How to Create Value by Being Unconventional

On this episode of the Private Equity Value Creation Podcast, Shiv Narayanan interviews Devin Mathews , Partner at ParkerGale Capital .

Shiv and Devin discuss how ParkerGale invests in smaller companies that many firms would consider ‘too hard’.

Learn how Devin and his team view potential challenges as value creation opportunities, and how they prioritize their resources in portfolio companies post-close. Plus, hear how to avoid buying the right company at the wrong valuation, how to minimize investment risk, and the value of setting realistic expectations for your return.

Mastering Urgency and Empathy in Private Equity

Private equity is an industry built on driving transformation. It’s about taking businesses—often well-established ones—and shifting their trajectory toward a new horizon of growth. But as any seasoned private equity professional knows, this process isn’t easy. It’s a delicate balancing act, not just of financial metrics and strategic priorities but also of human dynamics. In this world, two tools stand out as indispensable: urgency and empathy.

The Pitfall of All Urgency, No Empathy

In private equity, this can look like pushing a management team to pivot an entrenched 40-year-old business overnight. It’s like trying to rebuild a boat while it’s still sailing. Without empathy for the immense challenge this represents, teams can feel unsupported and undervalued, leading to disengagement and, ultimately, failure to achieve the desired outcomes.

Urgency is necessary, yes. It’s what drives change and keeps everyone focused on the goal. But without the balance of empathy, it can alienate the very people tasked with executing the vision.

The Pitfall of All Empathy, No Urgency

On the flip side, too much empathy without urgency results in stagnation. In the context of private equity, this dynamic can emerge when investors become overly accommodating to management teams, avoiding the tough conversations that drive necessary action. Businesses in transition need forward momentum. Without urgency, even the best-laid plans can languish, leaving both financial and emotional rewards unrealized.

Striking the Right Balance: Empathy Meets Urgency

The magic happens when urgency and empathy are combined effectively. This balance is where true leadership in private equity resides. As an investor working closely with a management team, the goal is to inspire action while also understanding the human element of change.

Empathy allows you to see the challenges from the perspective of the team on the ground. It helps you appreciate the difficulty of transforming a business that may be steeped in decades of tradition. This perspective builds trust and fosters a collaborative environment where people feel supported.

Urgency, on the other hand, provides the necessary push to break through inertia. It instills focus, creates momentum, and keeps everyone accountable to the vision. The right level of urgency ensures that empathy doesn’t turn into complacency.

In practice, this balance looks like:

• Setting ambitious but achievable timelines.
• Listening to the concerns of management teams and adapting plans when necessary.
• Acknowledging wins, even small ones, to keep morale high.
• Having difficult conversations, but approaching them with compassion and respect.

Realistic Expectations: The Key to Success

Success in private equity isn’t about chasing every headline-grabbing, outsized return. Instead, it’s about maintaining a disciplined, value-oriented approach that prioritizes steady, reliable outcomes. While 5–6x returns might occasionally happen, the reality is that consistent 2–3x outcomes often define true success. This pragmatic strategy is grounded in three fundamental principles: disciplined entry pricing, foundational execution, and realistic expectations.

Disciplined entry pricing is a cornerstone of private equity investing. By securing assets at the right price, investors can mitigate risk and position themselves for strong returns from the outset. This approach avoids overpaying, even in competitive markets, and ensures that deals make sense based on the fundamentals of the business—not short-term trends or hype. This discipline creates a margin of safety that protects investments and provides flexibility when external market conditions fluctuate.

Execution is another essential pillar. While growth strategies like add-ons and market timing can add value, the true engine of success lies in operational improvements. Boosting margins, driving efficiencies, and enhancing core capabilities ensure that the business thrives on its own merits. A portfolio company that can deliver meaningful performance improvements internally is less reliant on external factors to succeed, making the investment more resilient and better positioned for long-term growth.

Finally, setting realistic expectations is critical for healthy investing. Ambitious goals can be inspiring, but chasing extraordinary returns often introduces unnecessary risk. The best private equity investors focus on what is achievable, balancing ambition with pragmatism. By prioritizing steady, achievable outcomes, investors reduce reliance on external market conditions and build a more sustainable track record. This approach creates value not just for the fund but for all stakeholders involved, reinforcing the importance of a disciplined and measured strategy.

The Art of Being Unconventional

Success is about more than just buying, improving, and selling companies. It’s also about running a fund that generates returns exceeding what investors could achieve elsewhere. To accomplish this, investors must find a way to stand out in an industry crowded with competition. As the saying goes, you can be conventional and right, conventional and wrong, unconventional and right, or unconventional and wrong. The only path to true outperformance, however, is being unconventional and right.

Being unconventional isn’t always about defying trends—it’s about finding a unique angle, a distinctive approach that sets you apart. Take software companies, for example. Buying software businesses today isn’t contrarian—it’s a mainstream strategy. What makes the difference is how you approach it. If you simply follow the crowd, you’re essentially buying the index, achieving returns that are slightly better or slightly worse than your peers.

To truly outperform, private equity firms must step away from conventional playbooks and explore opportunities others overlook or execute them in ways others cannot. This doesn’t mean taking unnecessary risks or chasing contrarian ideas for the sake of being different. It means leveraging unique insights, processes, or expertise to identify and capitalize on opportunities that align with your strengths. For example, applying unconventional strategies to transform software companies or entering overlooked sectors with differentiated execution can deliver outsized returns.

By identifying opportunities where others see challenges and executing with precision, firms can achieve superior outcomes. Whether this means redefining how software businesses are improved or uncovering value in unexpected places, the key is to forge your own path. In doing so, you can outperform not just the market but also your peers—delivering returns that truly stand out.

Check out the full conversation with Devin??

Private Equity Value Creation is a podcast about the innovative approaches leading investors, operators, advisors and bankers employ to?drive sustainable growth?and create enterprise value. Hosted by Shiv Narayanan.

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