Women in M&A – A Conversation with Heather Hubbard

16 December, 2020

heather-hubbard-headshot Earlier this month, our friend Patrick Stroth, president of Rubicon M&A Insurance Services, had the opportunity to sit down (virtually) with Heather Hubbard, Managing Partner of Valesco Industries, a lower-middle market firm based in Dallas, Texas to talk about what women bring to the table in M&A. 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.

During the interview, Patrick and Heather chat about her 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

Patrick: Let’s start at the beginning. How did you get to this point in your career?

Heather: You know, I definitely didn’t set 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 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 and a gift wrapping business. And I knew I always wanted to be in business. 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. Now I get to 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: What brought you from running a company to going into private equity?

Heather: Well, 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: 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. 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 the benefits and value that women bring to the table. They have a whole separate skill set and perspective. And that perspective can be harnessed to do a lot of great stuff that just isn’t happening right now. From your perspective, what do women bring to the table in M&A, specifically M&A in private equity?

Heather: I think there are two unique things that women bring to the table. One is perspective. You’ve used that word over and over again, but we’re looking at things from a completely different lens. We’re not really interested in, generally speaking, talking about a football or 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. Because we’re interested in slightly different things, we ask slightly different questions and it gives us a different look or perspective on a potential target.

We also 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. It’s not better; it’s not worse. It’s just different. And if we have a balance in different perspectives 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's that different 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. You need the perspective from the target buyer, and you need to know who your customer is. 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. Because one of the things I said is so true. We represent way more than 50% of the consumer purchases, right? 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 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: Let’s talk about the team dynamics with women, either in the company itself or in a deal team.

Heather: That’s an interesting question because, again, it’s about perspective. A lot of times it’s cultural too. When we get into a diligence assignment, I’m the kind of person who wants to know about the person I’m engaging with. I may not ask about sales by product line or gross profit margin right away. I'm more likely to ask about your family and your background and your history. I might have different questions than the rest of my teammates and that might give me more insight that helps me to understand and appreciate where that entrepreneur is coming from. I think I bring that to the table.

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.

Patrick: That kind of human skills approach is one that is consistent with one of my absolute core beliefs about M&A. Mergers and acquisitions is not Company A buying Company B. It's a group of people agreeing and trusting to work with another group of people. The ideal is that the whole is going to be much greater than the sum of its parts.

Heather: Yes, I could sit here and tell you all about my investment criteria, and it would sound just as boring as the next person’s investment criteria and exactly the same. So it’s really 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, they're together for three to five 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 commonplace.

Patrick: Venture Capital Magazine recently reported that 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 if you’ve got female-founded companies. They also reported that companies with female founders generate 35% larger ROI compared with male-founded startups. When I hear that it catches my attention real fast. Despite that, there's still a lack of women in M&A. Why do you think that is and what can be done about it?

Heather: It’s a great question. It needs to start 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. A girl shouldn't think that she can’t be anything. I never thought I couldn’t do anything that I wanted to do. In high school and college girls need to be educated about the opportunities 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 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 the education of the opportunity in the world and what we do, but it’s also about encouraging women to get into business because we can and we can knock it out of the park.

Patrick: And it's not just women working with other women; it's teams that are mixed, men and women. All of a sudden you’ve got a different person in your group and 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. To think that a diverse team shouldn'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: Fifty years ago, the healthcare industry was all-male because all the men were doctors. Now we're seeing that women are outnumbering men in medical care, not only on treatment but in management. So it's happening there. But what do you see in the future for women in M&A?

Heather: I think it starts with people like me. 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 ethnic minorities. It’s people from different backgrounds.

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

Patrick: Can you give us your profile of what your ideal client is looking like right now? What are you looking for?

Heather: Well, I told you I wouldn’t bore you with our investment criteria. But we’re actually looking for entrepreneurs. That’s first and foremost. We’re looking for people who have great ideas and a great vision. People who started an awesome company based on a really cool product line or idea. And they’re looking to grow their business. So, they've got a great start on marketing and sales and business development. Maybe they've got a solid accounting team. But they're at a point where they're ready to take things to the next level.

They need somebody to invest in their growth. They need somebody to partner with them to understand them and relate to them. So we’re looking for those really interesting and unique entrepreneurs first and foremost. We’re looking for businesses in the $3 to $15 million EBITDA range and in the $10 to $100 million revenue range. We hope they’re not distressed when we make our investment in them. We want them to be growth-oriented. We want them to be 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. They may want to retain control and really grow the company. 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’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:We're in the midst of a global 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 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 are 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. 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 brings 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: It’s been a great time talking to you. Heather, thanks again.

Heather: Great chatting with you.


Patrick Stroth,
President & CEO of Rubicon Insurance Services, LLC.

Today, Patrick’s practice involves harnessing niche insurance tools to empower Sellers of companies to secure a clean exit from their M&A transactions faster, and with significantly more cash at closing. This keen focus in the M&A space has earned Patrick the title “Champion of the Clean Exit”. Patrick has spent all 28 years of his career in the Insurance Brokerage community. He’s been an Executive Liability specialist for the past 21 years with an emphasis on other transaction related insurance solutions, including Directors & Officers Liability, Accounts Receivable Insurance (Trade Credit Liability), and Cyber Security & Privacy Liability. In April 2000, Patrick founded Rubicon Insurance Services, LLC, where he developed as an Industry leading provider of Medical Professional Liability, HIPAA, and Medical Billing Regulatory policies for the Healthcare Industry. Patrick is a graduate of Loyola Marymount University and holds an Associate in Risk Management designation. A native San Franciscan, he now lives in Menlo Park, CA with his wife Barbara and their two daughters.

EMAIL pstroth@rubiconins.com
PHONE (415) 806-2356

101 Jefferson Drive | Suite 233A
Menlo Park, CA 94025