Dr. Relly Nadler: Today we are going to be talking about optimizing performance in the private equity market with Hugh Lytle.
Dr. Cathy Greenberg: Hugh is really going to help us understand some of the differences that I know I have questions about from a leadership perspective between the private equity market and equities market.
Hugh Lytle is the principle of Star West Ventures, LLC, a strategic healthcare advisory in Tempe, Arizona, and the operating executive with GenStar Capital, a premier private equity firm.
I’m really excited today to have Hugh Lytle with us. He’ll be talking about some exciting new mission-driven opportunities. Before founding Star West Hugh was president and co-founder of Axia Health Management, one of the nation’s first true single source provider of integrated preventive health and wellness benefits. Mr. Lytle successfully sold that company to Healthways Inc., that is a Nasdaq company, HWAY, for $450 million in 2006. Now that is a great leadership development success story.
Hugh served as Sr. Vice President for Healthways supporting the integration of the companies before founding Far West in 2007. I want you to help us welcome Hugh. He is going to talk to us today about leadership insights to the challenges of a multi-unit integration experience including issues like group goal setting and alignment, strategic coaching for personal mastery, teach smart people how to learn, which as you know is really difficult, and dealing with difficult situations while finding gratitude and success along the way.
Mr. Lytle earned an MBA from Butler University and a BA from the University of Indianapolis. I was truly very blessed and fortunate to meet Hugh a few years ago when he was leading one of the starkest strategic acquisitions in the healthcare market. He was the leader in this effort taking five companies collectively to market. Getting all the leaders to move in the same direction was certainly a challenge. However, he was very successful, eventually integrating the needs of all the various leaders under one mission and achieving tremendous financial success for everyone involved.
I want to welcome Hugh and thank you for being with us today!
Hugh Lytle: Thank you, good morning.
Dr. Cathy Greenberg: Hugh, I just want to ask to help us, including Relly and I, understand the distinctions in the private equity market and the equities market, before we get started.
Hugh Lytle: Sure. For clarification, equities markets generally mean anything having to do with stock and there is generally a function of public companies.
What private equity is, is generally private companies and these are generally high growth companies that will back a management team like myself and my team, and then allow us to make acquisitions that support the business basis that we are trying to accomplish.
They do that generally through acquisitions, however, our job as the management team is to not just acquire companies, but to add a layer of value on to that for the sponsors, for our shareholders, and then obviously to improve the business.
That is primarily the difference. Sometimes they get the term buy-outs shops but have to tell you it’s a lot more than that. It generally involves returns in the area of 25-40% internal rate of returns. I’d probably say Axia was 105%. They are looking for a significant return. Really, they are loaded up with some of the smartest investing advice this country has to offer around building due diligence plans to really understand the companies that you are acquiring, structuring deals, and then they really provide a tremendous amount of board and strategic support.
We were very fortunate to work with two outstanding firms in building Axia. These guys are really well-versed in healthcare and were real supportive through being able to achieve our goal.
Dr. Cathy Greenberg: I can certainly hear the excitement in your voice. Relly, I’m sure you are chewing at the bit to ask some questions.
Dr. Relly Nadler: Yes. Going back to you co-founding one of the nation’s top health management companies; tell us what it was like to be the co-founder of that and then going through the process, and then we will get a little bit more specific with some of the other questions.
Hugh Lytle: I don’t think I got a chance to first, let me thank you for having me on the show. It’s a really impressive format you have and I’m really happy to have the opportunity to share some of my insights.
What it was like to build Axia; it was a lot of fun but also a lot of challenge. First and foremost, though, I would say it’s probably the greatest experience for me to work with one of the healthcare industries greatest CEOs. Of course, I’m a little biased here, but it’s my father, Ben Lytle.
Ben really helped build the nation’s largest health plan, Wellpoint, through building up of Anthem. So, I’ve been in healthcare my whole life and he and I had always had a dream of working together, so it was great to be able to do that.
It was really an apprenticeship for me that was a transforming event in my life beyond just business, business later, it was as a person and even as a son you find a closeness that you probably wouldn’t have found. I probably wouldn’t have ever known how good my father was as a CEO, but I felt like I learned, and at least I got a lifetime of lessons from him in that brief three-year experience that we had together.
I would say that was probably one of the premier things about what we did.
Secondly, it was exciting for me, and I had done this before, to go from really a business thesis, we knew that there was a market coming in prevention and wellness, but we started with doing our research. It took us about a year or two of research before we ever really got engaged because we were big on strategic planning components. We were big on making sure that we execute against that plan and that we have our facts right before we start, so it was exciting to go from an idea to a platform, and then from a platform really to more of an integrated company. Then from an integrated company to a major division in a national health services company, which was Healthways.
Dr. Cathy Greenberg: Can you just pause for a second and talk a little bit about the different components of what Axia Health Management organization included?
Hugh Lytle: Sure. Part of our thesis was to be able to bring prevention and wellness to a scaled audience. To be able to bring it to millions of members. It had always been an industry of a lot of mom and pop businesses, all tremendous businesses doing really great things, but never really had the scale to deliver it at a national level, which is generally what is needed for health plans and employers to be able to provide the programs en masse, they are hard to customize for lots of people.
What we wanted to do is that we wanted to be able to at admission level to be able to prevent or reduce chronic disease through intervening with programs around diet, nutrition, around physical activity, around helping people stop smoking and around stress and depression management. Those were areas that were what generally contributed to poor health. What poor health contributes to is, of course, chronic disease.
Listen to the complete interview above.
Relly
