frankenstein myself. So just reading and talking with people and it enabled me to keep up with extremely sharp people and don't get me wrong.
I think I'm plenty sharp enough to hold my own, but it was something that almost compelled me to do that. And so. The other thing I learned just working with so many people like you is that, you know, top business builders are voracious readers and borrowers of other people's wisdom that they learn the hard way.
And so one of the things we do at BluWave is we give five books out to everyone. And the big age ahead of us is coming right now. It's here. And so I'm going to be rapidly reading this book probably on the plane on the way back. I don't know if I
[00:48:42] Kevin McAllister: can read the whole book. You can get an audible of it.
do it. I can't. I haven't achieved what my kids can do, which is they listen to about like one and a half speed. I wish. And it just sounds like mumble to me. So I'm a little, I'm still in the junior varsity. I go regular way. I'm at 1. 0 as
[00:48:55] Sean Mooney: well. It's like the little controllers on their video games too. I'm only.
I can do the Tecmo bowl, like AB and up, down, left, right. They have like 50, but this will be added with high likelihood. And so people are probably gonna be getting a sixth book.
[00:49:09] Kevin McAllister: There you go. Well, I think the books in combination with a good mentor network, because once you have an idea or question, how do you synthesize that?
How do you test it? And that's one of the things is you're consuming knowledge is playing it back and testing it with folks. And I think. That's one of the other elements that I think is really important as you're evolving and innovating and trying to understand what else do other people see, because as much as either of us see, and you see a lot more than I do, field of vision is really important, so you can consume knowledge, but then you have to test the knowledge, you have to gather field of vision through your mentor ecosystem, I think we've probably built such an advisory network, there's no one trick pony, you got to do a lot of things, and then try to it.
Bring them all together. I think that's
[00:49:54] Sean Mooney: a good point. And it's just this whole idea. Like, I always try to. In fact, some people, certainly when they read a business book in particular, like I'm going to do this chapter inverse line by line, and you're like, no, don't do that. Just grab the parts you like and then custom implement it.
Take those
[00:50:09] Kevin McAllister: concepts. Yeah. We get some good feedback. It's going to be a good year. 24. Let's
[00:50:14] Sean Mooney: go. Getting warmed up. Let's go. So Kevin, this has been really amazing conversation. Thank you for hosting us. Thanks for your hospitality and your generosity and having us in today.
[00:50:23] Kevin McAllister: Well, it's our pleasure. And so if you're coming through Baltimore, any of these listeners ever coming through Baltimore.
Just let us know. We love hosting folks. We don't get a lot of visitors, believe it or not. We're just off the Amtrak rail, so you can just walk up from the train station. We're only eight tenths of a mile.
[00:50:39] Sean Mooney: It's worth coming to Baltimore in itself to visit. Kevin and team and see kind of the amazing ecosystem they built here, but also for the crab cakes in Baltimore.
[00:50:49] Kevin McAllister: Yes, you had some of those yesterday. Yeah, we will have anybody comes and we will give you a visit, but we'll get you some good crab cakes. Wonderful.
[00:50:55] Sean Mooney: Thanks so much, Kevin. All right. Thank you.
That's all we have for today. Special thanks to Kevin for joining. If you'd like to learn more about Kevin, Access Holdings, or the top private equity innovator awards. Please see the episode notes for links. Please continue to look for the karma school of business anywhere you find your favorite podcasts.
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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.