Annotations (8)
“The most important asset in the waste industry is not garbage trucks, not landfill, not processing facilities. The most important asset in the waste industry is waste. You have to control the waste to drive value through your operation. How do you control the waste? By providing great service at a fair price. The mantra we lead with is service.”— Rob Michalik
Strategy & Decision Making · Operations & Execution · Business & Entrepreneurship
DUR_ENDURING
Control the flow, not the infrastructure
“Environmental services is necessary: removing trash, whether liquid waste, household waste, or industrial waste. When you think about that you need running water, maybe electricity, and you need waste services. When you think about a stable business model, waste fits the bill. It's like a utility, yet there's not a rate cap on the returns. Good service, good assets, strong marketplace presence allows you to build reliable service models.”— Rob Michalik
Strategy & Decision Making · Economics & Markets · Business & Entrepreneurship
DUR_ENDURING
Necessity creates pricing power without rate caps
“We're looking for businesses that are a little bit off the beaten path, businesses we and our operating partners know well, but maybe are pre-auction. Probably 70% of the businesses we buy, we're buying control but we're only buying 51 to 80% of the business and the entrepreneur families rolling the balance. For them it's much more important who their partner is and what the second bite of the apple is than the highest price. An entrepreneur builds a company over 15 or 20 years.”— Rob Michalik
Business & Entrepreneurship · Psychology & Behavior · Strategy & Decision Making
DUR_ENDURING
Partial buyout matches entrepreneur lifecycle stage
“We don't look to manage cost, we look to manage price. I'd rather pay drivers better rates that are going to show up on time, they're not going to have accidents, they're not going to ruin my equipment, and I'm going to make sure the customer rewards me for that quality service that individual provides. That's how we think about it. When you put two companies like these together, you can find opportunities to drive utilization.”— Rob Michalik
Operations & Execution · Strategy & Decision Making · Economics & Markets
DUR_ENDURING
Manage price up, not cost down
“We have never been big users of financial leverage given the orientation we have with our management teams. We want them focused on growth as opposed to myopically focused on quarterly interest and amortization. We financed Ironclad inside of four turns of debt to EBITDA. We have a very flexible balance sheet, almost 50% equity capitalization across the combined platform. It's worked out really well as we've looked to build the business and take advantage of new acquisition opportunities.”— Rob Michalik
Business & Entrepreneurship · Strategy & Decision Making · Leadership & Management
DUR_ENDURING
Low leverage preserves managerial attention
“I always think about the private equity business as being relay runners. This is the 4 x 400 versus the 1600. Private equity guys run their lap and hand it on to the next guy, who then has the next lap to really drive value. The pace of play is just greater in the private equity ownership cycle. It's one of the reasons private equity has been able to deliver consistent performance relative to broader equity markets for 30 years: under private equity ownership, we sprint.”— Rob Michalik
Strategy & Decision Making · Business & Entrepreneurship
DUR_ENDURING
Sprint, then hand off; don't run two laps
“Average tenure of our investment team is 14 years. Most of that tenure is because we've aligned their interests with long-term value creation and stability. It's not always easy when you really have a deep knowledge and appreciation for the beauty of an asset, and our view of the beauty was far greater than the seller's view. There is a propensity to want to cave and just pay and get it done.”
Psychology & Behavior · Strategy & Decision Making · Business & Entrepreneurship
DUR_ENDURING
Expertise creates temptation to overpay
“Great partnerships are about mutual respect, trust, communication. When you have a great partnership with your management team, you're able to solve problems together and they share their challenges because they trust you. We really value our partnership with our teams. Our operating partners are our most valuable asset. The role of the CEO is to set the culture, make the big sale, solve the big problem. That's what CEOs do, and setting the culture is really important.”— Rob Michalik
Leadership & Management · Psychology & Behavior
DUR_ENDURING
CEO: culture, big sale, big problem
Frameworks (1)
Lifecycle-Based Partial Buyout Framework
Matching deal structure to entrepreneur risk appetite
A structured approach to acquiring businesses from founders who have transitioned from wealth-creation to wealth-preservation mode. By buying 51-80% control while rolling the entrepreneur's equity, the framework de-risks the family situation while re-energizing the founder for growth, creating alignment between financial buyer and operating partner.
Components
- Identify Lifecycle Inflection Point
- Structure 51-80% Control Purchase
- De-Risk Family Situation
- Re-Energize for Growth Phase
Prerequisites
- Deep industry expertise to assess business quality
- Operating partner network to validate opportunity
- Access to founder before auction process
Success Indicators
- Founder enthusiasm for growth post-close
- Family financial goals met
- Clear alignment on value-creation plan
Failure Modes
- Founder treats rolled equity as just liquidity and mentally checks out
- Misreading lifecycle stage leads to wrong price or structure
- Insufficient trust between parties
Mental Models (4)
Hidden Costs Exceed Visible Costs
EconomicsMany operational decisions appear expensive based on visible direct costs but are actually cheap when hidden indirect costs are accounted for. High wages may seem expensive until you calculate the cost of turnover (hiring, training, errors, lost productivity). Low pricing may seem prudent until you account for the cost of under-utilized assets and foregone margin. The mental model requires making hidden costs explicit and comparing total cost of alternatives.
In Practice: Rob discussing Ford's $5 day wage premium versus 370% turnover costs, and Ironclad's pricing versus replacement cost
Demonstrated by Leg-cm-001
Control the Flow, Not the Infrastructure
Strategic ThinkingThe most valuable position in many industries is not owning the physical assets or infrastructure bu
In Practice: Rob explaining that waste itself, not equipment, is the key asset
Demonstrated by Leg-cm-001
Risk Appetite Shifts with Wealth Accumulation
PsychologyAn individual's willingness to take risk follows a lifecycle pattern correlated with wealth accumulation.
In Practice: Rob explaining why entrepreneurs at different lifecycle stages respond to partial buyout structures
Demonstrated by Leg-cm-001
Attention Allocation as Scarce Resource
Decision MakingManagement attention is a finite, non-renewable resource that must be deliberately allocated. Financial structures that consume management attention on non-value-creating activities (managing debt covenants, quarterly interest payments, lender relationships) reduce the attention available for growth activities. Low financial leverage preserves managerial attention for strategic priorities. The mental model treats attention as the scarce constraint and evaluates decisions based on attention cost, not just financial cost.
In Practice: Rob explaining Kinderhook's low-leverage philosophy
Demonstrated by Leg-cm-001
Connective Tissue (2)
Waste services as utility without rate caps
Environmental waste services share the necessity and stability of regulated utilities (water, electricity) but without rate-cap restrictions. Like utilities, waste removal is non-discretionary: when waste isn't removed, it accumulates and creates untenable situations. However, unlike utilities where returns are capped by regulators, waste services can pass price to customers during inflationary periods because the service is necessary. This creates a hybrid business model with utility-like stability and free-market pricing power. The parallel illuminates why certain service businesses can maintain margins during inflation: necessity drives willingness to pay.
Rob explaining why environmental services maintain margins during inflation
Private equity as relay race versus distance race
Private equity value creation is structured like a 4x400 relay race rather than a 1600-meter individual race. In the relay, each runner sprints their lap at maximum intensity, then hands the baton to the next runner who is fresh and ready for their own sprint. In the distance race, the single runner must pace themselves to complete the full distance. Private equity firms sprint during their ownership period (typically 3-5 years), implementing operational improvements and growth initiatives at high intensity, then exit to the next owner who can bring fresh energy and new capabilities. This explains why private equity has historically outperformed public markets: the sprint-and-handoff model enables higher intensity value creation than any single owner attempting to maintain that pace indefinitely. The relay structure also explains optimal hold periods: trying to run two laps means the second lap is slower because the runner is tired.
Rob explaining why private equity hold periods cluster around 3-5 years
Glossary (2)
tenable
VOCABULARYAble to be maintained or defended; sustainable
“That's not a tenable situation.”
myopically
VOCABULARYWith narrow, short-term focus; lacking foresight or breadth
“We want them focused on growth as opposed to myopically focused on quarterly interest and amortization.”
Key People (2)
Chris Michalik
Co-founder of Kinderhook Industries; twin brother of Rob
Rob Michalik
Co-founder of Kinderhook Industries; twin brother of Chris
Concepts (4)
master service agreement (MSA)
CL_LEGALMulti-year contract between supplier and customer establishing pricing and terms
utilization rate
CL_FINANCIALPercentage of total asset capacity being used to generate revenue
tuck-in acquisition
CL_STRATEGYSmall acquisition integrated into existing platform to add geographic coverage or product lines
dry powder
CL_FINANCIALUncommitted capital available for deployment
Synthesis
Synthesis
Migrated from Scholia