Podcast: executive sessions – reflecting on our success with John Stewart
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Under the leadership of our Founding and Managing Partner, John Stewart, we have carved out a unique and successful niche in the competitive world of private equity. On MiddleGround’s tenth episode of Executive Sessions, John meets with Sean Mooney, BluWave’s Founder, and CEO, sharing his journey and lending insight into the differentiated approach that has led us to success. If you like this episode, check out BluWave’s “Karma School of Business” podcast dedicated to exploring private equity, best business practices, and real-time trends.
- From the Factory Floor to Private Equity
- MiddleGround’s Differentiated Approach
From the Factory Floor to Private Equity
John’s path to becoming a leader in private equity was unconventional. Rather than following the high-finance blueprint of earning an Ivy League degree before starting a career on Wall Street, he dropped out of college and worked the night shift on Toyota’s production line. This decision laid the foundation for a deep understanding of operations and lean manufacturing principles.
Throughout his 18-year career with Toyota, John rose through the ranks and became the general manager for their largest division in Europe. Despite deep loyalty to the company, the allure of entrepreneurship and the opportunity to make an impact was irresistible and he started his own firm. To this day, he attributes his operational know-how to the rigorous training at Toyota. “It’s fascinating sometimes just to sit back and kind of reflect on how all this got started, and you don’t realize it when you’re in the throes of going through everything. But when you do take an opportunity to step back and reflect on it, it’s really interesting how this whole thing has unfolded.”
Despite MiddleGround’s success, many people don’t see the challenges and personal sacrifices that defined the journey. From the start, people questioned everything about the firm, from the logo and location in Lexington, Kentucky, to John’s lack of a traditional finance background. A lot of risks were taken, John even recounts a time when he had no income and was writing checks from his personal bank account to get everything up and running. Yet, despite the odds, 22 investors were secured out of approximately 350 initial meetings for the company’s first fund and we’ve just celebrated our sixth anniversary with almost 4 billion assets under management. There is a tendency among high achievers to always focus on the next goal post, but John’s advice is to “… stop and smell the roses along the way,” recognizing how far you’ve come.
Undoubtedly, the ability to persevere in the face of adversity and maintain an unwavering focus has been instrumental in our success. John acknowledges that “…the success that MiddleGround has was paid for with a lot of personal and professional failures…The entrepreneurial journey has its rewards, but people don’t see what it takes.” But these experiences have shaped who he is today and have helped contribute to the firm’s achievements along with the differentiated approach that sets us apart.
MiddleGround’s Differentiated Approach
We’ve distinguished ourselves by adopting an operational approach to value creation. We focus on B2B industrial manufacturing and specialty distribution investments, leveraging the operational background and expertise of our team to boost performance.
One of our distinguishing features is our rigorous underwriting process. For each deal, we create a detailed value creation plan, targeting a 25% or higher equity value creation from operational improvements. This operational emphasis allows us to be less reliant on traditional financial levers, such as leverage, to generate returns, as value is driven by implementing tangible improvements throughout portfolio companies.
Complementing this operational focus is the firm’s prioritization of actual EBITDA and free cash flow rather than relying solely on pro forma adjustments, which can often lead to overly optimistic projections. This approach highlights the firm’s commitment to sustainable growth and profitability within its portfolio companies.