🎙️ From Factory Floor to Private Equity: Rob Carskadden’s Journey in Transforming Small Businesses
In this inspiring episode, Rob Carskadden, co-founder and managing partner of Three Rivers Capital, shares his remarkable journey from working the factory floor at Ford Motor Company to building a successful private equity firm focused on small business transformation. With over 20 years of experience in buying and recapitalizing family-owned businesses, Rob reveals the human side of private equity, the untapped potential in small companies, and how foundational changes can drive substantial growth in overlooked markets.
✨ Key Insights You’ll Learn:
From Factory Floor to Finance: How hands-on manufacturing experience shaped Rob’s understanding of real business operations
The Hidden Market Opportunity: Why 350,000+ companies east of the Mississippi needed succession planning in 2004
Small Business Transformation: How basic foundational changes like sales processes and ERP systems drive substantial growth
The Human Element of M&A: Managing the emotional transition when entrepreneurs sell their “babies”
Private Equity’s Evolution: How the lower middle market has changed dramatically over 20 years
Untapped Talent Discovery: Finding hidden gems within small company workforces during acquisitions
Strategic Thematics: Using global trends like demographics and digitization to identify investment opportunities
Entrepreneurial Resilience: Learning from setbacks and the willingness to say “yes” at critical moments
Partnership Philosophy: Why trust and authenticity win deals over being the highest bidder
Value Creation Planning: Building growth strategies collaboratively with existing management teams
🌟 Rob’s Key Mentors & Influences:
Parents: Blue-collar background that instilled curiosity, determination, and strong work ethic
Wrestling Coach: Developed perseverance and “fire in the belly” determination from age six
Ford Motor Company Mentors: Learned real manufacturing operations and product development
Dale Buckwalter (Co-founder): Partnership built on mutual respect and complementary skills
Wife and Family: Incredible support system that enabled entrepreneurial risk-taking with four children under seven
Victor Frankl: “Man’s Search for Meaning” – philosophy on finding purpose through adversity
Marcus Aurelius: “Meditations” – focus on present moment and controlling what you can control
👉 Don’t miss this powerful conversation about building authentic partnerships, the hidden potential in small businesses, and how curiosity and determination can transform both companies and lives.
LISTEN TO THE FULL EPISODE HERE
Transcript
Anthony Codispoti : Welcome to another edition of the Inspired Stories podcast where leaders share their experiences so we can learn from their successes and be inspired by how they’ve overcome adversity. My name is Anthony Codispoti and today’s guest is Rob Carskadden, partner at Three Rivers Capital. They were founded in 2005 and they’re based in Pittsburgh. They focus on buying and recapitalizing small private companies.
Their mission is to remove barriers to growth for family and entrepreneur-owned businesses, helping them reach the next level. Rob co-founded Three Rivers Capital and has led numerous initiatives to transform these companies using his 12 years of operational finance experience. Before launching the company, he was a partner at Standish Consulting and helped finance roles at Ford Motor Company for finding his skills in process analysis and strategic decision-making. Under his leadership, Three Rivers Capital has gained a solid reputation for its hands-on approach and long-term growth mindset. Rob’s dedication to helping entrepreneurs thrive has made him a respected figure in the private equity space. Now before we get into all that good stuff today, our episode is brought to you by my company, Add Back Benefits Agency, where we offer very specific and unique employee benefits that are both great for your team and fiscally optimized for your bottom line. One recent client was able to add over $900 per employee per year in extra cash flow by implementing one of our innovative programs. Results vary for each company and some organizations may not be eligible.
To find out if your company qualifies, contact us today at addbackbenefits.com. All right, back to our guest today, co-founder, managing partner of Three Rivers Capital. Rob, I appreciate you making the time to share your story today.
Rob Carskadden : Well, thanks for having me, Anthony. I appreciate it.
Anthony Codispoti : Okay, so before you found your way to Three Rivers Capital, you worked in finance at some pretty large companies, including Ford and Thermoscientific. Specifically, what kind of work were you doing and how did it lay the foundation for the work that you’re doing now?
Rob Carskadden : Well, it’s interesting because I graduated from Columbia Business School and that role, my thought process was, was I going back to Wall Street because I was on Wall Street prior to going to business school. And I really thought to myself, I didn’t really want to go that path. I really wanted to get my hands dirty in industry and really learn about industry. And I also wanted to get out of New York. So I was at Columbia Business School. So I said, hey, it’s time.
I wanted to have a family that’s get out of New York. And so Ford had this program. It was called the Career Foundation Development Program.
And what I really liked about it was, it was a rotational program. It wasn’t primarily finance. It was finance driven, but it was really kind of getting an opportunity for people like me to get the experience on the floor, material handling, production. One of my roles at Ford Motor Company is I was a production line guy for the launch of, it was the new launch of, it was 1994, the new launch of the Mustang. And I was on a fender line and the whole steel, it was a steel plant.
So it was a stamping plant for the fender program. So I had eight guys on the line. And I was college. So you were working on the factory floor? I was working on the factory floor. And we were in basically job, it was job one, it was the first year. So as you can imagine on job one at Ford Motor Company, we had new cuckoo robots, we had new equipment.
And so you’re basically, as everyone says, buying that first year cars really maybe not a, the first model year car is very difficult. Well, we had eight guys on the line. And I had to hit about 400 units a day.
And I never forget this. It was the hardest job I ever had. We were working 12 hour days.
I was on my feet. But I really kind of learned a lot about kind of what it meant for these people to work. Quite frankly, I understand how difficult, I mean, there are people that were 30 years doing that kind of job. And I was never, ever so tired in my life. But hard physical labor, it was hard physical labor, you’re on your feet.
And again, we were doing overtime, it was, you know, trying to get everything to work problem. But, but it taught me a little bit about kind of the difference between, you know, real labor and kind of where I was going with my career, right? So, you know, I started in that regard, I worked in the controller’s office, I worked in product development. So fortunately, in that era, it was the rotational program, but I got to see a lot of the different elements of manufacturing and what goes into it. You know, we think about, I worked on the program, it was called the FN program, it was the small market transmission program. And it was free job one, we were working with Mazda.
Mazda was at the time, I think four down 30% of Mazda at the time. So it was a joint development. So they would come from Japan, and we would work through the engineering, and then I would be working on the costing. So long and short of it was, you know, very interesting job, you know, had multiple roles at that time, and learned a lot about really what it what it means to make a product.
Anthony Codispoti : Yeah, you had a lot of hands on experience, you were right there on the floor, you were seeing things up close. I’m curious, I mean, kind of fast forward, let’s, because I really want to talk most of our time here about what you’re doing at Three Rivers Capital. You co-founded this firm. Tell me about how you met your partner and what was the inspiration behind starting this?
Rob Carskadden : Yeah, it was interesting. So I was consulting at the time. So I had had, I was doing an activity based costing implementation for the Robert Bosch Corporation at the time here.
What does that mean? It’s kind of like a buzzword, but you know, at the time, but it really is trying, it’s a form of cost accounting where you’re trying to determine the real cost of delivering something or a service or a product. And so, you know, those products, the cost that goes into those products, there are activities that go into that. And those activities basically are allocated, you know, to that particular product or service. And those activities themselves have drivers to those activities. And therefore, you know, there’s a cost to that activity. So you can allocate that cost of that activity to get it, you know, to the final delivery of that product or service. And so there’s a lot of like analysis and mapping, time studies, things like that that you do. And so that you can say, all right, I mean, it can, it really is helpful, obviously, in some services. So, you know, you may, you know, have an engineer that has to do X, Y and Z. And so I have to spend time doing this, I spend time doing this. How do I allocate my time to this particular product? What am I doing? You know, it’s basically a fancy way of talking about a more, I’d say, detailed cost accounting.
Anthony Codispoti : Okay. So that’s what you were doing at the time. And then the idea and the meeting up with your partner, how did that come about?
Rob Carskadden : Well, you know, it was a mutual friend, I met Dale Buckwolder, who, by the way, everything I’m talking about today, about my firm and all that, you know, all kudos to him, because everything I’m talking about, he had a big major role in all of this. But that being said, we met in, you know, I think it was around 2003, 2004 timeframe.
And mutual friend, and he was in a transition as well. He was looking at, you know, I had the freedom because I was doing my own thing, you know, enjoying, you know, for the first time in my life, actually making money based on what I was delivering. You know, so it was really my, it was interesting for me and understanding what entrepreneurship is about, because, you know, I’m getting paid for the value and service I’m doing, and I was kind of really learning a lot about that aspect of it. But in the process, I met Dale, Dale was also looking to, I think his, his job, he was going to have to move to Tampa, his kids were in Pittsburgh, he didn’t want to move. We had talked about, you know, this idea of a private equity firm.
And then, you know, really what happened was, you know, we felt like, you know, as we talk, we felt like there was this need in the market. Now, this is back in 2004. I mean, the world’s changed since then. But, you know, there are all of these companies that are owned by people who are over 55 years of age throughout the entire Rust Belt area. And that’s where we looked at in the beginning. And I think we did some analysis that east of the Mississippi, 350,000 companies under 50 million of revenue that were owned by owners that were 55 years and older. So what were they going to do with their businesses?
Right? I mean, most of these individuals, you know, their entire, most of their net worth was kind of locked up, say, in these companies. And they didn’t have transition plans.
Anthony Codispoti : They didn’t have family members that wanted to come and take over the business.
Rob Carskadden : Yeah. And if you think about the timeframe, right, this is right past the late 90s and the dot com boom and everything else. And I think a lot of the, you know, the, you know, children and people coming up in that era were like, do I want to work in my dad’s or my mom’s or my family’s factory? You know, I want to go work for Google, or I want to work for eBay, or whatever.
Anthony Codispoti : Factory jobs weren’t sexy. I’m going to go get a high pay and white collar job. Yep.
Rob Carskadden : And I think that transition. So, you know, a lot of the, I’d say the boomer era of owning businesses. So, you know, we saw this huge opportunity set on the other side of the coin. There really weren’t any real private equity or institutional money working in this environment.
Anthony Codispoti : That seems crazy today. That is surprising. Yeah. Yeah. Now everybody’s doing it, right?
Rob Carskadden : Everyone’s doing it. But at that time there weren’t. So what does that mean? High demand, high demand, meaning, you know, I would say, I’d say high demand from people who want to sell their business. But let’s just flip that for a moment and say a supply of all these companies that are out there that need, you know, that someone out there that can help them, you know, transition their businesses, but really not a lot of private equity involved, right? At all.
Anthony Codispoti : And so, you know, what was the focus at the time? Was it still, it was tech, right?
Rob Carskadden : Well, it was tech and it was larger, you know, again.
Anthony Codispoti : Got it. This was too small for most people’s radar. Yeah.
Rob Carskadden : Think about a high margin. It’s kind of like a higher margin business, the higher go, right? Bigger fees, bigger, you know, put more money to work. The other side of the coin is, in these kind of businesses, and we can talk about that a little bit later, but these kind of businesses really, private equity kind of came in to say, you know, they’re buying these companies and they’re moving these companies forward in a way that maybe is a little bit easier as you’re at the larger scale than you are at the smaller scale, right? The smaller scale businesses, they’re usually not really prepared for the way the private equity industry was at the time. They weren’t scalable. There are a lot of these issues that they had, whether it was IT infrastructure, you know, management science alike. So, you know, the idea was is that these were hard deals to do. And there are hard deals not only just to actually get done, they were actually, these were deals that you had to roll up your sleeves and really get involved with the customers. You weren’t just buying a company and saying, all right, I got this platform, now I’m going to go out and find, you know, five or six other companies to roll into this and to, you know, to drive this into a larger market, you know, which is a lot of what private equity did and still does today, they still do today. This was more of like, all right, you have to come in and really transform a business from the ground up, basically foundational.
Anthony Codispoti : Okay. Say more about the team that you’ve got there at Three Rivers Capital. Is it, you know, primarily just you, like super small shop or you have some folks that are helping out?
Rob Carskadden : Yeah, we do. We, you know, we’ve changed over the years, right? In the beginning, it was just myself, Dale, and we had another partner, Bob Guire, at the time, and an assistant. And we did all of that work. You know, we did everything ourselves.
We sourced, we modeled, we did all of it. You know, over the years now, we have, you know, we have two deal people. We have another partner who’s just got promoted partner, Michael Zong, who drives their transaction group. We have a significant back office, I would say, and that really had to morph because of, you know, just the fact that today we have eight companies in our portfolio.
So, you know, we have basically a controller. We have two deal people. I have an office manager. And then we also have, we have a whole group of people operating partners that work for us that we have, you know, located with our colleagues.
So, you know, we’re about a seven person shop today. Again, what we do is, you know, primarily we’re quarterbacks. That’s, that’s what we do. Generally speaking, we have a lot of vendors and a lot of partners, you know, that we’ve developed over 20 years that support us in all different aspects of it. But our team is really focused on, you know, portfolio management, which is really where we built our Firmah transaction side of it. We’re, you know, we’ve been doing it for 20 years. It’s, we can crank out transactions. I’m pretty good at that.
Anthony Codispoti : So, let me understand when you guys go into an opportunity, are you buying 100% of the company? Are you taking majority stake? Are you taking over operational control?
Rob Carskadden : We do controlling interest, meaning we have over a 51% ownership. In most cases, we have, you know, the vast majority ownership, you know, and, you know, more often than not, a lot of times our owners will roll over and join us in the journey, you know.
We always call it the second buy of the apple. They get a payday when we buy the business and they have an opportunity to, to run with us to get that second buy.
Anthony Codispoti : And so they stay on board and they’re helping from an operational aspect as well? Yeah.
Rob Carskadden : And sometimes they stay on for the duration. Sometimes they’ll stay on for six months. Sometimes they’ll invest, you know, significant amount, sometimes a little, and then there are sometimes they don’t. But for the most part, you know, what we do is we go in, we take a controlling interest. We also give, you know, at least 10 to 15% of the company we set aside for our employees and our management team. So they have, we call profits interest. So, you know, we’re never 100%. At the very least, you know, the employees and or, you know, the operating team, you know, has some equity in the business.
Anthony Codispoti : And so a lot of times, as part of the transition, you’re finding your own operator to kind of put in place there, or maybe promoting from within if it makes sense.
Rob Carskadden : Both, yeah. And that’s part of the diligence, right? You know, we talk about when you do deals in this space, I think the one thing that 20 years of experience has taught us is, you know, when you’re buying these companies, again, they’re either family owned businesses or entrepreneur led, you know, owner led, it’s a very emotional decision for them. And I think sometimes, you know, and I think this is kind of the issue sometimes with a lot more, you know, we have a lot more players coming into our space now, right?
And we have over the 20 years, primarily because people are seeing the opportunity. But, you know, when you come into the space, you have to really understand there’s some nuances to this that are different than what I would say at the at the next level of private equity. And that is understanding that that emotional impact, there’s there’s a human element to this is a little bit more delicate. And, and, and so, you know, when we go in, we have to, you know, navigate that. And, and that really kind of plays into how we think about transitioning the business to, right? Because, you know, these are good businesses, right? We go in, we’re buying good businesses. They have to have tailwinds.
They have to be in markets that we’re interested in all the basic underwriting that you would expect. But yet, you know, there are clearly some low hanging fruit and things that they aren’t doing, right? That we see that what can we do to help make them scale, you know, what’s holding them back. And in many ways, you know, most owners, no one’s going to know, we always tell this to the owners, too, no one’s going to know your business better than you do, including us.
We’re going to come in, we can do all the work in the world. You know, I know a lot of people in our industry think they’re really smart, and I’m sure they are. But no one really understands their business the way that entrepreneur who built that is the stuff. So that partnership is critical. But really, where that partnership works, and where you have to understand is you can’t change what made the magic to begin with. You have to understand.
Anthony Codispoti : You don’t want to upset the apple cart, you got a good thing going. But what are the actually, can you give a specific example of low hanging fruit? It went into company X, and they were doing this one way, or they weren’t doing it at all. And you guys were able to put something in place that really helped to accelerate that growth.
Rob Carskadden : I mean, there’s a whole multitude of things. You know, most companies at this level, something’s pretty basic, like the biggest value creator of all in these companies is organic growth. Right. So if you think about us, we buy businesses from three to 10 million of EBITDA in that space. And so literally, you know, I would say, take sales processes. Admitting these companies, you know, if you think about it, right, if they’re especially entrepreneur led or owner led, right, they are primarily the salesperson for these companies. They’re the ones that started, they’re the ones that had the vision, they’re the ones that knew it, they’re the ones that went out and really pumped it to build that business. And what we often find is, find is that that piece of it is always lacking, you know, the importance of building a good tight sales process, because it never really needed to you, you know, the individual was able to drive and grow that business. Oftentimes, that business is started by that Keystone account that really gets in the business, right?
Find that one major account that gets you lost, right? And then therefore, in many cases in our businesses, there’s some customer concentration for that reason, right? Which is risk, which is risk. So that sales process is critical to de-risk it, right? And also to really accelerate the growth.
And that’s often the hanging fruit. I’d say secondly, we’ll find that like, you know, strategic planning. Some basic management science, I call it, right? You know, it’s IT infrastructure.
How do you scale, right? I mean, the fact of the matter is, you know, in today’s world, you have to have a fairly, you know, sophisticated tech stack to really, really, you know, drive value. You know, they have their tech stack, they may have something they built.
Anthony Codispoti : Sorry, Rob, when you talk about tech stack, what like, ERP system?
Rob Carskadden : Yeah, like an ERP system, say, or maybe, you know, you know, just, you know, your basic CRM, you know, you
Anthony Codispoti : know, which goes into sales processes that you were talking about that you need to put in place. Exactly.
Rob Carskadden : And many times they may have, you know, holes in their organizational structure. And what’s really interesting is, again, I call this foundational in a way. What’s interesting about some of these things is that’s what’s great about these businesses. The impact you can have, you know, by doing these really basic foundational things on the growth of these companies can be fairly substantial.
Anthony Codispoti : Things that you guys have done over and over again. So you’ve kind of got the playbook for it may not be, you know, common knowledge to the businesses that you’re acquiring. And that’s why it’s such a good sort of relationship there is you guys have that expertise to bring in, put that foundational stuff in place that you’ve seen work again and again and again. And you can see some results from it pretty quickly. Well, think about this way.
Rob Carskadden : If I started business, and let’s say I was in my late 20s, and I started my business, start building it, now I’m in my 30s, 40s, 50s, you start getting into that realm, you spent your whole career in that business. Your aperture is fairly probably, you know, your business really well, but you haven’t really experienced a lot of other things outside of your business. I think what’s really interesting about this is where the partnership comes in, right?
You have the, you know, you have the expertise and the domain expertise and knowledge of that entrepreneur or that owner, or that family who’s been there for years and years for you open up that aperture of thought that maybe they haven’t seen before, right? Whereas, you know, we’ve owned dozens of companies. We’ve been through multiple cycles. We’ve been through the Great Recession, you know, COVID, all the above, right? We’ve seen supply chain issues, we’ve seen inflation, we’ve seen all this. We’ve had to navigate companies through some of this, and they’ve had to navigate themselves and they figured it out as well, right?
If they’ve been around for that long. But the point is, is that, you know, over the years, what we do is we bring different perspectives. We bring opportunity.
We bring different thinking and also different, you know, I would say a whole laundry list, I would say of relationships and service providers that can really be helpful. So, you know, it’s really that partnership, you know, when it works, that partnership can really can keep the magic to the company and open it up, you know, to greater, just let’s go back to the moment for like strategic planning. You know, one of the real basic things, I think a lot of companies at this level don’t do, think about the map of your your your market and service, right? And you say, all right, I’m in a company that provides, you know, we have a company now and Wooncare, right? And you say to yourself, all right, what are we servicing the market? Are we does our service map really cover the whole range of marketing of opportunities that we see? What are those opportunities? What are some of the technologies coming down the path that we should be thinking about? Should we be getting into some of those, right? So there, you know, I think there’s some level of strategic thinking and thought that brings into play.
There’s frameworks, right? You know, I always say some of them, I think are kind of silly. You know, some people think, oh, it’s just another business school framework, you know, whatever. But I do think some of these frameworks are important because their communication tools and communication is always probably the critical. I always say, you know, business in many ways is just an amalgam of conversations, right?
Anthony Codispoti : I want to go back to something you said a little bit ago about sort of the human element of the transition. Because I think this is really important. And you were saying as much, but I want to explore it a little bit more. Something I’ve gone through in exiting businesses, something I’ve seen a lot of my peers, my friends go through as well is an exit. It seems very exciting when you’re on this side of it. As you get closer to it, and sort of the realization of this big life transition settles in, question marks start to come up. As you get on the other side of it, and the day to day of your life has now significantly changed, then it becomes really destabilizing. Like part of your identity has kind of been yanked from you.
This is been a big part of the reason I got out of bed every morning for years and years and years. I go in, I meet with my team, I make decisions, I put out fires, I meet clients. Now what do I do with myself? Now where do I fit in? I’m guessing you have seen this up close and personal multiple times.
How have you either been able to help folks through that or seen people kind of manage that process on their own to kind of find that new way of life?
Rob Carskadden : That is an excellent, excellent observation and good question. And I would say that is definitely true. I mean you even have, there are people who are in their 80s that may go to the office, they’re the owners. They may not even be that involved in the business anymore, but they go in for four hours a day to say hi to everybody, have their coffee, and it’s part of their life.
It’s a difficult thing because there really is probably no real good answer for that from our perspective on how someone transitions that. Because at some point either they’re there or they’re not, and if they’re not there’s not much we can do about it, but I would say that it’s important that they understand that their company is in good hands. The best you can do in that regard is let them know that hey, we have you covered.
We’re going to take good carrier of what we would consider your baby. And that really happens through the process before we buy the business. And so the communication and the alignment is important, and I always tell people when they’re trying to sell their business, our industry is full, it’s a bell curve. I mean there’s going to be some great firms and not so good firms in the middle.
Who you choose as your partner is critical, and that evaluation of your partner up front in terms of who they are, what their approach is, and one of the benefits we get from being around so long is we have a lot of references for what we do, but it’s that communication up front and that alignment of our vision for what we want to do with the company, and making sure that alignment is there with them and us. Now, we may not see it on everything. Some of the things we want to do, they haven’t done, they haven’t maybe thought about it, but for the most part, what, are you going to shut down my business and consolidate it somewhere else? Well, I don’t want to sell it. Are you going to fire half of my employees and do this X, Y, and Z?
Well, I may not want to sell it to you. Because let’s think about it, most of these companies, those employees are like family to them. They may be going to the club with some of them, playing golf, and I know they’re kids. A lot of these companies are in smaller towns where everyone knows each other. That communication up front and that alignment of vision is really, I think, the best you can do. Then when it comes to the other side, sometimes actually more often than not, from what I just said earlier, these people do have a lot of domain expertise. One of the things that you’ll find happen is they’ll sit on the board. You still have a board seat. You still have access. You still can be involved in some way.
Anthony Codispoti : You still have their feet wet in the business. Yeah. That means a lot to them.
Rob Carskadden : Yeah. That’s one of the things I think probably happens more often than not. We welcome it because they have that expertise and knowledge. We don’t want that to leak.
Anthony Codispoti : I want to hear a little bit more about what specifically you look for in a business. You already mentioned the EBITDA range, $3 million to $10 million annually. What kind of markets do you guys like in terms of industries? What kind of geographies are best for you? How do you think about that?
Rob Carskadden : Yeah. It’s changed over the years. Again, after two decades, things move. One of the things that we really focus on is one is size, as you mentioned. I think the other side is we’ve done, I think, 19 white papers. We started in 2015 in honing in on thematics. We like to stay a little bit flexible because we believe, and we’ve seen it every day, is the world changes fairly dramatically. Getting two honed in in one area or another, especially over 20 years, doesn’t make any sense. We were in oil and gas in the mid like 2013, 14, and 15.
We’re not doing that today. Our thematics, about 2015, we looked at it from the perspective of what are the great factors of influence that we see that we think are going to be relevant for at least a decade. That’s funny because it remains to be true. We had escalating global conflict, go figure. We had the transformation of our, basically, our energy situation in grid. We also talked about demographics and the demographic change that were happening. So the big picture. Finally, we talked about basically what we consider It’s essentially the transformation and digitization of the industries going forward. So if you think about that from the perspective of industrial automation or Internet of Things, we see it, those are the trends that we looked at. And then from there, we drilled down to manifestations and we wrote about those and then we drilled down into what we would consider sub vertical markets that we thought think are tracked. Those sub verticals may change year over year.
What do they look like now for you? Well right now, we’ve been kind of moving and we have for a few years into the healthcare services side of the coin. We have quite a few of those. And I would say industrial automation. Those are the two that really are very interesting to us. And I’ll give you a, you know, so if you think about, you start like I said earlier about the demographics, right? And you roll down and you have the change with millennials. Now you have the change with Gen Z and now you have, you know, the retirement, obviously, the baby boomers and maybe even some Gen Xers now, right?
And so, you know, we saw like everybody else, obviously healthcare and healthcare services consumption is going up. The question was where do you want to play? So when we talk about the sub vertical, right, we looked at, we want to play in and, you know, in a segment of the market that basically reduces the cost curve, right, in the industry itself, right?
And we want to, and it has measurement of improving outcomes, right? And also that you can actually service. Meaning, you know, who are the employees that you’re going to need to hire to service this industry?
Those are all critical factors. And I’ll give you an example. So we did, you know, about 15 years ago, we launched into, it wasn’t 15, maybe a little bit less, but we went into physical therapy. And where did that make sense at the time? Well, that made sense because physical therapy was a cheaper alternative, right, to going straight to orthopedic and getting surgery. We felt like, you know, there were good outcomes in physical therapy, people were getting healed, right? And, you know, there were plenty of physical therapists to hire and there are people out there, right? Now, you know, we moved into pediatric home healthcare. That was another industry we got into. And what did that mean?
Well, these are… Sorry, specifically pediatric home healthcare? Pediatric home healthcare.
So it’s private duty nursing. So in that example, right, you have children who need 24-7 care, they’re catastrophic situations, they’re in… they’re basically in children’s hospitals. So what happens is, you know, the cost differential of being in children’s hospital versus being home is significant. So you’re bending that cost curve down, you’re bringing those children home to their families. And that personal care that they get because these nurses that work in this industry are just saints. And they have that really good, you know, relationship with those children and that family. So the level of service is better. It’s more personal. And so that was an area which we, you know, that’s another example of kind of going down to that subvertible and why we chose that.
Anthony Codispoti : Apologies if you already mentioned this, but what’s the term of your fund? Are you guys kind of seven to eight year, 10 year hold? Or is this like a buy and build and like just you guys hold on?
Rob Carskadden : It depends. I mean, we’re not much different in terms of our… We’ve had, I think, three exits that we’ve owned the company with for three years. I think we have some right now, we’ve owned for six or seven, you know, in all in between. I mean, we’re not under the gun necessarily to, you know… We feel like it’s a little bit of a longer cycle, I think, in what we do because of what I said earlier about the foundational, you know, investments you need to make to start to scale. I’d say the first year, year and a half, you’re really trying to put all those foundational elements together. You are growing the business, you’re doing the best you can, but for example, in that pediatric home healthcare business, we grew top line by 35%, but even though it was flat. And the reason that was the case was because we probably spent a million and a half dollars in year one, compliance, right? How do we upgrade compliance? What are we doing in our recruiting structure?
How are we… So as you put that SG &A to build that scale, you know, what kind of system do we need to put into place, you know, so you have, you know, your healthcare systems and your ERP and all that stuff. All those foundational investments that take time and effort, you know, you’re just not coming out of the gates right away and doing it at the same speed. And quite frankly, we’re not even thinking about, say, add on acquisitions or anything else until those foundational elements are handled.
Anthony Codispoti : Rob, I’d be curious to hear a specific, specific example, like an actual case study, if you can mention the company’s name even better, where your finance experience in particular directly influenced the direction of the success of one of your companies.
Rob Carskadden : You know, I would say it’s interesting. Finance is a broad term. I would say our, you know, when we think about it, I would say the impact, finance is not real difficult. The real area where finance helps them would be obviously the capital structure that we put into place to give them the liquidity they need to do what they need to do. I would also say on the evaluation side of projects, things like that, there’s some rigor that we put into place.
But it’s really on the add on acquisitions is where our finance comes in. I think the real impact is on the operational stuff that I talked about earlier. That’s really where that comes into play. And it’s interesting because we’re a business that people think is just finance driven.
And I think in some levels, it’s important that it is. But yeah, of course we help, you know, when it comes to accounting, it comes to KPIs, it comes to all those elements, right? We put all those in place and those are lightly considered finance per se. And we put some finance, finance, rigor.
We have, you know, financial reporting that we do, you know, monthly, we have quarterly, we put all that discipline in place. But really and truly, I would say probably more than any, an example, you know, maybe in terms of, you know, I would say like one of our companies in Salt Lake, BCG, you know, where we owned a ton of equipment, right? And some equipment we were like, look, this company in many ways, it was really kind of fascinating because the prior owner collected a lot of, you know, equipment, but a lot of equipment wasn’t put to use, right? So there is a valuation there that we do. And it’s like, okay, as part of our plan, does this fit in, not fit in?
How do we evaluate it? What do we need in terms of restructuring the balance sheet? We sold some of that equipment. We sold a lot of it, right? Help pay down debt and do that. So those are things that we do, I think, that we come in and bring a different perspective and an analysis and an approach that helps that company make those decisions. But in reality, it’s like, those are the decisions that they weren’t thinking. Why are you just hanging on to all these assets?
They’re not creating any value for you right now. So there’s a make-by, right? Is this in the plan? Do we want to keep this?
You know, we have a whole second line, you know, in one company, a beverage line, right? What do we need this for? We’re not using it, right? What do we need to do? Let’s unlock some of that value that’s sitting there and recycle that into something that’s more.
Anthony Codispoti : I kind of want to touch on some… We touched on this a little bit earlier. I want to come back to it. You know, when you’re structuring a controlled buyout, and you want to keep everybody happy, right? You guys obviously need to hit your numbers. You want the folks that are exiting eventually or now to be happy and for the employees to be happy. What are some key strategies that you employ to make sure that both the seller and the business itself are going to thrive after that transition?
Rob Carskadden : Yeah, that’s the critical piece I alluded to earlier about the communication and the alignment, right? So, you know, when it comes down to what we do presently is we have… We develop during our diligence process what we call a value creation plan. And that plan, you know, is driven primarily by… We start with an investment thesis that we have. We delve into our diligence and within the diligence comes a lot of things that we find and come up and out of that usually comes many opportunities. So, we build that value creation plan. And that value creation plan is not only built by us, but we try to work hand in hand with the sellers pre-closing with that, right? So, in that regard, right, we’re trying to get not only the sellers and to the extent that the sellers bring in, sometimes they don’t, sometimes they do, bring in some members of their team.
In many cases, they do. And so therefore, we’re already engaging with the team and we’re already agreeing on kind of what we need to do going forward and getting their buy-in. And again, back to what I said earlier, and I think this is… This sometimes is the hubris of some people in our industry is there are so much untapped talent in these small companies that people just don’t understand, right? And there are so many different employees. I mean, you may have an AP clerk down there that knows more about where everything’s hidden than anybody else in the company.
And you just sometimes you don’t know that till you own the company, but there’s a lot of information and things that are locked up in these companies. So, the idea of bringing them into the mix, obviously it’s ownership, obviously it gives them empowerment because they’re part of it, it’s engagement, it’s all those kind of buzzwords that they talk about, but it really is true. Bringing them into that process is, I think, critical to what happens post-close, because everyone’s on the same page, we know what we’re doing and we go forward. It doesn’t mean that things don’t happen along the way that we have to adjust, but the point is that everyone feels very good about what they’re doing. Everyone in that circle at least, and we try to bring the critical people that we need in that circle to begin with, is an agreement and understanding about what needs to get done. So, we hit the ground running and everyone should be on the same page.
Anthony Codispoti : I’m sure that some of these companies that you eventually acquire, you were probably in a competitive bid process, there were, I’m sure, other firms that they were considering. The ones that choose you over your competitors, what do you think is the biggest reason they do that?
Rob Carskadden : I think over the years, we used to say, I don’t know if it’s as true today as it used to be, let me just say that. But it was really the, I think we’re from Pittsburgh. There’s a little element of we’re kind of not the Wall Street guys coming in.
More often than not, I’m not wearing this. We go see these guys, we’re on the plant floor. I learned early in the game, I remember back in the, you know, 2005, we were looking at some foundry and I was wearing really nice clothes and it looked like Terminator, seen from Terminator in there and all the ash and all the stuff going on. I came out of there going, I don’t know what I was doing here, but this was silly.
I learned my lesson. We go in and I think it, you know, I feel authenticity and trust is critical. So how do we win? You have to build that trust and that authenticity. Over time, that’s become, over a period of time, that became easier for us because we had a track record and people could, they could do a background on us.
They could talk to former CEOs and say, are these guys for real or not? But I always try to do, you know, over the time, try to build, look for elements where we can build trust. And that means there are times at which there’s a point in time in every discussion, a conversation, a relationship where you have to have to actually exhibit something that garners that trust, right? And I think you look for that.
And so where do you, you know, so there may be an instance where, you know, we had had a discussion three weeks ago and something had changed. You said, well, you said this and you promised this. And I’m like, you know what, you’re right. Let’s move on. You know, I’m not going to go back on, you know, this is what we talked about before. This is what we agreed to.
Boom, let’s just move forward with it, right? Or whatever. I mean, that’s a silly small example, but it’s like, how do you exhibit ways to say, I can be trustworthy? So along the way, it’s like, how do you win? We used to say, it’s who you partner with.
It’s all those things. It’s an emotional decision. Do they trust you?
Do they trust what you’re going to do? And I would say that we built, you know, that’s one of probably our, I don’t know, superpowers, probably a big term. But as a firm, it’s because we were lucky because we’ve been around for 20 years and we built that reputation.
That reputation is very helpful. So when we’re in a bid and it’s, you know, pretty much on par, where are they going to go? Right.
And we’ve won in a few instances over the years, we’ve not, I think more often than not historically, that hasn’t been the case recently, but more often than not historically, we’ve not been the highest. Okay.
Anthony Codispoti : And we’ve got, They’re choosing you because they feel more comfortable with you in the direction you’re going to take the company and they trust you. They like you. Yeah.
Rob Carskadden : Again, it’s an emotional decision. It’s their baby. I think, you know, it’s always about the money, right? No matter what they say at some level, it’s about the money. But if on balance, who you want to partner with, particularly if they’re going to stick around and play for that second point.
Anthony Codispoti : Now you gave sort of what you called that silly small example of, you know, a few weeks later, they’re like, Oh, hey, wait, you said this and you’re like, okay, yeah, let’s go with it. But, you know, this doesn’t need to be an argument here. But I wonder if there are ways, this is the wrong word to use, but I can’t think of a better one in the moment where you can sort of manufacture those opportunities to demonstrate trust. Rather than sort of like waiting for something like that to kind of happen. Yeah.
Rob Carskadden : No, and there is. And I look for some of those too. Where can I show, you know, what is it that we’re doing? How are we doing it? We’re negotiating. And there’s some things where we’re like, look, all right, I get what you’re saying. I mean, there are times when it’s clear that, you know, we know and they know you get towards the end of a deal. But everyone’s burnout.
Everyone’s tired. You’re getting close to getting it closed. The poor seller has been through hell and back through a financial and operational audit.
They never, no matter what you tell them, they never understand it. She go through it. How difficult of a process that really is, particularly for companies that don’t have that infrastructure I talked about. So all the diligence is a lot of work for them. Right.
And so everyone’s fatigued. And so at the end, there are ways to, you know, all right, we’re good with this. We’re good with that. I’m not going to fight over this. I’m not going to fight over that, you know, and even though we know that we may be in a position of strength towards the end of getting it done. I mean, there are three days from saying, I’m going to get the biggest payday in my life. And we’re like, well, we’re going to walk away from this deal because this, this is, doesn’t make sense.
We can’t agree to X, Y and Z. And you’ll find it sometimes there’ll be those events too that we’re like, you know what, again, we’re in a business. The interesting thing about attorneys and about, you know, structuring deals are, you know, their job is to structure every scenario possible to protect every scenario. And what I tell people is that that’s impossible. We could, we could iterate all day long at some point, right? We’re in the business of equity at some point, we have to take some leap that says, all right, there may be a gap here, here, but we’re not going to be able to do this.
And I can’t spend $5 million trying to legal. A deal at that level, which I think has a 0.005% chance of ever occurring, you know, so, you know, you get down to that point oftentimes, but, you know, we’re pretty rigorous. We know what the market is. We, we understand what the terms are that we need to get and what’s really important and not sellers. One of the issues is sellers don’t really understand that.
Anthony Codispoti : They haven’t had as much of that experience. Exactly. This is their first time riding that rodeo. Rob, what’s for you, whether personal or professional, what’s a serious challenge that you’ve overcome? How’d you get through it? What did you learn?
Rob Carskadden : Yeah, I’d say, you know, probably one of the biggest ones was I, when I was at Fisher Scientific, I had started up. It was one of these, this is where I started really getting my love of entrepreneurship. I started this, this, it was basically an eBay for scientific equipment and supplies. At the time, I was like a, I was the finance manager for the distribution logistics group for the company. So I think at the time we had like 63 distribution centers around the world and we were having a huge problem.
You know, we sold active about 200,000 SKUs and we had a ton of inactive SKUs, right? It was a big, big company. It covers a lot of bases and huge amount of what I would consider excess and obsolete inventory in the system and I was like, how are we going to solve this? And so, you know, the, I came up with this idea.
This is no joke. I sat, I was, I was at, um, PICCon, which is a conference and it’s called PICCon, but it was a conference for medical supplies and equipment down in New Orleans. And I don’t know why they invite, you know, they invite the finance guy.
Why am I doing it? One of these conferences, right? It’s all about sales and the like. Um, I literally hold myself up in the hotel room when I was down there and I wrote a business plan for what I eventually called Einstein’s garage. And in that process, we developed what I considered, you know, a way to leverage what, you know, Fisher scientific had the assets, distribution assets, the, you know, the, the transaction ability and, and, and the like. And what I ended up doing was saying, look, we can turn what I guess you would call now as more of a reverse logistics type of situation, but it was an auction business. So create a new website from scratch.
Anthony Codispoti : Did all this, um, did the brand here was this? I just want to frame it.
Rob Carskadden : It was like 2000, 1999 timeframe. Early days. Okay. Go ahead. So it seems a little cliche maybe now, but at the time I had to, I, we had to hire a firm out of, you know, San Francisco to build my auction engine. You know, I mean, that’s how long ago this was. And so, you know, we built that and it started to, to move and it was interesting.
And I started thinking outside of just Fisher with this. So I went and talked to AstraZeneca, some of the other major companies and said, look, we can do this for you too. Right. Basically, we set up a system not only to sell the product through the secondary market, but a way, you know, we, we built a warehouse down in North Carolina. And I said, you know, we can take your excess out of your system. And, and that, that stuff that you would actually written off at 100%, we can do, we can do, uh, we can do some profit recovery for you.
Right. And so I felt like this was a, and then, oh, by the way, we can also manage your fixed assets. So if you’re AstraZeneca and you have four or five locations, um, R and D locations or labs, where you have a Beckman centrifuge, that should be listed.
That should be on an intranet on the system that everyone in your organization should be able to access where it is and is it in use or not. And therefore you may have a lab over here that may need one and wants to buy a new one, but you have one that’s idle over here. So why don’t we do a holistic asset management program for you.
And oh, by the way, if you want to unload it, it’s on the system. You let us know, we’ll take it down to North Carolina. We’ll sell it and we’ll get you some.
Anthony Codispoti : Sounds like a pretty clever idea, especially for the timeframe you’re talking about. Love it.
Rob Carskadden : And then soon as the dot com era ended, you know, the company at Fisher was like, we don’t want to do this anymore. It’s a distraction. You know, they’re a multi-billion dollar company.
Anthony Codispoti : Everything felt, everything internet related felt toxic at that time.
Rob Carskadden : And the whole strategy, the company changed. And so I actually went to them and said, well, can I buy it from you? You know, because I really believed in it. And they’re like, we can’t do that.
And I get it now that I’m older or understand. We can’t just let an employee buy one of our businesses and go off, right? It’s not a good look. But, and so at that point I was like, all right. And in my options as I’m going back to being, you know, a, you know, finance person for a division or moving my way back that way. But I had that taste of entrepreneurship that I was like, I can’t go back.
I don’t just want to do that anymore. And that’s when I ventured off into standards consulting and where I was starting to do that activity based costing system. And I said, look, I want to start something on my own.
And I want to make money. You know, it’s like, it kind of demystified things for me. It was very difficult. And by the way, it’s a lot easier to do this stuff when you have a big company that’s allowing you to do it. So don’t get me wrong. I did not go down that route, right? There are a lot of people that you still got the steady paycheck.
Anthony Codispoti : They were paying for everything. Yeah, exactly. But a nice way to kind of wet your beak. And it was really, I’m sure, hard and like heartbreaking that this thing that you had built and, you know, we’re close to really making work. Now you got the rug pulled out from under you. Got the rug.
Rob Carskadden : You know, by the way, we had some issues. It was so funny. We did have some issues with Einstein’s. I think they’re, we had a little issue with our branding. They were like, hey, you guys are, you know, you can’t use Einstein’s. And we, it was Einstein’s garage and we had a lab rat. It was, that was our icon. You know, we used it. We had little beanie babies with a lab rat and everything else. But they weren’t real thrilled with us using his name in that way. But it was dumb.
Anthony Codispoti : The family foundation or something.
Rob Carskadden : Yeah. Okay. And it was interesting. But yeah, so all that was, you know, disappointing because I really put a lot into it. And I really felt, which is interesting, I think maybe a little bit ahead of our time. And that I think that whole industry of reverse logistics and some of the things that happened over the over the ensuing years became rural industries, right? That, you know, those were real, real impactful industries. And we were just a little piece of it. It was an idea. But unfortunately, I didn’t get to see it to fruition.
Anthony Codispoti : Well, and that happens, you know, is you’ve now learned having been in the venture space and been involved with lots of businesses. I mean, that happens in business, right? You’ve got these ideas. You’re so excited about them. It seems like this has to work and you chase it down. And sometimes it doesn’t come to fruition. And it’s a lot of lost time, sometimes a lot of lost revenue and other resources. So yeah. Yeah.
Rob Carskadden : Without that, I would not have done it today. So I mean, the bottom line is all this precursor is just, you know, I always say life is a little bit like, you know, that ball that drops on that pegboard, you know, it’s like the peg and you don’t know where it’s going to end up at the end. That little ball, I don’t know what they call that little thing, but it’s like, these are like, yes, no decisions or points in your life.
And so there’s all these permutations at the end where you get that ball can end up and it all depends on where you tack when you hit that peg. Are you going this way? You’re going this way. And, you know, that was one of those pegs that pushed me this way, right? That forwarded me on to where I was, you know, got today.
Anthony Codispoti : So what’s your personal superpower, Rob?
Rob Carskadden : I don’t know if I have a real superpower. I mean, I would say, you know, I would say the thing that I feel like has propelled me is, I will one, luckiest man in the world added to, you know, my father’s since passed away, but mother and father that were excellent parents and they didn’t go to college, you know, but they, you know, they instilled in me, you know, I think a lot of the attributes that I think have propelled me, you know, and I would say one of those that’s really propelled me is just curiosity. I think I, you know, if you think about it, I, you know, people always laugh at me. It’s like, you want to talk about physics or you want to talk about, you know, you want to talk about health or you want to talk about this and you delve so deeply in it.
That’s nothing, you know, nothing to do with. I’m just, I’m very, very curious about things. And I think that curiosity, you know, in that willingness to say yes at critical times has been really critical. I’ve had young people that come to me all the time, like, how did you get there?
How did you do this? You know, and, and I look at them like, I’m the last guy you want to talk to because this, this was not a planned career path for me, right? This was one step at a time. One step at a time. It was opportunistic and, and, and the willingness to take the risk and say yes, when we started this business through River’s Cap, I was, I had four children under the age of seven. My wife went back to work and I would say I’m the luckiest man in the world because I had an amazing, amazing wife that put up with all of this and allowed me to do this. And I’m sure I’m not alone in many people that would say their spouses were critical. But, you know, it was, you know, I went two years without making any money getting this started. And, you know, she went back to work and we had the kids and there was, it was just chaos.
And man, I mean, without that support, it wouldn’t have happened. So it’s also this second piece of the curiosity and I would say that determination. I was a, I was a wrestler as a kid ever since I was six and, and I always felt like, you know, you learn a lot from that, right? It was a very difficult sport.
It was very, you know, and I remember it was just like, it just developed that determination that fire in your belly. And I think, you know, I don’t give up. And, and, you know, and I think that, you know, if you’re an entrepreneur, I don’t care what anyone says. I’m sure there’s that anecdote that someone, you know, overnight did this, that, and the other, but no one gets hardly in whenever it does that, right? I mean, you have to go through hell and back to make the stuff happen.
You really do. And you have to have that determination and you have to have that perseverance. And, you know, it’s the vision and the belief in yourself and that vision and that perseverance is really what drives it. And I think more than anything, I would say that those, you know, the curiosity to be willing to learn is critical in our business. It’s critical to understand all different aspects of things.
You never know, like, you know, I think, you know, you never know when some element of knowledge or whatever can come be helpful to you. But, and then that, that willingness not to give up. I mean, that’s one of the really, I think, superpowers of our, our business and the 3RC and our, and the culture that we have here is we don’t give up. We’re very, very, very determined.
Anthony Codispoti : That’s great stuff. Rob, I’ve just got one more question for you. But before I ask it, I want to do two things. I’m going to invite all of our listeners to hit the follow button on their favorite podcast app. I’ve had a great conversation here today with Rob from Three Rivers Capital. I want you guys to continue to get more great content like this in your feed. Rob, I also want to let people know the best way to get in touch with you or continue to follow your story. What would that be?
Rob Carskadden : I think our website and LinkedIn are the easiest ways. We’re out there and I would just say that my name is very unique. Not many of us have Kars Gaten or I don’t know if you, Anthony, know anyone named Kars Gaten. But I’m out there in Three Rivers Capital. So our website, 3RCcap, 3riverscap.com, the number three.
Anthony Codispoti : The number three. You go to our website. I will include links in the show notes for everybody to both your website and your LinkedIn profile. So last question before you, Rob. You’re from now, you and I reconnect and you’re excited and you’re celebrating something. What’s that thing you’re celebrating?
Rob Carskadden : Well, my first grandchild is going to be a year old. I’ll be celebrating that. That’s an excellent thing to be celebrating and I’m a new grandparent. So I’m very excited about that.
I would say business-wise, I’m looking to probably have a couple of exits a year from now. I think we’d be celebrating that. A couple of them we’ve had a long time. Some of them we’ve really had to drive, hit some speed bumps during COVID.
So the ability to kind of, back to what I was saying before about that determination and working through it and seeing to the other side and really making something happen, I think we may be able to see that next year.
Anthony Codispoti : Love it. I love that the family was the first answer. Rob, I want to be the first to thank you for sharing both your time and your story with us. Here on the Inspired Stories Podcast, I really appreciate it.
Rob Carskadden : Hey, thanks for having me. Really appreciate meeting you, Anthony.
Anthony Codispoti : Folks, that’s a wrap on another episode of the Inspired Stories Podcast. Thanks for learning with us today.