95 % of the wealth in America is through small business, right? And so we're looking at extending those folks legacy. The way you take care of your customers is by taking care of your employees. And if you treat your employees well, the employees will treat your customers well, and it's a full circle.

I'm Patrick Pacheco, and you're listening to Season 4 of In Good Companies from Cadence Bank. The podcast we have your best interest at heart because at Cadence, we're much more than a provider of financial services. We're a lifetime advocate driven by your success. Success. Before we dive into today's episode, we want to wish all of those who have served a happy Veterans Day. Thank you for your courage and for putting our country first. Now, turning to today's show, according to the national census, there are 16.2 million veterans in the US, with 4 million under the age of 55. Many come back from deployment with a whole life ahead of them, and savings right for investment. But where does this new life begin? Our guests today have their ideas.

I'm Rich Sexton. I'm a partner here at LDR Growth Partners and been one of the first employees with LDR back in 2013.

Will Braym, Connecticut native, and one of the partners at LDR.

Rich and Will are behind LDR Growth Partners, a private equity firm they have built from the ground up over the last decade. And it all started in the military. Rich is a former airborne ranger and an infantry officer. From deployment to Iraq to special operations in Latin America, he served overseas for seven years. But even in the early days, he had a pension for business. When he got back stateside, he did something about it. Rich went from serving our country to growing our economy through LDR. The road was winding, but it was a natural fit. So first lesson today, it starts with grit. Here's Rich.

Ldr Growth Partners is a veteran, founded, private equity group. We really carved out a niche in the family-owned business. And we essentially started off with myself and two other veterans, JD Dolan and Lauren Gore, did the classical entrepreneurial thing that we essentially took $10,000 each and we threw it in a basket, also known as a bank account. And we said our first project was going to be to write a book together. So we wrote a book on financial leadership for soldiers. While JD was in deployment in Afghanistan, Warren was coming back on our deployment. I was in in South America. And we were working on that book at 3:00 a. M, 4:00 a. M. I still remember drinking those five hour energy drinks trying to get through the chapters. And we wrote that book in about six months. And so that $30,000 that we started with was down to about 4,000 after the book. It was more philanthropic than anything else. And so I decided that I was going to take the first leap of faith out in Casper, Wyoming. And we essentially worked with a midstream oil and gas trucking company. And we really worked in a very hands-on approach with a close buddy of mine.

But the longer the shorter it was is that we ended up bringing about $27 million of private equity money into Casper, Wyoming, for this business. And that put us on the map. We started off just really just trying to do good business with family-owned companies. Two years later, Lauren Goore met Ryan Martin, who's our other business partner, and Will joined us full-time in 2018. We came on full bore with private equity and really looking at the industrial markets for American manufacturing.

I think people don't ever realize how much sacrifice many successful business owners make at the start. It's not just it falls in your feet. You really do have to make some sacrifice to get there. So early days, how did the business take off? What was the nature of the first big deal?

Yeah, sure. So I think to your point, when I decided to this LDR thing, I really, like I said, I had $3,000 in the bank account. And I had this 1995 four-cylinder Jeep Wrangler. So I basically hacked everything I had, which wasn't much as a single soldier at 28. And I drove west to Casper, Wyoming. And I worked out of the Jeep Wrangler for about a month, slept on a floor for about a month. I think the reality was I remember sleeping on this floor because my buddy, shout out to Miles Childers, would let me sleep in his house with two young kids. And I was sleeping next to his diaper pale. And the longer the shorter it was, I just told Miles he owned this trucking business and it was a family-owned business. And I said, You know, Miles, what I want to do here is I want to help you with this business, but I don't want to work for you as a W2. I want to work as 1099 with this company LDR. And I want to see if I can provide value. And I said, say, hey, look, pay me whatever you think I'm worth.

I'm not trying to get rich here on this engagement. I just want to provide value and learn. I just work for you for the first three months, basically behind the scenes, helping clean up the stuff that we're doing today, honestly. There are small things, these small businesses are just so inundated with operations that they forget that you can go out and negotiate a gas discount policy for the company, right? And so what I did was I aligned LDR with success message fees. Every dollar I save you, I get 20 % of it. So they paid us $3,000 a month in the beginning, and we basically got a percentage of savings of whatever we got on the company. And that's where we proved ourselves to be valuable to them. And that's where we got a reputation in that small community in Casper, which is about 55,000 people, but very entrepreneurial.

Spotting untapped opportunities, that's lesson number two on how to succeed. Look around you, find gaps in the market, and put yourself on the map.

We started getting additional clients, and we realized that there's a lot of people out there that are really good operationally, but not necessarily has the business mind or discipline to focus in on some of these low hanging fruits that will exist on the back end of things. When we started doing that, that's when we started realizing there's more opportunity. And you start to realize, oh, my gosh, these guys in New York, they have a lot of money out there that they're trying to put to work. And there's these companies out there that really need it, but they're not on the radar because they're in Casper, Wyoming. And so these New York guys, when I started talking about the bones of this business is doing three million in EBITDA, 20 million in revenue, but they're bleeding cash. All of a sudden, they get really excited about it because they're like, hey, I got a lot of cash. What I don't have is a connection in Casper, Wyoming. And so when you can start, you create that bridge, all of a sudden, it's like you become very important for the local populace and you become a trusted advisor for them, because they see you as somebody who's living and breathing their life.

And you're not the guy from New York, but you're the bridge to New York. And so that was the start.

Life is full of financial decisions. We've got the products, services and people to help make them easier. Stop by a branch or visit us online at cadencebank. Com to find out why Cadence is the.

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Ldr is about five minds coming together. One of them is Will Braim. When he joined in 2018, he brought on a new expertise.

I was an equity trader at J. P. Morgan, and I was in that position for about 12 years. The trading floor and the energy there and it being very much like a locker room and high energy, all those things existed, it was quite an eye opening experience early on my career. So I ended up going out and getting my part time MBA at Columbia Business School as well while I was still working at the bank. I had a tremendous experience being in finance. And I think certainly as we've alluded to some of those skill sets are very applicable to what we do day to day today.

So you're a JP, everything's going well. How did your path cross with LDR? And then how did you decide it was time to leave JP Morgan? Because it's not always an easy thing to do. How did you make that decision?

Yeah, Patrick, it was a huge risk, right? I didn't really know Rich that well. And to answer your question, so JD was actually one of the first individuals I met at business school. So JD and I were in the same class at Columbia Business School. And he had the roots obviously back to Rich with the touch points out to the trucking industry in Wyoming. And we shared this very common interest in business ownership. And so we were chatting all the time, and he was telling me about what they were doing at LDR. And so we early days have similar personal interests as well. So we graduated in 2015, so I went back to J. P. Morgan for a couple of years. And throughout that time, we were chatting every single day. It was almost like all of us were working two jobs. I'd work all day and then work all night at the same time. And I realized that I think coming out of business school had a very, very strong interest in business ownership and really going the private equity route, as opposed to being in this trading position I had been in for a very long time.

So I ended up raising my hand at J. P. Morgan a month after my first child was born. And I think my wife was looking at me sideways saying, You sure this is the right decision right now? Maybe six or 12 months from now might be a little bit better when we're a little more stable, but it was definitely the right decision. I'm doing something that I'm really, really passionate about. And yeah, it was a huge risk walking out the door, as you said, Patrick. But I think the foundation for us was we recognized that we had something special in the people and that that would lead to successful outcome.

Banking on people, that's lesson number three. And that also means keeping good people in good companies. Will knows a little about that. When he joined LDR, the firm acquired his dad's business, Whitman Controls. So carrying the company's legacy, that became personal.

I was at business school and I was talking to one of our professors, and I was like, Hey, I think I'm really interested in business ownership. Do you know any firms? Do you know any brokers? How do you get in the mix? And how do I start looking at companies? And we started chatting. I was like, Oh, yeah, by the way, my dad has a company up in Bristol, Connecticut, which is a manufacturer of pressure, vacuum, liquid level, and temperature switches, serving a number of OEM and other B2B customers. But he was like, Wait, wait, what? He was like, Your dad has a company up in Bristol, and you haven't really thought about talking to him about buying that company. And it was an aha moment, where for me, it was really, really rewarding. I actually made the initial acquisition with my brother, Ramsey, and then subsequently my brother rotated out and the LDR team came in. So obviously one of the things we talk about all the time at LDR is continuing the legacy of the owner. And I think that was something that really resonated for us at an early stage, particularly with Whitman, was that it was personally rewarding for us to be able to do that.

And I like to think personally rewarding for my father to know that his legacy was continued with a trusted buyer. And then it was really like a milestone event for us to have an opportunity to acquire my family's business, turn from really outside consultants to more like operators, owners and operators, and see it firsthand. And that really set a strong foundation for where we are today. So it's been a successful transaction, and my father stops by from time to time and pops in and makes sure we're doing things the right way, and it's been great.

Taking care of people starts with your own team. Every partner needs to be in the right place to use their knowledge and experience. Let a good piece of gear be all that it can be.

I've spent a lot of time in finance, so looking at our team holistically, that's really the expertise I'll say that I bring to the team. With a lot of our businesses, they aren't quite large enough to support a full C-suite, so you won't have a CFO, CEO, COO-type roles. I really play the backseat CFO with a lot of our businesses, helping them with capital allocation and those types of things. But then there's like, you look to our broader team, I know we mentioned them at a high level, but JD, Dylan, Ryan Martin, and Lauren Gore. Ryan Martin is a former Vincent and Elkins attorney, went to Harvard Law School, spends a lot of time on legal and governance. So he really plays like that legal compliance officer behind the scenes. He's also very sharp with sales and marketing. So we have him step into that position. Lauren Gore, also a Harvard Law Grad spent a number of years of Baker bots actually in industry and so helps also on the legal side, but then also on the business development front. So very different backgrounds. And I think that's been a great competitive advantage for us looking at our individual businesses, because we have this whole back support team that can really support the managers on the ground.

So Rich, I'll have you explain a little bit more about your specific role.

Yeah, no, I feel like I have the fun job, Will. Everybody's job has different challenges. But I always really appreciate having guys like Ryan and Will side by side, because you just can't do this work without good compliance and financial diligence. And I always say that if you can't find an air, Will Brayne, will find it. So he's a good guy to have on your team for sure. I get to focus a lot on working with the emerging general managers of our companies. So I do a lot of the on site, one on one interactions with these business owners, which I really enjoy, but it's also interesting. I always say, every company, whether big, small, has skeletons. And if you can't find the skeletons, you're probably missing them. And it's just a matter of wrapping your head what they are and then being honest with each other because makes a good partnership, a good working relationship, and understanding what those potential risks are inside of those companies allows us to put our heads together. A lot of my work is on site with the general managers and with the operations team to make sure that we implement what we call the LDR way.

So it's a lot of fun.

So you guys definitely have an interest in family-owned businesses. It's your expertise. What is it about the family-owned business that excites you?

There's probably a myriad of ones, but the ones I can point to most specifically is that we're looking at extending those folks legacy. You have 95 % of the wealth in America is through small business, right? And so when you think about that number, these folks have been working in and out of small business for 30 plus years. And when they go to sell it, the last thing they want to do is have it chopped up and sold to somebody who doesn't have those touchy feely, warm interactions. How do we extend that legacy so that's not being sold overseas or going into more traditional financial group, where we're really re-investing in these companies, putting additional cash to allow them to grow, and then obviously providing the horsepower to get the right leaders in place. So we really try to put a lot of time and effort in making sure we hire the right people, the right cultural fits. But the way you take care of your customers is by taking care of your employees. And if you treat your employees well, the employees will treat your customers well as a full circle.

The LDR way is all about care. So take note. If you want to succeed, stay human, know your stuff, and take a genuine interest in the companies you work with.

I think being genuine in this space is really important. We were birthed into family-owned businesses. So I think when you come and talk to a family-owned operator, they want to know that you understand those nuances. You understand how nepotism works. You understand the political landmines, although not a large bureaucracy, still exist in these family-owned companies, right? And there's a million stories of that. But they want to understand that you know that you can't go in there like a bull in a China shop. You can't be a corporate guy, quote-unquote, to come in there and just start throwing in policies. And when you do change management, you really need to think about incremental change. It needs to be slowly over time. I'm going up up north next week to do a town hall is what we call it. And a lot of private equity groups don't do this. We're literally going up there to make an announcement to this family-owned company to all their employees who they see as family. And we're walking them through the process of how we've done this numerous times. And that gives family members, specifically, a lot of comfort and the idea of handing over this company, which is figuratively speaking, their baby, and them understanding that this is in the right person's hands over this next chapter of the business.

And so it allows us to stand out amongst our competition, because a lot of people who play in this two to five million dollar EBITDA space, they're not necessarily looking at this in the same sophisticated way that we are as a professional buyer. What we're seeing is the opportunity to grow these companies, make them LDR companies, professionalize them, implement ERP, create systems, have an org chart, have all those systems that the larger financial buyer would want and grow them to north of five million of EBITDA to really put a stamp on where these companies are going to be able to scale and grow into the future.

Buying a company, that's just the first step. Once you're in, the real work begins.

The thing is that the dynamics with these family-owned businesses that even if they don't have the echelons of present CEO, they still have a power asymmetry with the employee base of being the boss. And what it does is it creates conflict between the incoming leadership and the outgoing leadership. And a lot of times what we find is that if you can create a transparent social capital with that seller, that family member, what you can do is say, What do you want to do in your next chapter? A lot of these folks have been working for 50, 60 hours a week for the last 30 years. They don't necessarily want to just go fishing for the next 30 years of their retirement. So they may be interested in the design, engineering component, or they might be really interested in just the sales customer facing component, but they're not interested in running payroll or dealing with employee issues like that stuff. They're like, Yeah, you can take all that. But having that collaborative conversation with them allows us to put them in that consulting metric like Will is talking about, have them go on the board and be like, Okay, this is your lane.

You're not an employee, but you're focused on this. You have a ton of tribal knowledge here. We don't want to lose that. But at the same time, we don't want you to be an employee of the company because that's just setting everybody up for disaster. So I think it's that conversation that we have upfront that really brings some resolve there.

You acquired Mustang Motorcycle, Cincinnati Radiator, Ohio Heat Transfer. One, a manufacturing sector. Two, you guys really have a focus on the United States and the US centric business and who you sell to and who you're buying. What drives that and what brought that about, really?

I mean, I think this is like our core investment thesis. So Will and I both have very similar opinions here. But the idea is the pendulum swung really hard to outsourcing back in the last 30, 40 years. And I grew up in the Rust Belt to some degree, and Lauren did as well. And what we saw was a lot of these manufacturing companies leaving the US to take their business overseas. And honestly, the supply chains have been very thin in the last 10, 15 years. I think COVID really exasperated that. And it showed this example that if China decides to shut their doors, we do not have supply lines internally that allows us to continue to produce and operate autonomously. So I think for us being veteran owned, there's a lot of ways to show and demonstrate patriotism. And I think bringing light or short-line manufacturing for critical needs inside of the US, A, there's a good profit there, right? Because you're able to provide a service that might take six to nine months if you were to go overseas with, and we can provide it in two weeks or less. But it also allows us to really double down on what America is really known for still, which is quality.

It reaps the core of what LDR is.

Investing in local companies also means supporting our communities.

A lot of these companies, they're not in downtown Houston or downtown Detroit. They're outside of fifth Philadelphia. They're outside of Boston, Massachusetts. They're in these rural areas that are starving for jobs. They're starving for positions. And it's really, in my opinion, the heartbeat of America in these blue-collar districts that were robbed of their employment statuses over the last 30, 40 years. And so it makes us feel good about what we're doing in the sense that we're really trying to double down and create jobs here in the United States. And so it gives us really great social relationships with local municipalities.

But then most importantly, we're also creating a return for our investors and ourselves and creating more opportunities for the employees to get paid as well.

So that right there has to really set well with the companies you approach to purchase. I mean, that is not the focus and has not been the focus. And that's what I think these companies probably even started thinking they didn't want to be outsourced, didn't want they wanted to be a US-based company, a US centric. And I think that's got to resonate really strongly with them. So let's jump a little bit down towards leadership. I think it's fair to say that the military leadership training inspired your business philosophy. Would you agree, Rich?

Yeah, essentially inside the military, you use LDR like a squad leader or a team leader, or platoon leader, and you just abbreviate it with an LDR. And then at the end of the day, the leaders make or break any organization. So we thought it was very fitting for our organization that invests heavily inside of the leaders of these companies. What's interesting is a lot of times with the military, they do a lot of things not so well, but a lot of things really well. And it's one of the longest standing traditional approach of organizational leadership. And so they have this thing called the Rule of Four. And so the Rule of Four essentially is that there's four Brigades in a division, there's four battalions in a Brigade. There's four companies in a battalion, there's four platoons in a company. The longer the short of it is, the idea is that you should only have four people directly reporting to you. And if you do that correctly, that is really what has made the American military so dynamic, because that is how you actually are able to scale these 100, 200,000 person militaries into geographic regions because they have this coordinated approach with their leadership team.

So everybody has a job. They have their left and right limit. They know what those limits are. On these smaller companies, you'll have a 30, 40, 50 % company, and it'll just be like all of them will report to two people. You'll have 20 % of the things that you shouldn't be dealing with taking up 80 % of your time. So that's where we really start. And that's why we have LDR leadership help with some of that organizational design. You've got to design your team first, and then you can start putting people and blocks underneath it. And that allows everybody to have a feedback loop of how they're doing and how they're performing. That's where you can do incentive programs and allow team to function in a high performing way.

So structure is the first thing, but there's got to be a big human component. People have been doing things a certain way for a long time. How do you get them past the idea of, well, this is just how we do it?

Yeah, that's always like the most dreaded but most commonly used term that you hear. This is how we've been doing it for the last 20, 30 years. And just because you've been doing it one way doesn't make it the right way. But change management is best in very, very small bites. And what we do is I always say measure twice cut once. And so really with that incoming leaders, we always are hiring typically a key leader to bring into these companies. We're putting them through a personality assessment, which is different than a behavioral assessment to see how it matches with the existing leadership. And so what you normally will find is that if you do a personality assessment of the current leadership of a company, you'll get some insight into the culture of that company as well. So if there's low trust on that leader of that company, you know they'll be probably some trust issues in the company itself. And so you'll want somebody with high trust because they won't have 20, 30 years of social capital built up with that same group. And so that's a way to mitigate it, is those personality assessments.

When you get to know a company, you have to be on the front lines. You have to dive deep, learn about their culture, and figure out with them what needs to change.

There's these things called manager bias. It's exactly what it sounds like. Essentially what it does is it gives about 25 to 30 diagnostic questions to the employee base. For example, my manager gives me feedback on a weekly basis, yes or no. The manager may say, Oh, yeah, I get feedback every day. And then the employee will say, I haven't heard from my manager only once a year at the annual review. And that's a manager bias, right? Every company has this. There's no perfect score for this test or diagnostic. But what it does is it gives you a guide map to how do you lead into what I call the power symmetries. So even if you're the CFO, that doesn't necessarily mean you're the leader of that company. A lot of times what you'll find is I always say, who manages the water-cooler? When you go on lunch break, who is the guy or gal that people look to for confidence in certain decisions that are made internally. There's always those conversations, Oh, John's doing this. Why are they doing that? And Suzanne may say, This is why it's happening. And all of a sudden, even though Suzanne is not the titled leader in the company, she is a large influencer of that company.

Who are those influencers inside of your company? That may be the executive secretary or they may be the machinist, it could be the welder that's been there for 30, 40 years. And those are the people that you bring in decision making, key decision making. You bring them in as a collaboration tool, and that makes them feel like they're part of the plan and you're no longer forcing the horse to drink at the river. Now all of a sudden, he's bringing his people with him to drink the water.

So Will, occasionally we end up bringing new leadership. What's the recruitment process look like for new leadership?

We spend a lot of time collaborating with the owners, the sellers of the business on who the new transitional leadership is going to be. We run an interview process in collaboration with a staffing agency we've worked for a number of years, but the sellers of the company are heavily involved in that process. And so they have the best understanding of their culture, of who would fit well in their facility, who would get along with their employees. And so that's really how we think about change management is making sure that the sellers of the business have a big hand on it, and they're fully signed off on the person who's coming in. And in a couple of cases, we've actually promoted within, which has worked really well also. Folks who have high integrity, who are highly passionate about the company who have been there for a long period of time. At a high level, we really like to have that collaboration through the sale process to make sure that everyone sees continuity and a seamless transition on the backside.

And when things go wrong, because things will go wrong, the only thing you can do is learn. Take it from Rich and Will.

There's a saying in the military that no plan survives first contact. When you go through these plans, the execution gets a little messy as it always does. But then what's really important is after that happens, going through and doing sustained and improves, have a conversation with the key stakeholders and figure out what did we do well and let's make a deliberate conversation so we can ensure we do that next time. And then what did we maybe improve upon for the next operation that we're going to be doing? And I think that's allowed us to do is really the 10,000 hour rule, where you do 10,000 hours of something, become an expert. Same thing we preach at our manufacturing companies. If you do that same task over and over again, every time you do it, you do it slightly better, slightly better, slightly better. That's your lean methodology that we're preaching at our manufacturing companies. We practice it inside. It's just a forcing mechanism to look back at what do we do well and what will we improve upon next time.

Yeah. I mean, I think it wouldn't be private equity, honestly, if there weren't highs and lows. So for us, it starts with a lot of things that Rich, Sully mentioned, right? Rich and that side of our team, they go in and they make baseball cards about every single employee at the business. Who are you? What handshake deals might be in place? How many kids do you have? Where do you live? How long have you been at the company? And little things like that goes such a long way and develop trust over time. So I think that has mitigated some surprises that come on the backside. But as you mentioned, there's always going to be surprises. I think it's for us making sure that we have the right cross-functional team in place to tackle those surprises. There's all these stories that we could go on talking about maybe it's not the right leader, there's not the right org chart in place. Or last year we had a tree go through the top one of our manufacturing facilities, and literally I have people building units around branches of a tree. This is the stuff that you battle through every single day, and you deal with the setbacks, and you just make sure that you have the foundation of the team in a position to tackle them.

Collaboration, that's our final lesson. When we work together, we thrive. So once you're in business, take it step by step, observe, adapt, and get people involved. But most importantly, believe in your team because they've got your six.

I always have friends telling me like, Oh, I'm thinking about going to business with somebody. And I'm like, look, I mean, five partners, Will would sit here and tell you the same thing. We all have war stories internally, like there's five more people you're married to. You're just interacting with each other on every level. So the fact that the five partners are still together, I think we've already beaten the odds in that. And I still remember a couple of years ago talking with Will and saying, look, man, 20 years from now, if all five of the partners are still together, we've won. So I think the reality is we're already beating the odds there. And so I think that's probably the thing that I'm proud of.

Yeah. I would echo the same. I mean, when I first joined LDR, one of my friends said, It sounds fantastic, except for the fact you have five partners. Just a quick plug, just closed our first fund last week and closed on our first investment in that fund this week. And that's something that we've talked about for a number of years, and we never would have gotten there without the diverse skill sets of the team, but also the diverse networks as well. Rich is down in Houston with two of our other partners. I'm in southern Connecticut, our other partner, JD, is outside DC. And that's afforded a tremendous opportunity for helping build our, our investor base and our partnership base. So really proud of the team, really proud.

Of where we are today. This podcast is provided as a free service to you and is for general informational purposes only. It was a thrill to speak with Rich and Will today. So if you're a veteran looking for your next venture or an entrepreneur moving into private equity. Let's learn from LDR's success. Building a new business takes time and determination. Investor savings is wise and make connections with people outside the field of business. The more diversity on your team, the better. You have to be smart, too. Find your place in the market, ask yourself, What are we missing? Find your niche and focus on it. For LDR, that was industrial manufacturing and family-owned businesses, and it made them stand out. Finally, connecting with companies is the heart of what you do. So take a human approach. Learn how their business works on the inside, understand their culture, and look at things from their vantage point. The more you know, the better place you are to drive a company forward. I'd like to thank Rich Sexton and Will Brare for sharing their story of grit and inspiring many others along the way. In Good Companies is a podcast from Cadence Bank, member of C, Equal Opportunity Lender.

Our production team is Sheena Cochran, Edie Pengelly, and Natalie Barron. Our executive producer is Danielle Connell. This podcast is made in collaboration with a team at Lower Street, writing and production from Andrew Gannam and Lee Zlavadi, sound design and by Ben Crannell. This podcast is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness, or tinieness of the content in the podcast. The podcast is not intended to provide legal, accounting, or tax advice and should not be relied upon for such purposes. To the extent that this podcast includes predictions about the economy, these predictions are subject to a number of variables and you should confer with your legal, accounting, and tax advisors for their input regarding the possible outcomes of any economic subject matter discussed herein.