From Investor to Operator: Hard Truths from 35 Years in Private Equity with Matthew Kearney

This episode is packed with pragmatic advice and “growth hacks for operators” – get your pen ready.

⏱️ Episode Highlights & Timestamps:

00:03 – Introduction
Meet Matthew Kearney: 35 years in private equity, from 3i to operating partner and PE-backed CEO.

01:07 – From 3i to New York CEO
Matthew’s early career, moving from UK PE investments into operational leadership in media and technology.

02:31 – Common PE Mistakes
Why thinking “buying right” is outdated and why zombie portfolios exist. The importance of adding value post-investment.

04:56 – Speed Matters
Why hitting the ground running with a viable plan is critical – and where many PE firms still fail.

05:23 – The Need for Differentiation
You can’t differentiate on capital anymore. Matthew explains the need for pre-planned specialization and strategy.

07:21 – The Case for Specialism
Why generic approaches fail in auction processes. Success lies in preparedness and knowing your niche.

09:27 – Private Equity’s Evolution
From generalists to specialists, and from deal teams to fully professionalized operations functions.

11:24 – Pick Your Spots
The strategic importance of check size, deal type, and industry vertical – especially for smaller funds.

12:47 – Talent Strategy
When to insource, when to outsource. The balance between internal teams and external experts.

13:42 – Reducing Direct Reports
Why Matthew cut down his direct reports from double digits to five – and how he structured high-performance teams.

18:38 – NASA-Level Team Building
Using High-Performance Team models (inspired by NASA) to fast-track team effectiveness and reduce storming time.

20:06 – Grata Partnership Promo

20:35 – Lessons from Three Exits
Matthew shares what made his billion-dollar exits successful, from growth-first mentality to choosing the right M&A advisor.

23:27 – Beware of Price Promises
Red flag: advisors promising high valuations without understanding your business. Chemistry and early engagement are key.

24:31 – Staying the Course Through Uncertainty
Avoiding plan deviation in volatile markets. Why good governance, transparency, and dialogue are essential.

26:46 – The Decision to Pause a Sale
How Matthew and his board paused a 2021 sale due to geopolitical headwinds, only to exit successfully in 2025.

28:07 – Balancing Shareholder vs. Management Perspectives
Navigating differing time horizons and objectives post-sale delay. The role of a good Chair in alignment.

29:59 – What Matthew Reads
Matthew’s go-to content: Wall Street Journal, Financial Times, The Economist (begrudgingly!), BBC, and even Daily Mail for well-researched stories.

31:55 – How to Connect with Matthew
📧 Email: matthewjkearney@gmail.com
🔤 Name spelling: Matthew (with two T’s) Kearney (K-E-A-R-N-E-Y)

Raw Selection partners with Private Equity firms and their portfolio companies to secure exceptional executive talent. We focus on de-risking executive recruitment through meticulous search and selection processes, ensuring top-tier performance and long-term success.

🔗 Connect with Alex Rawlings on LinkedIn: https://www.linkedin.com/in/alexrawlings/
🌐 Visit Raw Selection: www.raw-selection.com

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Transcript

00:03
Welcome back to the Raw Selection Private Equity podcast. Johnny's today is an absolute cracker with Matthew Kearney, an experienced operating partner, private equity back chief executive, and started his career in private equity as an investor at 3i Corporation. 35 years on that journey, here's his take on the private equity landscape. This is Essentials for Investors.

00:29
Growth hacks for operators, so get a pen ready, take notes.  This is a good one.  Matthew, if you can share a brief insight into your place.

00:39
Certainly, Alex. First, I'd like to thank you for inviting me on the podcast. I've listened to a fair few of them. I know how popular it is and I really enjoy them. So I was delighted and humbled to actually be asked. Although I had been waiting a little while to be totally friendly. So, about me, I've got a 35 year business career.

01:07
I started in the UK in the early 90s, as you can now in New York. As you can tell from the accent, I am very British. I started off in private equity working for a group called 3I, a fantastic training ground for any young executive. And I became an investment executive at a young age back then. I was allowed to...

01:35
proceed with my own investments overseen, of course, there were typically technology investments, got an engineering  degree  and I've stayed in private equity and technology pretty much ever since.  After  3i,  was approached whilst working there  to join an operating company  in media and technology called Carlton Communications, also based in London, but a multinational.

02:04
They  had a great time there and they invited me as a young man to be CEO of a business called Screen Vision, which is what brought me to New York, sold that to a private equity firm, stayed in private equity related leadership roles ever since, and have now achieved three  exits  totaling over a billion dollars  in value. Well, thank you very much for coming on.

02:31
on the podcast and looking forward to exploring that exposerians over those 35 years and also the exit stuff. What mistakes do you see private equity or portfolio companies making and what would you suggest to correct them?  Oh,  right. Well, the interesting question.  The  first thing I'd say is, and I guess it relates to  the private equity world when I first joined it back in the day.

03:01
I remember very, very clearly research at 3i showed that  the key factor to making a successful investment was buying on the right terms. That was the key factor. Fast forward to today, I think that's a mistake.  Maybe, I'm sure it was true then,  3i had plenty of success, but it's a much more competitive market now in the private equity world, and you have to add value during the life of the investment.

03:29
and add value during the exit process too. You've got to address all three components.  And I see some firms embrace that, embraced it early. I see some firms still struggling with that now.  That's a big mistake to make. And I think  it explains why we have  zombie portfolios in private equity  these days. know, the businesses that  are

04:00
not valuable enough to realize a profitable exit and they're just sitting on people's books.  Mistake number two is taking your time over things. Again, back in my three I days, very different world, but they  point to a key differentiating factor for them, which is they could sell the business  when the

04:28
then the moment naturally occurred. They didn't have a  fund that needed an exit at a point in time.  If you are a fund, the clock starts ticking the day you invest. You have to move with speed with the management team to execute against a game plan to build that value up so you can sell it  within a reasonable investment period for the fund.

04:56
Too often I see private equity  firms  not hitting the ground running with a viable plan.  So there's a couple of thoughts for you straight off the bat. Okay, thank you. So diving into that, so you've seen the lens from CEO from an operating partner and an investor, your reference kind of hitting the ground running, kind of condensing all that experience. What would you be doing  maybe differently or what have you done well?

05:23
this is what we do to try and get things off the ground as fast as possible as that clock  starts ticking. Yeah, think you have to have a special thing. You have to have  an angle  at the time you invest.  And that means you have to have a point of differentiation over your competitors.  No one that can differentiate these days over the money. Your money has no smell. Everybody, all the private...

05:52
firms in more active have money. It's all like this, the same money.  You leverage it the same way. You're using the same business model with graduates who went to the same business schools. No differentiation. So you need differentiation elsewhere.  And  you've got to pick your markets,  the check size,  the situation. Is it, are you going to be doing turnarounds? Are you going to be doing growth?  And then you have to be staffed up ahead of time.

06:22
hit the ground running. You can't say, oh, we just found this interesting acquisition. We're going to progress with it. We're going to buy it. And then we're going to,  with a team that's never been formed before, then we're going to work out how we're going to build this and grow it. You've got to, I think you've got a pre-plan and you've got to have a strategy already in place to enable you to execute. I you've come from the 3-I world, which obviously will have more fight or have

06:51
had more firepower,  some phenomenal businesses that have come out of a three-hour portfolio perspective and some phenomenal investors that have set up and really done some incredible things. So I  certainly believe you when you say it was a good breeding ground.  on that,  how should  businesses be approaching? Because if you're going through an LOI process, you don't know if you're going to win the platform. It's highly competitive. You can't find a management team or you...

07:21
don't want to spend the money finding the management team beforehand. How would you suggest mitigating that or does that come back to guys, you've got to be specialist? It comes back to guys, you got to be specialist.  And yeah, that classic  auction process is another  reason why  you've got to be specialist because  all the bidders are getting that same...

07:49
information, they're getting the same confidential information and the same presentations,  the same access to the virtual data room. So  all things being equal, everybody's going to be bidding the same price.  And  that's a hell of a lot. And therefore the likelihood of you winning is relatively low because you're not differentiating yourself in any way, shape or form. So it comes back to being pre-prepared.

08:18
So with that specialism side diving into it, because I'm an absolute advocate for this, think  my frame sits around an interesting how you've seen obviously so much of private equity,  in the early phases there was less competition.  There was predominantly lawyers, bankers kind of moving into this world and doing a  new concept, a new asset class. But then what we've seen is  huge amounts of investment, huge amounts of capital.

08:47
loads and loads of competition and it's a bit like anything, law firms, search firms, any kind of professional services business, financial services business, difficult to differentiate. So with that specialism and saying, hey, we should do this,  you then have that avenue of being able to say X, Y,  Z. What else do you think that the specialism brings for somebody that goes, now I'm quite happy being a generalist.

09:11
Look, if somebody is quite happy being a generalist and seeing good deals and good returns, if it ain't broke, don't fix it. But I'm not saying a lot of...

09:27
Yeah, that's  definitely the case.  So looking at that kind of  competition lens, how would you kind of categorize that as a difference of private equity firm as everybody fights  to be different  within the increasing competition  and increasing absolute fight for capital? So Terry, what was the question, Alex? So how are you categorizing? Are you just seeing it purely as

09:56
specialism is king or do you think there's other avenues that private equity firms are doing? I kind of regard it as the professionalization of private equity as we see different functions in the firm. It's no longer just deal guys. We've got operating partners like yourself, et cetera, et cetera. Yeah. I think  deal size,  deal circumstances.  I've spent my life in growing businesses.

10:26
drive top line to profits, to drive cash flow. Other folks specializing in turnarounds or spin-outs from businesses that are looking to lose a division that maybe not on its own a fully-fledged business and so has talent gaps because it's left the CEO behind and the holding company or the CEO behind and the holding company.

10:55
So that's what I mean by the business situation.  So I think you need to specialize in business size as well.  Is the check size going to be 100 million, 200 million,  a billion?  And  that brings each of those brings their own  different  challenges and opportunities.  And then

11:24
industry  categories.  Are you going to be in retail? Are you going to be in wholesale? Are you going to be in B2C? Are you going to be in B2B? Are you going to be in tech led businesses? Actually, I hear that phrase  more and more these days, but it's very hard to find a business that isn't tech enabled  and successful at the moment. But  everyone's going to have a technical angle.

11:50
And certainly what, what you're one of the companies I've worked for Carlisle  massive organization.  Um,  and they were big enough to have their own departments that could help you with upgrading your technology stack, your IT systems, your reporting systems, your, your HR systems.  Um,  and they were  busy because the, uh,  uh, the,

12:20
Funds  were multiple and the need was at scale for the entire Carlisle group.  And then you,  the client, Carlisle investment team. So they were really excellent to work for.  But there's not many funds that have that scale.  you  need to, the smaller you are,  the more important I think is to do.

12:47
to pick your spots, know when to have the talent in-house and know when that you want to outsource through hopefully a very close relationship with an outside party like a consulting firm or an individual consultant who you can go to when needed. But if you hire somebody who's just going to be kicking their feet, twiddling their thumbs,

13:14
because they're not busy enough or frankly not as good as outside consultants might be, then don't waste your time and money. Yeah, well, time is everything, but I would of course say that. So talking about talent, in a prior role, you took your data reports down from double figures down to five. Now five is kind of like the recommended number, isn't it? Although I think the Nvidia CEO is about 60 odd.

13:42
uh, Darrow reports, but I'm assuming that while he's even came out and said everyone's an athlete and they're asking him and telling him information.  Um, he's just hired better people than he is. And he's just very good at managing those, but,  um, to the normal world,  uh,  talk to us about that journey. Talk to us about other than just reducing the number of Darrow reports,  um, for obvious reasons.  Why, why did you do that? How did you do that? How did you select? Let's dive into it. So the,

14:11
business  situation as I inherited it, it wasn't growing.  The business's top line had stalled.  The bottom line was in significant decline.  one of the  reactions to this was to try and reduce internal costs.  So the  predecessor CEO

14:41
have been making more and more, it's starting to centralize the decision making more and more. And if you're declining, that's much easier than if you're trying to grow because the goal is just to try and keep the lights on as opposed to trying to break into a new industry vertical or to build the tech stack.

15:11
Et cetera.  So that was the situation I was in.  so I  have  enough time myself, because the scope of the span of control was too great,  to  spend with each of these individual reports  to help them develop, improve, and grow their business, as opposed to just

15:40
manage the issues from day to day. So I utilized my personal experience, I knew both from my MBA courses back in the day to my own personal experience that you span a controller because if six to eight, fine. More than that, not fine. 16, way too many. You're just going from one meeting to the next.

16:09
one discussion to the next and also sharing information  is tough. can't scale a business for growth like that.  So  I took the approach and also the private equity firm introduced me to a couple of  excellent  outside consultants in HR and team building, team building specifically.  So the approach, which was super helpful too. So  I identified the

16:39
key functions required to make this business grow.  It wasn't hard.  Sales, finance,  operations, technology, HR, it wasn't hard.  It was the classic ones. I also wanted to make sure that  each of those senior roles had  clear collective and individual responsibility that matched the P &L.

17:09
So that you at a board meeting or a weekly  team meeting, who's responsible for the revenue going up?  One hand is raised.  Who's responsible for the technology costs  going up? One hand is raised.  Or the technology breaking down or the improvement. You know where I'm going with all this. So that you can have  easy delegated

17:38
responsibility, but also collective responsibility too. So  we wanted a team of peers.  And that's where one of  the outside consultants proved super helpful. Do remember the old adage that  when you form a team, you have to go through several phases first, the spawning. Storming, norming, performing.  Yeah.

18:08
Doing that on the job  takes time and also is expensive. Some of those mistakes that you're making  are hitting the bottom line and delaying the business improvement. And the more you work together,  the more quickly you can do this norming, storming, and then get to performing. And this outside consultant had a team building tool.

18:38
called the High Performance Team.  And they'd work some of their focused work with NASA on  making sure the astronauts could work together if they were put on a  mission together.  Because  if it's six months later and he's still up there and he's not getting on, that's not such a good thing. And that process was actually  really helpful.

19:07
Uh,  it, uh, was painful at times. have to share with each other, uh, what people found annoying about you, um,  that you had to stop.  Uh,  and, uh, yeah, when it's  you as it be, and you're discovering that things that you think are charming and wonderful actually aren't going down very well,  uh, it hurts.  then.  Yes. You put it right. And you move on.  Um, so.

19:36
We, that process was really valuable and the storming was much less painful  and  was much faster as a result. know, I'm a big fan. use that internally a lot and we've encouraged storming when we have changes in the business, let everybody get everything out, the management team and everyone in the business really. And we all will have that kind of period and we try and get to norming so everyone knows what they're doing  and then performing again.

20:06
ever cycle through for a growth business  to happen and go through. Sorry to interrupt. Just a quick mention of a long-standing partnership with Grata. As you all probably know, the private equity scene is constantly evolving and deal flow is moving now to proprietary and data-driven processes. Grata provides you with the data and information of over 7 million private companies. So if you're looking to improve your proprietary deal flow,

20:35
and improve the data access and reach out to Grata today. Now back to the podcast. you've been,  Samantha, you've been involved in a number of, of exit processes. What is something that you've done in that exit process that's made the process smoother,  um, that you would encourage others do, or you wish you knew on your first one?  Oh, gosh. Good questions.  Um, none of the...

21:04
Three successful processes, for sure. None of them perfect. All of them had bumps in the road. It's tough. It is a tough process. So what advice could I provide first?

21:32
build a business, grow it and grow it fast. Because  if you haven't added a decent amount of value before you go into a sale process, you could discover  much more easily than otherwise that you're not going to get the price that's going to make the shareholders happy. So  it comes back to that  middle phase.  You've got to buy well, you've got to

22:00
grow the business and add value well against a good plan,  executed in a tiny manner, and only then are you now in a good place to do the sale process. So there will be bumps in the sale process. But if you've got the  value growth in place, the sale process is going to be able to absorb those bumps. So that's first go.

22:30
Second up, I'd say  choosing your  M &A firm that's going to help you sell a business  is another critical moment in  time as well.  Again, they have similarities,  but they also have  specialties and specialisms  and pick them on that basis, but also pick them  where the

22:59
the chemistry is right. And for the chemistry to be right, not just with the P firm, but with the management team, that means start talking to them early.  You might have three or four firms that look like they're the right ones to represent you. Start talking to them two or three years ahead of time, get to know them  and then pick them well  and be...

23:27
super careful about picking the one who says,  I can get you this price.

23:34
Because if their price is the outlier, that probably means they don't understand your business or the industry well at all.  And if someone says the opposite, this is going to be a tough one.  This  is what  we might be looking at.  Maybe double down on that conversation.  Because they're  certainly not saying it to win the mandate.

24:02
they might be saying it because  they understand the business well. What's your take on...  I mean, we've seen this the whole time, but we're seeing a lot now. We're in a difficult market at the moment and everyone's very quick to blame the market  for their businesses  failure, but very quick to take the credit for their businesses success and not blame the market for that. We're in a difficult space.

24:31
as an industry at the moment,  lots of stuff going on, let's not go into the economics and  politics that's happening. But what I've found is that businesses are now beginning to go, we're deviating from our plan. We're going to pause, we're going to wait. How have you avoided that in your career for the decisions? And this can come both when things are good and bad, like, actually we've been doing all right, so we're not going to change our CEO. Actually, things are going all right, so we're not going to put the capex expenditure in.

25:00
We'll do another two years with this  machine  knowing that it could hold things back. All these decisions that are critical for the business, some of them obviously going to be wrong, some of them are going to be right. How have you navigated that kind of avoiding the distractions from the plan or the belief that things are good or bad and therefore not making the difficult decisions? Okay. That's a good question.

25:29
Yeah, I've come out of my most recent  exit experience  with that very much  in the recent history of the business.  my last company was sold in at the end of April for  600 million  and  very nice realization. The business had grown handsomely  over a 10 year period of ownership.  It had gone really well.

25:59
But the first attempt to sell the business was in 2021.  The  Ukraine wars started.  Suddenly we went from an excellent time to sell to  what the hell's going on. And we took the business off market.

26:22
That's because we could. There was no urgent need to sell. The business was continuing to grow. The business was doing so. Let's just sell it when things clear up and brought it back on the market in 2024 and sold in early 20, well, in April 2025.

26:46
with even a final bump in the road, which was the tariff wars had just started,  just as we were about to sign. Well, thank you very much.  But there comes back to you, there's always going to be bumps in the road, which is why having written,  we still got a great result for the shareholders because there was plenty of value already built into the exit plan. But.

27:13
We were therefore sitting  between 2021 and 2024 on a business where  making long-term investments didn't kind of,  if we made long-term investments now to continue to grow the business  to 2030 and beyond,  would we, the seller,  be given full credit for that?  And it did cause a lot of debate at board level.

27:43
The management team took, because they're going to be responsible for delivering clothes in 2030, they have a different perspective to the shareholders, who they were going to have moved on and be living in the beach house in 2030 or whatever, or it won't be on another fund.

28:07
debate inevitably happened, not because people were thinking differently about what was needed for the business, but because people had different perspectives. This is where a good board comes in and a good affinity with the management team. I was chair at the time and I spent a lot of time in long

28:37
Sunday night telephone conversations  between  shareholders, CFOs, CEOs about what to do about this year's budget  or what to do about  the recommendations for the next quarter, et cetera, et cetera. Making near-term investment decisions, pretty easy.  Spend more money on marketing,  pretty easy. But a fundamental  investment in the...

29:07
a new vertical  or a new category of technology.  was,  that was  much longer to discuss.  And I don't think in any of those discussions, there was ever a right answer,  but transparency  and  willingness to talk and debate.  Even if things at times got a little tense and things did get a little tense, but that's, that's kind of where, where someone like

29:35
me in the chair role can come in and help  navigate the difficulties and come to a good resolution.  you. I apologize. I know there's some depth to that question, but certainly something that's, I know a few of our clients are playing with at the moment as they make decisions. What do you  watch, read, listen to that you recommend that others check out?

29:59
Oh, gosh. Well,  I don't know if I read anything spectacularly different from most,  one of my  joys of life is sitting down with the paper version of the Wall Street Journal on a Saturday morning with a very large coffee and reading the op-eds, the Peggy Nudens, et cetera.

30:28
I think it's hard at the moment to rely on one particular publication or medium to get your balanced view on life. I found that The Economist, which I will fess up, I find it a little bit heavy duty. I know I'm not supposed to say that. I know I'm supposed to say I love it.

30:55
It's beneath my level of intellect generally, but I lower myself to it. I find the economists can be a tough. Here we go. The Wall Street Journal for me, and the Financial Times, I occasionally read, the Wall Street Journal for me, in the US, it's relatively speaking, conservative, but takes a fairly balanced view. And of course, in this polarised world, that's what you need.

31:25
The BBC, my old alma mater, The Daily Mail, which is tabloid, but it's really properly researched. if they say something has actually happened, they're usually the first to get out there. And it's always correct. They never put anything out there that's uncorroborated. And anyway, everyone really likes a little bit of celebrity gossip every now and again,

31:55
That's cool. If anybody wishes to reach out to you post this, Matthew, how best do they get in touch, Matthew J. Karning, which is spelled K-E-A-R-N-E-Y. Matthew with two T's, jkarning at gmail.com. Perfect. Thank you very much. Well, thank you very much for coming onto the Private XE podcast. Joining us and giving us 35 years insight over a 30, 40 minute

32:24
podcast discussion. So thank you very much for coming on. You're welcome. One minute for every year. That's pretty good. Absolutely. And thank you very much for everybody yet again tuning into the Private podcast. Till the next time, keep smashing it and thank you very much for listening.