Business and finance professionals discuss the pros and cons of leaving the nest
Professionals leave Corporate America for one reason or another. Some retire, while others may transition to the nonprofit world. Others are simply dissatisfied and need a fresh start.
Then there are people like Jonathan Kasen, who left an almost 14-year stint as a portfolio manager at a large financial services corporation to become a first-time acquirer and entrepreneur. Today, with a partner, he is co-owner of a regional chocolate company, in addition to managing Boston-based investment firm Shaker Valley Capital Partners LLC. The pair used their own capital to do the deal, which came through Axial and closed in February 2021.
“We both went from running multibillion dollar funds to licking envelopes for accounts payable,” Kasen said of him and his partner. “We realized quickly that our new roles were for real.”
To be sure, leaving a high-paying, secure job to enter the world of deal-making and entrepreneurship in the lower middle market comes with risks, among them the potential to fail. Challenges run the gamut, from finding the right company to buy to funding the deal to running the newly acquired business, sometimes as a first-time, relatively inexperienced operator. Instead of wearing one hat, new acquirers may wear several, as they get their feet wet in a strange new industry.
But the move from big business into entrepreneurship — whether one is self-funded, an independent sponsor seeking outside funds, or an eager searcher looking for advisory and financial partners — is becoming a bit of a rage, and in most cases, the pros outweigh the cons.
Just ask Thomas Mangas, the former CEO of Starwood Hotels & Resorts Worldwide Inc., who in his own words has had an “eclectic career” and could have sauntered down his previous path until retirement. Before Starwood, Mangas was the executive vice president and CEO of Armstrong Flooring Products, and previously was a vice president at Procter & Gamble. In 2016, he left his post at Starwood and founded Centerfire Capital LLC, an investment firm and holding company. During the first few years of running Centerfire, he also worked as CEO of the International Car Wash Group in Denver, until January 2020 when he left the corporate world entirely. Bottom line: Mangas has an extraordinary resume, but he chose to found Centerfire because he wanted a new beginning. “I didn’t need to go do the next CEO gig,” he said. “I always imagined this would be a place to land.”
Since its inception, Centerfire has invested in numerous tech startups, but in March 2020 Mangas pivoted and began acquiring companies on just two primary platforms: the kitchen and bath design space, and the non-medical homecare sector. He used his own funds to acquire five companies, including Colorado-based JM Kitchen & Bath Design and The Cabinet & Granite Source, taking on qualified management teams and consolidating these companies under his holding umbrella. “I’m attracted to the industries that are highly fragmented that can benefit from scale,” much like the car wash segment, Mangas noted. He enjoys the “independence” of running his own show, and being creative in altering product lines, expanding into new segments, and being more hands on — using his knowledge and skills learned from years as a corporate executive in consumer-facing industries.
Mangas plans to officially launch as an independent sponsor within a few months, at which time he’ll seek outside capital to fund future deals on his noted platforms. Admittedly, he wanted to get grounded before pitching outside investors to help drive his plan for consolidation and growth. “To be an effective independent sponsor or raiser of other people’s capital, you need to demonstrate success beyond being a CEO,” he said.
While Kasen and Mangas are overseeing their newly acquired companies, Dallas Perkins has been searching for months for a company to buy in the construction services sector. Now an operating partner at A111 Capital, a private investment firm focused on operator-led companies in the lower middle market, Perkins, a CPA, spent almost 15 years as a director at PricewaterhouseCoopers before venturing out of the corporate realm. He helped build out PwC’s private company services practice in Florida, but after a time craved a change. “I realized that I was starting to get tired of consulting and viewing things from 30,000 feet,” Perkins said. “I was ready to transition into an operational role and felt I had the skills and opportunity.”
A111’s mission is to invest in companies for the long haul and build sustainable growth over time. The firm works with operators, like Perkins, who help lead the search and then embrace operating roles at their newly acquired companies. A111 screens and vets targets, oversees the deal process and negotiations, and brings investors to the table. Perkins and his team now have two solid deals in the pipeline, and he meets with these potential sellers weekly to “understand the world from their perspective” and establish a solid relationship so that everyone feels comfortable if the deals close, he said.
While Kasen, Mangas, and Perkins have taken different paths into unique sectors, all three have faced a variety of challenges after leaving Corporate America.
For Kasen, who decided he wanted to run and grow a business long term, both buyers and sellers of the candy company were rookies. “We tried to get as much figured out before we got anyone else involved,” he said. He and his partner have worked diligently with the sellers, who are still taking an active role in the family-run business.
Mangas views his new role as “very personal”; instead of a corporate human resources department paying employees, payroll is now his direct responsibility, for instance. He’s also adamant about delegating and having a strong management team, to help handle the many tasks at hand. “That’s where things can fall down, he said. “If you become the gatekeeper for every decision, nothing gets done.”
Perkins, meanwhile, has had to fine-tune the screening process and ensure he and investors are aligned before a target is found and a deal is done. “The biggest challenge is having capital partners that have the same vision and motivation that you have around the business,” he noted. Perkins also discovered that for sellers, the deals are more personal than transactional. “You quickly learn that their big motivation is around the nonfinancial elements of the transaction,” he said of sellers. “It’s their livelihood and legacy.”
Perkins’ ultimate goal is to continue to buy companies that could complement previous acquisitions, handing off the reigns one by one to a seasoned management team, after he moves on. He advises other wannabe entrepreneurs to be ready if and when they take a similar leap from a well-oiled corporation into running their own business: “This isn’t a shortcut to being in a C-suite or a shortcut to potentially making a lot of money in an easy way,” he said. “You have to be prepared to work, be self-motivated, and able to handle the emotional rollercoaster.”
Mangas echoes that sentiment. “Look before you leap,” he quipped. “Corporate America runs very differently.” The main thing is to do well for employees and customers, and build great brands, “but it’s not for the faint of heart”, he added.
Kasen and his partner plan to sow their oats first with their new chocolate company, and then eventually do another deal, this time a bit larger. They may or may not bring in outside investors, depending on the size of the transaction. “The most important thing is we fall in love with the company and we’re not going to cheat ourselves on that,” he said. “My fear going forward is that we won’t buy something as good as this. People love their chocolates so much.”