Source Talks ep. 39

Source Talks is a series where we discuss deal origination with expert PE and M&A pros. On this episode, Mark Gartner of RLH Equity Partners talks about RLH’s people-focused investment strategy and research-driven sourcing mechanism.

Mark, tell us about RLH Equity and the kind of investing that you do there.
RLH Equity Partners has been around for over 40 years now, and for most of that time we’ve been investing in high organic growth, founder-owned services businesses, but the unifying theme in the businesses in which we invest are the people. So if you think about our strategy, we gravitated very early on to things like culture, employee satisfaction, leadership continuity, and really generating great outcomes via growth as opposed to the use of leverage, cutting costs or roll up strategies.

Tell us about your approach to sourcing transactions there.

We take a really thematic and research driven approach to sourcing transactions. So we identify the 6 to 12 very specific sectors we want to be invested in over the next say, 12 to 24 months. We can speak with extreme specificity about the leaders in each of the categories that we care about. And if we’re doing a good job, then our internal watch list of companies that we want get to know better and add value to on their journey leading up to a transaction really matches the list of companies in the pipeline of investment banks.

What is the key to getting a business owner to respond positively to that first call from you?

The key is to establish a foundation of mutual respect. They have way too many options for capital, and so we like to very quickly share anecdotes of prior investments, case studies that demonstrate we understand at a visceral level what they’re experiencing, not only as a business owner but a human. And if you can do that, you know, in your usual intro – thirty, forty five minute callthat’s only going to cement a foundation for future repeat interactions leading up to a transaction.

Mark, tell us the role that technology plays in your origination efforts there.

We’re in the era where the future is now. Anytime you might say, man, I wish this tool existed to help me with deal sourcing – that tool either exists or you can build it, which is really cool. And all of these tools increasingly integrate into the CRM, which is becoming the nerve center of all deal sourcing activities. Sutton Place Strategies is a wonderful tool; I’ve been a longtime subscriber and in the deal sourcing role, the scariest thing in the world is missing out on a transaction. Nobody wants to get that email from a colleague saying, Hey, why didn’t we see this deal? And in the rare instance when you did miss something that you should have seen, you get a really nice digest of who the advisor was when the deal closed. And so you can reach out to that person with full transparency and try to figure out politely why you weren’t on the list.

Tell us your, your favorite quotation that has, that has helped guide you in your business career.

The one that has really stood the test of time is from a German philosopher, and the quote goes: “All truth passes through three stages. First it’s ridiculed. Second, it’s violently opposed. And third, it’s accepted as self-evident. And I’ve always found that quote inspirational and I hope others find it inspirational too.

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