Heather Hubbard | Representation for Women in M&A

On this week’s episode of M&A Masters, we’re joined by special guest Heather Hubbard, Managing Partner of Valesco Industries, a lower-middle market firm based in Dallas, Texas. This past May, Heather was named D CEO’s Private Equity Investment Professional of the Year, and in a market like Texas, that’s no small achievement.

“I think, coming in, we represent what we’re oftentimes looking at in portfolio companies and potential prospects. There’s a very diverse group of people working at the majority of these companies, so when we can reflect that back to them and relate to them each in their own way, I think that it gives us an advantage,” says Heather about the unique perspective of women in M&A.

We chat about Heather’s journey from running a company to private equity, as well as:

  • What women bring to the table in M&A, specifically in private equity
  • Team dynamics with women in M&A
  • Why women are underrepresented in private equity
  • The future of Women in M&A
  • And more

Listen now…

Mentioned in this episode:


Patrick Stroth: Hello there, I’m Patrick Stroth, president of Rubicon M&A Insurance Services. Welcome to M&A Masters where I speak with the leading experts in mergers and acquisitions. And we’re all about one thing here, that’s a clean exit for owners, founders and their investors. There’s a saying out there, the bigger the challenge, the bigger the opportunity for growth. It’s hard not to see the obstacles we’re all facing these days.

But I’d like to focus our attention in today’s show on an entirely different challenge and the real opportunities out there were business owners and private equity both stand to benefit tremendously. I’m not talking about the pandemic. I’m talking about how women are seriously underrepresented in M&A today and how this situation presents an unbelievable opportunity for those who want to take on this situation. I’m thrilled to be joined by Heather Hubbard, managing partner of Valesco Industries.

Valesco Industries is a lower middle market president pretty firm based in Dallas, Texas. Now, for my regular listeners, earlier this year I profiled Valesco’s Bud Moore. I’m returning to Velasco because this past May, Heather was named D CEOs Private Equity Investment Professional of the Year. And in a market like Texas, that’s not a small market. So this is a real big get for Heather. So who better to talk about women in M&A? Heather, welcome to the program. Thanks for joining me.

Heather Hubbard: Thanks for having me.

Patrick: Now, before we get into macro issues, women, M&A and all that, let’s start with you. How did you get to this point in your career?

How Heather Got to This Point in Her Career

Heather: You know, I definitely didn’t sit out and say I want to be a female partner of a private equity fund or an SBIC fund when I was a little girl because I obviously didn’t know what that quite meant. But what I did do when I was a little girl was take all the groceries out of the pantry of my parent’s house, set them up on the kitchen island and take one of the two cash registers that I begged my parents to buy me when I was growing up and sell all their groceries back to them.

So from that small business that I started, which had a great gross profit margin, I started a pool cleaning business, a gift wrapping business. And I knew I always wanted to be in business. So I didn’t know what I wanted to major in, in college but I did attend a meeting of the Collegiate Entrepreneurs Society, and they were interviewing.

At the time, there were 12 kids in the basement of Business College and interviewing a local business owner in Oklahoma City who wasn’t doing anything bright or brilliant, just had a really cool business that he was operating. I think it was a data center or something like that. But learning about how he started his business, how he signed a lease, how he hired his employees, how he managed his accounting system, how he on and on and on.

The questions that we would ask in diligence today, we got to ask in that setting. And I realized that I was hooked. I just wanted to know everything about what he was doing and how he was making that happen and all the little details and the fact that he could control his own destiny and he could chart his own path. That set entrepreneurship and really this idea of investing in entrepreneurs into a whole different plane for me because I didn’t want to just be another employee in corporate America doing corporate finance or accounting or anything like that.

Not that there’s anything wrong with that. I just really love the entrepreneurial spirit. And so we get to, now fast forward all those years, back those really cool entrepreneurs who have a great idea and a great vision, and we get to support their vision and we get to learn about their vision. And it’s pretty much the coolest job that I could ever imagine.

Patrick: Yeah, one of the things that can separate us in age and perspectives is, you know, some of us that are a little bit older, we were just at the dawn of going from the big corporate America structures out there where you had one job, you stayed with that firm for your entire career to now it’s a free for all where there are all these smaller, nimble companies where you get a whole wide variety of different tasks you can do and things you can focus on.

So you get in there, you’re in this great positive pool and you’ve got the mindset for an entrepreneur. It is a particular mindset you have to have. What brought you from, you know, running a company to going into private equity?

What Led Heather Specifically to Private Equity?

Heather: Well, you know, I kind of stumbled into it in a way. I had an internship with the folks at Valesco in college. And they gave me an opportunity to learn what they were doing. And at the time, we were independent sponsors. So we were doing investments on a deal by deal basis. We didn’t know what this whole fund thing was all about. And when I started, we said let’s raise a formal fund. Let’s make a legacy out of what we’re doing. And so I got to be in on the ground floor sort of starting with everything from all of our diligence lists and making sure those were right to our models to how do you raise a fund.

How do you portray a sort of track record? How do you do anything and everything? How do you hire an intern? How do you train that intern? Obviously, people have methods on those things. But we didn’t have a Valesco method until we started to do it. And so everything that we are today, I had a finger in developing which is also really cool because I feel like an entrepreneur amongst all these entrepreneurs we get to invest in. We created our own destiny at Valesco as well.

Patrick: Well, it’s nice because it was just growing and so you were in the ideal position coming in at the ground floor, literally. And there were all these opportunities within there and you can try a bunch of stuff and probably stub your toe but you can at least get in and get exposure to that.

Heather: I was told many times that all the things roll downhill and I was the only one at the bottom of the hill, so,

Patrick: That’s how it goes. Now. I’m not going to take credit for the idea of talking about the topic of women in M&A. Actually, I was inspired by one of the law firms out here in Silicon Valley, which is very active in trying to attract more female attorneys to get into the M&A practice. And so we were looking, you know, when you look at a profile of private equity firms out there, it doesn’t take a lot of time to notice that there are fewer ladies in the pictures of the team members than men.

Now, there are studies coming out that are listing all of these benefits and value that women bring to the table when they come in. They have a whole separate skill set and perspective. And that perspective can be harnessed to do a lot of great stuff that just, for nobody’s fault, just isn’t happening right now. Now, from your perspective, what do you see the women actually bring to the table here for M&A, specifically, M&A in private equity.

A Woman’s Touch in M&A/Private Equity

Heather: So I think they’re, it’s interesting to ask this question because we’ve been working from home for coming on six months now. I almost forgot what the answer to this question was because when you’re in your own little world working with your own team and the situations that you’re familiar with, you stop getting that perspective of what it is to be female and what it is to be different. But we recently had the opportunity to start looking at deals again and get on the road a little bit and spend some time with folks.

And I think there’s two things that women bring to the table. It’s perspective, which you’ve used that word over and over again, but we’re looking at things from a completely different lens. And it’s everything from we’re not really not interested in, generally speaking, talking about a football game or the baseball game or what happened in March Madness. We’re interested in other things. So we bring a different perspective on business models and product lines and what’s attractive to certain audiences and maybe how to approach diligence assignment in a slightly different way.

Or maybe we’re interested in slightly different things and because we ask a certain line of questions, it gives us a different look or perspective on a potential target. And I also think we bring a lot of balance. We look at the world differently. It’s not universal, obviously, we’re all different human beings and we all are along a spectrum, right? But there, it’s not better, it’s not worse. It’s just different. And if we have a balance in different perspective that we’re bringing to the table, we’re investing in female entrepreneurs, minorities, different people that may not have had a fair shake. And it’s not because my male colleagues wouldn’t give them a fair shake.

It’s just that they may not have seen a perspective that that type of investment would bring to the table or an opportunity that we may have seen. And we’ve certainly stopped a lot of bad cosmetics investments that have come across our desk. The guy said, Oh, that’s a pretty cool deal. And we’ve shot those down. So it gives good perspective because we are 50% of the population and we buy more than 50% of the products out there in the world. And so we have a unique take on that.

Patrick: No, I mean that’s fundamental, particularly if you’re doing consumer products or whatever. You need the perspective from the target buyer, and you know who your customer is. And if you’re selling hockey equipment and the only people that are involved with that business have never played hockey before, you’re not going to be able to connect with the target audience there.

Heather: That’s a great example, right? Because one of the things I said is so true. We represent way more than 50% of the consumer purchases, right? And yeah, one of the members of my team might have never played hockey before. But I’m a mom and a lot of the women I work with are moms. And you know what I do is I buy all the soccer equipment, I buy all, I sign up for all the gymnastics lessons. I buy a lot of the things that our family consumes and so I have a different look on that world.

Patrick: Yeah, so he needs sporting equipment. Well, wait a minute, who’s buying it? So absolutely. Well, talk about real quick the team dynamics, because you would mention that where, we’ll get into later on reasons why there hasn’t been as much representation and we could be turning the corner. But let’s just talk about the team dynamics with women, but either in the company itself or in a deal team.

Heather: And when you say team dynamics, you mean with females in the room?

Patrick: Yes. Yeah.

Heather: You know, I think that’s an interesting question because I think, again, it’s about perspective. A lot of times, it’s cultural too, right? When we get into a diligence assignment. I’m the kind of person, I want to know about the person that I’m engaging with.

And I may not dive into, you know, tell me about sales by product line by gross profit margin by, you know, geographic mix right away, but I may ask about your family and your background and your history, and I might have different questions than the rest of my teammates and that might give me more insight or a line of questioning that might be helpful for us to understand and appreciate where that entrepreneur is coming from. And so I think I bring that to the table. My other colleagues bring, you know, maybe a different spin on the analytics to the table.

And so I think us coming in, we represent what we’re oftentimes looking at, at portfolio companies and potential prospects. Because there’s a very diverse group of people that’s working at the majority of these companies. And so when we can reflect that back to them and relate to them each in their own way, I think that it gives us an advantage.

Patrick: Well, on that softer approach, I’m just using that term, but that kind of human skills approach is one that is consistent with one of my absolute core beliefs about M&A. It’s not, mergers and acquisitions is not company A buying company B. It is a group of people agreeing and trusting to work with another group of people who when they come together, the ideal is that the whole is going to be much greater than the sum of its parts.

And that’s people. And I think a perspective when people are talking about well, we’ve got great synergies and on paper, this all looks good. If you get under, you know, a couple layers down, you’re going to find out that well, maybe they have other priorities or other fears that we need to deal with. And that gives you an edge.

Heather: Well, Patrick, Bud’s not gonna want me to tell you this, but our money is just as green as everybody else’s money. And our differentiator is 100%, related to emotional intelligence and being able to meet people where they are and to build that bond. And I can sit here and tell you all about my investment criteria, you’re probably going to ask about that. And it’s going to sound just as boring as next person’s investment criteria and exactly the same.

And so it’s all about how we meet people where they’re at, and how we engage with them on a number of levels because we’re going to be tied at the hip. These teams, we’re three to five, seven years, at least. They’re going to be texting us on the weekends and wishing our kids happy birthday and also diving into some really hard topics. So we’ve got to meet them in a common place.

Patrick: Let me circle around just on some stats here when you talk about your money’s as green as everybody else’s, and so forth. But let’s talk about just specifically with women. And this is from Venture Capital Magazine just recently, startups with one female founder hired two and a half times as many women as compared with male-founded startups. And exclusively female-founded startups hire six times as many women.

So you’re going to have diversity right there if you’ve got female-founded companies. Now, companies with female founders generate, get this, 35% larger ROI compared with male-founded startups. Okay, this is a meritocracy, okay? and it is all about the bottom line and performance and execution. And when I hear that, that catches your attention real fast. And this is what’s real contrarian into that. And again, same survey from Venture Capital.

Despite their success, a study shows that 40% of female-founded companies will not meet their fundraising goals this year. Okay, there’s the disconnect. There is great opportunity, if you’re getting a higher ROI, you’ve got more built-in diversity with a firm already this organic. Why not take another look at it? And so the thing that is just, it’s almost hiding in plain sight, which is why I think it’s a tremendous opportunity out there. Now, when you and I talked, Heather, you know, there was this lack of women in M&A. And I just want to get into the reasons because it’s not that they’re being held out.

I think quite frankly, they just may not be aware of the opportunities that are there. And unfortunately, you could have some situations where maybe they’re not being encouraged or they may be actively being discouraged by people, you know, in authority, in education or whatever. You know, let’s talk about that real fast. And, you know, what do you see, what steps can be taken, what confirms do to say, you know, to people that weren’t even thinking about private equity or finance that, hey, door’s wide open and here’s some great stuff?

Educating People About Existing Opportunities

Heather: I think it’s a great question and it absolutely starts with kids that are my daughter’s age at six years old, teaching her about budgeting and business and getting her interested in those types of worlds. It goes to high school. Don’t let a girl think that she can’t be anything. We were talking about that the other day. I never thought I couldn’t do anything that I wanted to do. So I just kept going. So in high school, you know, getting that opportunity in college, educating about what the opportunities are that are out there.

I was one of probably three females in my entrepreneurship major at all. Even in the finance classes, there weren’t very many females represented. When we go to hire, unfortunately, the pool of candidates is very low on women. My team knows that I’m going to ask how many female applicants we get for that job. And they go out and they hunt for those female applicants because they know that I’m going to want them to interview and just at least give that woman a fair shake at the opportunity.

But they struggle to get the candidates that they need. And it’s not because those women don’t want those jobs it’s because they never were told they could. They were never told that they could major in finance or entrepreneurship or accounting. They were never told that this was an option. So it’s about education of the opportunity in the world and what we do, but it’s also about encouraging women to get into business because I think we can, we can knock it out of the park.

Patrick: And when we talked before, it wasn’t just women working with other women, you’re enhancing teams that are mixed, men and women. And all of a sudden, and we can see this where suddenly if you’ve got a different person in your group, everybody seems to up their game a little bit. There’s less complacency.

Heather: Absolutely. And you’re having to figure out how you relate to different people because you’re just inherently different, right? So if that starts internally with us, then how much better are we going to be if one of my male associates has to relate to me every day, he’s going to be way better at relating to that female CFO at our portfolio companies. We see a lot more, you know, CFOs and accountants that are females than we do in the finance profession.

So, you know, there’s, we’re everywhere. We’re out there. We’re doing jobs at portfolio companies. You know, we’re heads to purchasing and heads of inventory management and heads of marketing. And so to think that a diverse team at bar level wouldn’t be the goal or the gold standard is just misguided because we’ve got to pair with those diverse teams that are popping up everywhere else.

Patrick: Let’s look in the crystal ball real quick. And again, from your perspective, because you’re actively doing recruiting out there. I know the law firms are actively recruiting. If you want to look for a model or an analogy, look in the healthcare industry. Virtually everybody in management and upper management in larger institutions are all women.

Now, presidents, vice presidents all the way through. The old days, 50 years ago, it was all-male because all the men were doctors. And you’re seeing now women are now outnumbering men in medical care, not only on treatment but in management. So it is there. But what do you see for the future for women in M&A?

Heather: I think it starts with people like me. And we have a great responsibility to encourage that education and encourage the hiring of a diverse pool of candidates. And it’s not just women. It’s, you know, ethnic minorities, it’s people from different backgrounds, right?

We benefit greatly from having people who grew up in rural communities on our team, and urban communities. And I think that difference right there is huge. So just keeping an eye out for those differentiators and people’s backgrounds and really getting to know their backgrounds so that you, you know, we’re investing in America. We’re a small business investment company. So our team has to be a reflection of that and it starts at the top.

Patrick: I’m personally looking forward to just once the whole pandemic issue passes, and I will really appreciate this more as that human contact again. And I cannot wait to be out there. This has been nice technologically for me being able to reach out and meet people like you remotely like this. So we’re not forced to travel.

But I think we’re all really going to appreciate being around other people. And I think that the more you can bring to the table, it’s only going to be a net benefit for everybody. Well, let’s not leave our audience hanging out there, okay Heather? Why don’t you tell us, give us your profile of what your ideal client is looking like right now. What are you looking for?

Valesco’s Ideal Client Profile

Heather: Well, I told you I wouldn’t bore you with our investment criteria. And I can leave that to the end. But we’re actually looking for entrepreneurs. I think that’s the first and foremost. we’re looking for people who have great ideas, great vision, and they started an awesome company based on a really cool product line or idea. And they’re looking to take their business. That, I don’t know, you’d rate it on a scale from one to 10, you’d rate it a seven, right? Great idea, great product line. Great start on marketing and sales and business development. You know, a solid accounting team, but they need that something to push them to the next level.

They need somebody to invest in their growth. They need somebody to partner with them to understand them to really relate to them. So we’re looking for those really interesting and unique entrepreneurs, first and foremost. We’re looking for businesses in the three to $15 million EBITDA range in the ten to $100 million revenue range. We hope they’re not distressed when we make our investment in them. We want them to be kind of growth-oriented, really all over the US because we are a small business investment company. And we’re investing in minority and control equity positions.

So that means that we can pair with entrepreneurs in a variety of different circumstances, whether they want to retain control and they want to really grow this thing and knock the socks off of it, great. We can be a solution for that. If they’re looking to exit and pass the business down to their management team or their family members, we can facilitate that. We can come in and a traditional sense as well and facilitate a buyout if that’s really what’s of interest, but we’re looking to be a good solid solution and partner for that entrepreneur to do whatever he or she is looking to do in the next phase of their life.

Patrick: Bud’s comments about your investments have been real community-oriented, where you’re looking not just to enhance a portfolio company, you want to enhance the community that that company serves. And I think that’s broader and that really resonated particularly when we first talked was pre-pandemic. What do you see trend-wise in terms of business now for you guys? Is the activity picking up?

Heather: It is. Thank goodness. We’re so excited. We’ve been really busy through this time just trying to make sure that we set our businesses that we are invested in right now up for success on the backside of all of the things that are happening in the world. But we are seeing the activity pick up. Our business development team, I have to give them a shout out because they are doing excellent work and the fruits of their labor definitely showing up in the activity. We’re interested in making investments this year. We’re engaged in that process. And we will be making investments next year as well. And we’re not slowing down.

Patrick: Great. Well, Heather, how can our listeners find you?

Heather: Sure. Well, we are launching a new website, which I’m pretty excited about. So that should be online soon. We have a lot of cool interactive videos to show people who we are. We like to highlight our team, which is really great kind of bringing this whole conversation full circle. We have a video out there that talks about our team and our culture and how we partner with people and how we partner with each other as well as all the things you’d want to know about why you should choose us, but our website is valescoind.com, and you can find us there and maybe check back a couple of times because we’ll have new updates.

Patrick: Heather, thank you very much for joining us today and I encourage anybody that wants to learn more about just this whole subject, heather is truly an inspirational person to speak with. And it’s been a great time talking to you. Heather, thanks again.

Heather: Great chatting with you.


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