Investor Jake Brodsky on Flipping the Script When Looking for Deals

As an associate with San Francisco-based private equity firm Alpine Investors, Jake Brodsky is on the front lines of the dealmaking process — networking with bankers and brokers, reviewing countless teasers, and representing the firm’s interests.

He’s also always thinking a few steps ahead. One of Alpine Investors’ differentiators is its “CEO-in-Residence” program, which takes exceptional operators in the software and business services industries and places them in management positions at their portfolio companies. Instead of finding the right operator after the deal closes, Alpine bases their investment searches on the skill sets of their current CEOs-in-Residence.

In 2015, Alpine was looking for a healthcare software company where they could place CEO-in-Residence Josh Pickus, an experienced operator in the software industry. After connecting with Charlotte-based M&A advisory firm Lyndhurst Partners on Axial, Jake led Alpine’s acquisition of Optima Healthcare Solutions. Josh took over as CEO of the business, a therapy management SaaS software company serving the post-acute care market, soon after.

Jake talked to us about the deal, how Alpine is helping Optima grow, and the biggest challenge facing PE investors in the middle market.

Alpine Investors invested in Optima Healthcare Solutions as a result of a connection made on Axial. Tell me more about the deal.  

As part of the CEO-in-Residence program, Josh Pickus had spent six months with our sourcing team looking for businesses that Alpine could own and operate with his help. During that time, Axial introduced us to Lyndhurst Partners, the bank representing Optima, who we hadn’t worked with before.

Optima is an outstanding growth company and we were immediately impressed with what their special group of founders had built based on their commitment to product excellence and customer experience. That commitment resonated with the market, leading Optima to be one of the most recognized brands in post-acute care.

Josh played a huge role in the three-month due diligence process and helped us solidify the transaction. The founders didn’t want to run the day-to-day anymore. By bringing Josh in as CEO, they were able to maintain minority ownership and stay somewhat involved in the management of the company.

What is Alpine doing now to help Optima grow?

Josh has shown himself to be a strong leader as he has helped bridge the gap to meet Optima’s customers’ evolving needs. Josh and Optima’s founding team have worked to broaden the company’s offerings and deliver even greater value for customers.

Alpine recently partnered with Josh and the Optima team to acquire Hospicesoft, a supplier of cloud-based software for hospices, as an add-on. To date, Optima has also launched 2 new products expanding us into adjacent markets (including hospice with the acquisition of Hospicesoft), building the business into a sizeable and quickly growing platform.

As it does with every portfolio company, Alpine has also provided Optima with an operating playbook to help the business continue to grow organically. The PeopleFirst Playbook collects 100 years’ worth of expertise from our limited and general partners, as well as operators. The playbook provides our CEOs-in-Residence with advice on topics ranging from what attributes to look for when building out a management team to how to match add-on targets to your business.

Josh Pickus at the Alpine Investors annual Leadership Offsite

What do you think is the biggest challenge facing PE professionals in the middle market right now?

Competition is stronger than ever. Having the ability to differentiate based on your firm’s focus and strategy in the marketplace is crucial if you want to stand out from the crowd to win deals. The challenge is succeeding in building a firm that is compelling, differentiated and clearly understood. I believe that a PE firm’s strategy and underlying values should permeate its entire being, from the way it presents itself to the world to the way its people act.

For us, our founder transition strategy allows us to pair domain-experienced CEOs with great businesses.

It’s been a very fulfilling story to be a part of, especially considering the firm’s humble beginnings. We grew from a 1-man shop based out of a Stanford dorm room.  Now we’re seeing tremendous numbers and improvements in deal flow and signed LOIs. But the numbers are really just an output. They measure how effective we are at staying true to our purpose and values.

What does your typical deal pipeline look like?

We look at around 2,500 deals per year with the goal of closing four to six. This has been a remarkable year for Alpine — we’ve already closed five and have another five under LOI.

We get there with a hybrid approach. We source deals through a variety of channels: our existing sell-side and buy-side networks, deal databases, industry conferences, and more.

Any time we can get in front of people is when we’re most successful. Reaching out through multiple touch points — email, phone, meetings — is useful because it helps us stay top of mind.

What’s one piece of advice you think every business owner should hear before a transaction?

Planning ahead will help you make your business more attractive to buyers. The most attractive companies have a strong value proposition with customer loyalty, recurring revenue, and white space to grow.

Spend time dreaming up what an ideal transaction would look like before you want to sell. Once you’ve done that, look for the right partner to help take the company to the next level. Think about what your company needs from a buyer, and pay attention to company culture and shared vision when you are determining whether the buyer is a good fit. Valuation is important, but there are many other factors that go into a deal like certainty, speed, and ease of working with the partner, all of which are very equally crucial to growing your legacy.