This episode features Marc Herdegen, Senior Operating Partner for Strategy at New State Capital Partners. Marc is also Chief Operating Officer at New State Portfolio Company and MWM Corporation.

Marc’s past corporate roles have included Senior Director of Marketing and Product Management as well as Senior Strategic Planning Manager at Honeywell, Director of Acquisitions and Development at I Group LLC, a family office, and Corporate Strategy Consultant at Bain. Marc also served as an officer in the United States Army.

About New State Capital Partners

• New State Capital Partners is on its third fund.
• They look for companies with between $8 and $35 million of EBITDA.
• They invest up to $100 million of equity.
• They look in a wide variety of industries but tend to invest in business services and industrials.
• They bring an entrepreneurial mindset and partner with portco managers to drive value together.

Mr. Herdegen and His Role

• Enjoys the opportunity to work with great companies and great management to drive results.
• Looks for opportunities to work with the management team to make an impact quickly.
• Understands value creation and how to execute it.
• Has a varied background in different jobs where he had to understand an unfamiliar situation quickly, assess, put a plan into action, and execute the plan—what they do all the time at New State.

Point of Engagement

• Typically assists due diligence with a phased approach that depends upon the company.
• Works closely with his colleagues on the deal side.
• Will constantly update each other on the status of different opportunities.
• Gets involved early as an operating partner to help look at the company, assess the risk and figure out how to make it a great opportunity for everybody.

Playbook or Common Elements

• The company is organized into different functions with a financial-oriented group, human capital, strategy, and operations.
• Each of the people in those areas look at the different portcos with their particular lens.
• With most companies, they look to bring in new key talent depending on where that talent is.
• With operations, it's going to vary, but there are certain things they try to do in in each scenario.
• With strategy, they look to do one or two strategic pivots that will change the growth trajectory and transform the company depending on the scenario and the company.
• The earlier you can think about talent the better, knowing that you want to get that in place as early as possible.
• Having the right people is key before you can execute on the strategic pivots, prove an investment thesis, modify it along the way, and find other opportunities that you didn't know existed.

Keys to Working with the Management Team

• Be sure that what you're seeing and what the management team is seeing align while you execute.
• Be sure that you've come up with what everyone agrees is an executable plan to get you to the final vision.
• Have monthly portfolio reviews, board meetings, and rules of engagement—a way to interact, bringing bad news in early, being solution oriented, and dealing ethically.
• Think holistically about the company, understanding the impacts of what you're doing on the employees as well as the management.
• Have a framework to interact with all the companies and a common understanding of how to deal with each other to get to the right outcomes.

Working with Third Party Resources like Chief Outsiders

• They're likely to engage third parties once the value creation pivots have been identified.
• Part of the reason it's a strategic pivot is you may lack the expertise in house to perform all the functions that you need.
• While you put in place key leadership and identified others within the company that have the potential to step up and drive the pivot, bringing in the right third party at the right time can help accelerate that change, a big lift.
• Do it so that at the other end, you've put in place something sustainable.

Words of Advice for Operating Partners in a Similar Role

Being an authentic engaging partner is truly what the portfolio company employees, not just the management, are looking for. So, understanding what it is that they're facing, the dynamics they have to work within, is really important.

Otherwise, you risk being disconnected. And then you're coming in with ideas that are either a field too far, hard to execute, or aren't truly bought into, and you don't have alignment. And you won't know that unless you're engaging in the right way with the people at the company.