Eric Jensen, Nordic Capital | Achieving Operational Excellence: A Look into M&A and Talent Strategy in Private Equity

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So.

I'm really excited to be here today with Eric Jensen from Nordic Capital. Eric, thanks so much for joining us.

So maybe just to give folks a quick orientation. So I spent the first decade of my career in management consulting, worked with McKinsey Company, doing a fair amount of work in the healthcare services space. And then maybe part two of my career was very much focused on entrepreneurship and operating companies. So was part of the co-founding team for a company called Avia, which helps hospitals and health systems with their digital transformation. And, you know, also spent time running a health systems business for another health marketing oriented firm. And sort of came to this step in my career two, three years ago, where I said, Okay, I am absolutely convinced I just need to go run my own thing. I need to be a general manager or a CEO of some kind of firm in the health tech space, and I started pursuing those kinds of opportunities.

And then, as luck would have, it had this call from Nordic Capital and I said, Well, who are you guys and what do you do? And what I'll say is that I didn't originally envision myself getting into private equity. But there were just a couple of things about both the role and the organization that were incredibly appealing. For where I was in my career, the first thing was, you know, I actually really liked consulting, you know, in the first part of my career. But what I didn't like was not having skin in the game and being able to see the results of my work carry through and sort of fully realized. And so the operations function within private equity really helps bring those two things together in providing continuity of experience with our portfolio companies.

You know, the second thing is, I really liked the performance orientation of private equity. So, having been an entrepreneur, I spent a lot of time seeing venture capital, how venture capital worked, how venture capital backed companies worked. And, you know, on the margin, that was a great experience as well. But it was striking to me how much focus was placed on storytelling and management of optics versus. What are the numbers telling us and how do we use those to inform where we go strategically and operationally? And I really appreciated that kind of fact-based, rigorous way of looking at organizations.

You know the third thing? Well, I guess there's two other things, and I'll say both of those were very specific to Nordic capital, as opposed to private equity. Writ large, but one. They just had a fantastic health tech portfolio, and as somebody who spent a lot of time in health tech, I could tell. It was a group of people who really knew the space and had gone, you know, built some assets that I thought would continue to grow and be valuable. And then the final thing is, I sort of love the opportunity to be a bit entrepreneurial in helping grow and promote Nordic within the U.S. So the firm has been around for 35 years.

I had never heard of them because it's been mostly Europe-focused for the first 75 percent of the history of the firm. But I will say that over the last five, you know, five, six years, the U.S. has become a really important area of focus for the firm. And so it's been fun to be part of building out our team and the infrastructure that exists here in the U.S. To catch up really with, frankly, where our capital was already flowing.

And you think about one, it's this melding and integration of OPS teams and deal teams working symbiotically together, but also becoming more global. And you know, we've had the privilege to do some work with Nordic and seeing this perspective that you all. That goes beyond one shore. And being able to look not only with the business internally, but bring this perspective throughout the world, and that's really unique.

But that also applies in a few of the other sectors that we invest into as well.

And people get incredibly confused about who said what, and which one are you talking about? And so it was determined that somebody needed to take on a nickname so that we could differentiate between the two. And almost as a throwaway comment, I said, Well, you know, if you're going to give me a nickname, it better be something really masculine, like Thor and really just joking. And it absolutely just stuck. And you know, it's actually interesting.

I mean, I will say that there was a little bit of truth behind the nickname as well. And in the sense that I could be pretty direct. I sometimes threw down the hammer and was very clear about what I thought about something or a specific direction. I do tend to tell things or say things like I see it, which is a very kind of Danish heritage, kind of way of communicating. But I will say, over time, I have acquired a bit of a soft side. And for those of you who are fans of Thor Marvel movies, you may be able to track a little bit of the arc of how. He was very emotional and brash, and, you know, thought he could control everything in the first couple of movies.

And then, I don't know. I even watched Love and Thunder, which is probably one that's off the radar screen for some folks, you know, he's, like, very much focused on how can he help and support the people around him. And so hopefully I've made a bit of that change and followed a bit of that, the arc of that narrative in my career as well.

I had kind of, here's the checklist to help kind of rein in the chaos and the noise that was in my head. So I'd be curious, Eric, What are maybe two or three of the most important traits or ideal traits that you look for in a company? When you think about operational excellence of a business or its related potential? And maybe I position it also is not only what they have, but also what they could have given what they are today.

And a bit of that orientation is grounded in the belief that over time, the companies that have the best products will tend to win. And they will tend to win disproportionately. And so I think the diligence process certainly is focused on, Hey, do we believe this is best of breed or has the potential to be, you know, best of breed within a period of ownership? So, having said that, when we think about the levers that we could apply in order to drive value creation, I think there's a. You know, there's a couple of things that really focus on first. It really does start with with the team, right, and the management team that is in these companies. And this takes a little bit of, there's a little bit of subjectivity involved in what that looks like.

Do you have the right folks on the team? But in many ways, it's like sports teams. And it's not just about the individual capabilities of folks. But how do they mesh together and play well together? So that's certainly something we spend time on, you know, the second thing I would say is we are a very growth minded investor.

And so what that, you know? What that tangibly means is we spend a lot of time looking at commercial processes and activities. So what does the sales process look like, what's the sales team look like, what kind of cadence is in place? Are they doing the things they need to do to drive performance conversations within that function?

You know, just broadly, maybe elevating from the sales team and process. What is the go to market, how could that be improved? And, you know, are there opportunities to cross sell and other products on the back of sort of the core customer relationships? And then, lastly, I think, you know, looking at your value based pricing is also something that's important, especially in tech. Are you demonstrating the outcomes that you're driving for your customer base?

So that's, I'd say, maybe the first and biggest lever that we spend time on, you know? The second thing I'll kind of call out is that I spend a lot of time with health care companies that are tech oriented, but no company is purely tech and health care. There's a lot of services and so the management of professional services functions and how that looks and operates, and again, sort of the performance metrics. All of those things are another space that I spend some meaningful time on.

And then the last thing I'll call out, which is maybe not a traditional operating lever, but one that I think a lot about. In collaboration with our deal team, is like, at a strategic level, what are the untapped assets that could really provide meaningful value? So does this company have data assets that could be used in new and different ways? Do they have access to market segments that would allow them to sort of accelerate distribution of other products? So thinking about those kind of additional assets that are outside the bounds of commercial levers and all those kinds of things is another area we spend time on.

So maybe I'd love to kind of segue here into talking about you've got this company, you like what you see, you like what it could be. Then how does Nordic? And how do you then approach the value creation phase? And maybe what are some of the resources that you bring to bear to support your portfolio companies on this journey?

What I would say that the how we approach it in terms of resourcing here at Nordic, I do think is somewhat unique, you know? I think it's fair to say that many, if not most, private equity firms will start with investing in functional expertise that they can provide in a horizontal way, that they can scale horizontally across their portfolio. We absolutely do that, and we have a team. Our operations team is about 20 people, and I'd say about a third of the people within our team are in that functional support area. But the other thing we do is we bring in generalists who are, let's call it, experts in a given industry, who really focus on owning the relationship with a handful of portfolio companies.

And so the interplay of those two things, I think, is somewhat unique. And the benefit of that, in my view, is that it allows us to take sort of the CEO view and lens to what are the biggest rocks that need to be addressed. So I try to say, like, OK, if I were running this company, what would matter most to me now? And presumably, many of those are already on the CEO's agenda, and maybe there's one or two that isn't yet.

And I can have a conversation about that. But it does make sure that we're always kind of solving for what matters most to that individual. As opposed to saying, hey, we have this HR thing or procurement thing, we're able to connect those dots, so that's generally how we work as an organization. Maybe just a couple other points that are worth mentioning.

We've also made a meaningful investment in earlier career folks who are just high horsepower talent that can be dropped into a situation to work on things. And so, you know, sometimes portfolio companies don't have the resources to either recruit these people or keep them. And so that is a big source of value to have that kind of flexibility available at the ready. The second thing that we do is, and this is especially true in Europe. But we talk a lot about the use of black belts, and so black belts in the vernacular of Nordic are individuals who are either independent consultants, individuals, or boutique consulting firms that have highly specialized expertise in a given area.

And you know, in Europe, we kind of have this network and we have some events to keep them up to speed and really seek to cultivate those relationships. Because the fact is, you know, I can't solve for I don't know everything, and I know that I can't. So those resources can be highly valuable. And then, you know, I think the final thing I'll just call out is in the U.S, we don't have that network.

And I don't think we'll really seek to build it in a meaningful way. And so we've been quite active at reaching out to you, Sean and your team, because in many ways, you're the U.S Black Belt network that we have.

We're going to bring the strategic expertise, but we're also going to bring the tactical expertise. And we're going to have some of that in-house and then a lot of it we're going to use house, house. And so you're creating a better whole. And because you always don't have to make this binary choice that I think a lot of people do.

And so that's one of the things I really appreciate about your unique approach to private equity, and then also value creation.

That, truth be told, I'm still figuring out, right, so I don't think I've entirely nailed it. But a couple of things that I will say. With regard to deal teams, I do have the belief that operations needs to have a one team approach. And what I mean by that is, we have to be having conversations with executives that are informed by the discussions the deal team is having and are aligned.

And so, you know, the last thing you want is, hey, Eric comes in and has these three topics to discuss. And they're not at all aligned with what the deal teams are having conversations about. So I really, I try to spend a lot of time making sure we're in sync around priorities. Because these folks that run these companies, they have a day job which is not managing their investor. And so we want to recognize that that time is precious. You know, with portfolio company leadership, you know, here. What I would say is my biggest focus is like, how do I build trust with these folks? And they need to believe that in working with me and in spending time with me. That that will make them more successful than they would have been otherwise. And you know, I don't know if you're sort of familiar with the trust equation, or if you've ever sort of heard of this. But you know, I'm going to miss, I'm going to leave one of them out of it. But it's sort of credibility plus reliability, plus something else divided by self-orientation.

And I'm a big believer in trying to think about that as I interact with folks, you know, with operation team members and sort of the extended team at Nordic. I think I've already spoke a little bit about what that looks like, but I try to stay, like, very actively engaged with. You know, we have a pretty well-developed procurement office that has is looking at all the spend data across. Our portfolio has negotiated master service agreements with a number of companies that can get leveraged by our portfolio. So, you know, I got to pull him in. Okay, we need a little bit more juice, all right, Alejandro, help me out here. What can we do?

And so I'm always I'm trying to almost like, bit like a quarterback. To make sure that those resources are all sort of aligned and in sync and that everybody's kind of playing their part, that's right for the situation. And then, I guess, you know, the last thing I'll just say about coordinating with these folks and working with all of the various stakeholders. I called out. There's a bit of a remind, you know, continually reminding myself that, and this is like a recovering control addict point. Like, ultimately, it's not the operations teams decisions that get made here, right? Like we're here in service of others.

We can have points of view, we should share those points of view, we should help hash them out. But, you know, Jeff Bezos has this disagree and commit, you know, notion which is like, Hey, call out what you're thinking and then don't debate it ad nauseum. And once a decision is made, you got to get on the bus and move with it.

And so that's kind of a I just, I think, an important mindset to bring to the job.

And so, you know, kind of what you're saying. The way that you are approaching it is is I'm thinking about in in where the future of private equity going is. This, you know, you're running a private equity firm in some ways, like a larger hole in where the portfolio company, the private equity firm. Their various constituents are broadly aligned in building trust, as a larger hole in itself. As the business of private equity is becoming a business. But you're giving people at the operating company level to Freewill to create truly differential businesses. And you let them to kind of get their, you know, call their shots at the same time. So I think that's it's really forward thinking and I think where the future of private equity is going, for sure.

And but when things get tough, the only way to really work through those is if you've built trust with people that you're working with. So anyway, I maybe I'm sounding like a bit of a softie here. But I think it is notable that much of the conversation here has hasn't been particularly focused on hey, this tool or this, you know, best practice, or whatever the case may be. Those things are all, of course, you know, important, but I don't know that they're as foundationally important as some of the things we've talked about.

Let me start with the thing that's very clearly the same between us and Europe private equity, which is, we're performance focused and performance driven. But maybe, you know, the how we get to performance, I think, sometimes will vary by shades of, by degrees. And you know what I would say, you know, culturally. Within our firm. What we try to do is we try to take a very collaborative approach to engaging with some of our, with our portfolio company executives. And maybe the other way to say that is like, I hear a lot within private equity. Hey, we've got this playbook.

It's 128 pages and we're going to drop it on a company we invest in. I think our orientation is, you know, not 100 of any given playbook we might have will apply for a given investment. And so we want to start with collaboratively building a VCP plan with those executives. And some of those things on that list are not going to be things that we have a playbook or expertise, or whatever the case may be. But we have to back to the point on trust. We have to trust that the people that we have in those seats, running those organizations are directing their energy and focus to the things that matter most.

Now, having said all that, we do have points of view on what best practice looks like. And part of my job and responsibility is to surface and elevate those things that I know are working at other portfolio companies. And make sure that a company that's not doing those things really is both aware of it and strongly considers pursuing it. So, you know, as an example, we do have pretty strong points of view on what good revenue operations looks like to just drive a commercial engine. And I tend to be, I will say, unapologetic in saying, if you are not doing XYZ, why not? And how do we accelerate and get that started?

So maybe just the summary point that I would make here is on the spectrum of hey, we've got this playbook, go forth and execute, and the other side of the spectrum of Hey, here's our phone number, call us if you need help. We're really trying to walk a fine line in the middle ground between those two approaches, in a way that's viewed as value-added by our portfolio company executives.

It's usually somewhere in that middle. I think that's a great approach that, you know, certainly, I'll take back from this conversation, even as I think about our own business, because it's, you know, the world's not binary.

Then what would be one of the things? If you were to look back to your, you know, the younger Eric Jensen pre-thor days and say, Young Eric? You know, this might be something that you should listen to.

So I learned about rule number six from this book called The Art of Possibility by Ben Zander, who is a orchestra, orchestrates various symphonies. And the essence of Rule number six is Don't take yourself too seriously, right? In my consulting days, I absolutely took myself too seriously. I thought every meeting, every client situation was a very high risk situation. And I entirely overestimated both my own importance and the importance of what I was necessarily working on at the time.

You know, in my entrepreneurial days, I probably took that even further, you know, in terms of viewing everything as sort of life or death. Is this company going to make it, is this decision going to make or break where we head? And in PE, it's a risk that you take everything very seriously, given looking at the numbers all the time and saying, where is this going? But look, you know, life is more fun if you don't take it seriously.

And it's better mentally to not ride the roller coaster if you can avoid it. So that's thing. One thing, two is keep reading. So I was a voracious reader when I was a child, through high school into college.

And then when I went out into the professional world, I stopped reading. I just stopped. I didn't read anything outside of work materials. And around when I turned 40, I know I'm sort of now dating myself. I decided to really pick back up reading and took the orientation of, Hey, if anybody recommends a book to me, I'm just going to buy it immediately.

It's easy enough on Amazon, you know, click of a button before the conversation is over to make that happen. And so a couple of you probably noticed some themes here, but just I'll call out a couple genres I spend time on. So stoicism is one area of interest, with Ryan Holiday, who's got a variety of books in this area, particularly interested in Kind of Human Behavior. And Robert Greene has written a number of fascinating books. 48 Laws of Power, The Laws of Human Nature, The Art of Seduction. Lots of books in that category. In the category of History and Human Evolution, Yuval Harari has written some amazing books about humanity.

Sapiens is just probably a top three book for me. And then lastly, in the category of productivity and resilience. Actually, a former colleague of mine from McKinsey, Brad Stolberg, is just a great writer and most recently published a book called Master of Change. That I'm working my way through. So, you know, keep reading. And then my final point, and I'll be way more short here. With this one, Sean become a bit verbose, but maybe just I would tell myself that careers aren't linear.

And they're probably fair to say that they're sort of happy accidents. And so, you know, enjoy the ride, and certainly enjoying the ride where I am today. And I've been glad to talk a bit about it with you here today on this podcast.

But.

Thank you for so much for spending the time and sharing your wisdom and insights here with us today.

Special thanks to Eric for joining. If you'd like to learn more about Eric and Nordic Capital, please see the episode notes for links. Please continue to look for us anywhere you find your favorite podcasts, including Apple, Google and Spotify. We truly appreciate your support. If you like what you hear, please follow, rate, review, and share.

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Onward.