Introduction

Under Way, Windward

I will never forget when I heard the news that would shape the development of my professional career.

I was at my desk at Royall and Company, where I was managing director for data, when I heard a commotion in the corridor just outside of my office. Our founder, Bill Royall, had passed on the highest bid. Our company, which provided student-recruitment support services for undergraduate colleges and universities, was being courted by several private equity firms. Eventually, an active bidding war ensued. But rather than going with the deal that would best line his own pockets, Bill had entrusted the company to the most qualified, right-fit partner to grow the business.

When he later looked all of his employees in the eyes and told us that these folks were going to support us as we grew in the right way—so we could do more for our clients, allowing us to deliver more value to them because of the resources and partners we would now have access to—we knew it was true. It was clear that what mattered to him was the long-term success of our clients, our employees, and the company. It was not about Bill. It was about all of us. And that made all of us want to stay and work even harder.

Our clients knew it too. We had always had excellent client retention, and that did not change. In fact, the process of the sale and the growth that followed resulted in so little disruption that many clients did not even know we had been bought. Royall and Company continued to put clients first and almost never took credit for our work—to the degree that, a few investment cycles later, when the company sold for $850 million and made splashy headlines in industry trades, there were companies up the street from us in Richmond that did not know who we were.

Having a front row seat for it all—seeing a founder approach private equity partnership in the right way and for the right reasons, and then implement that investment successfully—made me want to support every young founder who wants to do the same. After many more years at Royall and Company, I left with Bill’s blessing to start my own company. As CEO of MacLaurin Group, I now lead my own business, which specializes in partnerships between private equity firms and the portfolio companies they acquire. But more on me later. Right now, I want to talk about you.

Pushing Beyond Your Fears

I understand (and empathize with) the fears and challenges you are facing as a founder, or challenges you will face if you have plans to become a founder.

You realize you have taken, or soon will take, your company as far as you can. Growing your business, not to mention the process of finding a partner to support your growth, is scary. I get it. I see that reluctance in our clients all the time. And I have experienced it in myself. Talk to any successful leader, and they will say, “I’m scared every day.” This is especially true for first-time founders.

Here are some of the fears I and my clients have faced. Do any of them sound familiar?

• What you do not know. You built the company on the skillsets of you and your co-founders, who may have also been your college roommates. That is not a bad thing; it is the embodiment of entrepreneurial spirit. Now you realize you have outgrown your collective skillsets. You don’t even know how to begin having conversations about the appropriate way to grow, because you don’t have experience doing things any other way.
• The loss of control—but not of accountability. You will no longer be in charge, and it is scary to give up control. You are accountable, after all, for your employees and clients. People are counting on you. How do you know you can trust a new partner? What if you choose an investor who does not share your values?
• Airing dirty laundry. Everything will be public. So far, when things are not pretty, you just deal with them and move on. You do what you need to do, because that is entrepreneurialism. But with an investor, all of your blemishes will be revealed—past and present.
• The outsiders. You know that growth will require an additional management team member, and you worry about a private equity firm assigning someone without your say. Your senior leadership team has a carefully curated culture, and someone who does not “get it” could muddy the water for you.
• The vulnerability. You no longer have the brazen confidence of someone with nothing to lose—because you have a lot to lose. What if you find a partner and try to grow your business, but it turns out this partner only wants your client list and mismanages it? Or, what if the plan for growth simply does not work? It would mean you are removed as CEO, or it may even be the death of your company—either way, your legacy ends.
• Appearing needy. Finally—and this is often unconscious—you may not be willing to admit that you have taken your company as far as you can on your own. It is natural to instinctively avoid that kind of self-assessment. It goes against who you are as a founder, to think that you cannot do it alone.

Any of these fears can keep founders from having the courage to risk growth. Uncertainty leaves us feeling too afraid to sail away from shore, much less to eventually lose sight of it. But no great voyage has ever consisted of merely hugging the coast.

So how do you build the courage to lose sight of shore? You find the right-fit partner for your business by taking time to anticipate what that team will look like, and by putting in the work to be a right-fit partner yourself. That is what you will learn in the pages that follow.

Fair Winds

Repeat after me: This process is not about money; it is all about finding the right fit for a safe journey and good fortune.

Okay, great, but how do you find fair winds to aid in your safe journey and good fortune? I have organized my advice—on how to navigate your journey from founder to partnering with private equity—into nine chronological steps, one per chapter.

Sticking with our sailing metaphor, here are the steps:

1. Demonstrate who you are as a person, so people will trust you as Captain. Private equity firms want to invest in leaders who do things the right way and who chose private equity with an understanding of what it means to take that investment. Tell your story through your actions.
2. Prove you can sail. Prove your company’s value via the kind of clients it has attracted in the past and your ability to retain clients and revenue (and bring in new ones) even amidst rough seas.
3. Ascertain the seaworthiness of your boat. Know everything about your business before anyone asks, and make sure you can defend (or learn from) the decisions you have made in the past.
4. Determine what skills you and your crew lack, so you will know what you need in an Admiral. Do not just choose the highest bidder.
5. While seeking said Admiral, do not leave your boat unattended! Do not get so distracted by this process that, at close, you no longer have a business to sell or cannot recognize your crew.
6. With your new Admiral, choose a route that your craft and newly expanded crew can handle. Have a long-term plan in place for growth that is challenging but clear for all to achieve.
7. Tend to the ship. Know when you need a bigger vessel and assess how to scale up, whether through technology or an add-on acquisition.
8. Go once more around the Cape. You are now in a cycle. This will not be a one-time event. What can you do with your collective wisdom now that you are all more experienced? Logistics will be easier as you now have your sea legs under you, but that does not mean the next voyage won’t have rough seas, so prepare.
9. Rising Tides Lift All Boats. Invest in others, your community, and your passions, and you will continue to grow yourself and future leaders.

Partnering with private equity does not mean there will now be a “co-captain.” There can ultimately only be one leader, one authority. Since private equity is buying your business, it is more akin to you as the Captain now having an Admiral. You are but one in the Admiral’s fleet. You will still lead, but now you will also have a boss. This is why more than half of the book is dedicated to preparation, because if you do not choose the right Admiral—or you and your crew are unknowingly heading into stormy waters—there is little point in setting sail.

My Rose-Colored Sunglasses

No matter what my role has been over the last twenty years it has in some way, shape, or form, involved mergers & acquisitions.

The hard part in some of my past roles was watching from the sidelines as a merger & acquisition became more about the parts of a company than the founder and the people. Although that is a fine and worthy side of private equity endeavors, that is not the side I am interested in—especially after being on the management team at Royall and Company. I was able to see, firsthand, what can result...