Balance Sheet First Investing Like an Operator, Not Traditional PE

In this episode, Alex Rawlings speaks with Andrew Sachs, Founder of Mauloa, about why he believes the traditional private equity model is fundamentally flawed — and what a long-term alternative looks like.

After starting his career at Morgan Stanley Capital Partners, Andrew built Mauloa around a simple philosophy: no excessive leverage, no forced exits, and a focus on compounding cash flow over decades.

Mauloa takes minority stakes (30–40%) in family and multi-generational businesses, avoids debt, and prioritises culture, balance sheet strength, and long-term alignment.

⏱️ Timestamps

00:00 – Andrew’s background and founding Mauloa
01:10 – Why private equity’s model is flawed
03:02 – Investing without debt or exit pressure
06:18 – Fund structure without institutional capital
07:44 – Incentivising management long-term
10:49 – Free cash flow freedom vs leverage pressure
12:14 – “Piles of money” vs chasing IRR
16:54 – The Middle Market Accelerator
19:16 – What Andrew reads and recommends

Key Themes

• Over-leverage and short hold periods distort decision-making
• Long-term compounding beats short-term IRR optimisation
• Culture and leadership matter more than financial engineering
• Supporting “boring” small and middle-market businesses builds real wealth

If you're questioning whether traditional PE is the only model, this episode offers a thoughtful, long-term alternative.

Raw Selection partners with Private Equity firms and their portfolio companies to secure exceptional executive talent. We focus on de-risking executive recruitment through meticulous search and selection processes, ensuring top-tier performance and long-term success.

🔗 Connect with Alex Rawlings on LinkedIn https://www.linkedin.com/in/alexrawlings/
🌐 Visit Raw Selection www.raw-selection.com

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Transcript

00:00
oh Welcome back to the Royal Solation Private Equity Podcast. Joining us today is Andrew Sachs, the founding partner  of Malloa, a different,  genuine different approach to private equity investing.  Let's dive in.  Andrew, if you can share a brief insight to you,  Sure. ah So  I was born in San Diego, raised in San Diego and

00:27
Thought I was going to be a professional golfer, but God had a different plan for me.  I was fortunate to go to Georgetown and study at London School of Economics. Thought I was going to be an economist.  And  ended up working at the second largest buyout fund  for my first job, Morgan Stanley Capital Partners. $1.9 billion, so this was about 30 years ago. Times have changed.

00:49
And ended up after that working for some family offices  and ended up starting my own investment firm just over 19 years ago.  And it's called Mauloa.  Mauloa means endless in Hawaiian. And that really uh flows through our entire thesis of investing in people and life.

01:10
Thank very much for that. Sorry to hear the professional golfing didn't work, but thankfully you were saved by private equity. What are the mistakes that you see private equity firms making all their portfolio companies and what would you suggest to correct them? So I think private equity is actually fundamentally flawed in terms of the model they're using, especially with higher valuations. So the most obvious mistake is putting too much debt  on a company,  which now in the last 10 years, massive amounts of debt.

01:39
have been forced on the companies because valuations are higher and private equity funds need to  try to hit their IRRs, which is another, frankly, kind of makes you make interesting decisions, which aren't always the best decisions.  I would say the second thing is timelines. So to invest in a business and then think you're going to make proper decisions with a lot of debt thrown on it and have to sell it in five to seven years uh creates a paradigm which  just doesn't really make sense from a long-term business perspective.

02:08
And so those are really the two, I think, major mistakes that are getting amplified. And you see it today coming out that a lot of funds are not able to sell their companies.  You do see bankruptcies with too much debt.  Obviously,  often they're restructured  because it's private credit now. So a lot of it's  under, you don't hear a lot about it  and it is private.  But I think those are two fundamental mistakes that private equity is making over and over again.

02:37
Well, I'm going to guess that you're not going to tell me that you're heavily leveraged and your whole period is two years. So let's start with your focus from a balance sheet perspective  and how you're approaching things differently than the heavy debt cycles that's traditional with PE.  So part of it goes to what we focus on. We focus on family businesses,  often second, third  generation businesses.

03:02
looking for capital for owner liquidity  and growth capital or working capital to grow  and We do this without debt.  We do not like leverage. We would actually rather have annual distributions  to the owners and to us  rather than some big pop at the end of the day  and Then we're often acquiring 30 40 percent of a business  With with no put or redemption, right? So we don't have timelines

03:28
And so, maualoa means endless. We believe in endless timelines. We have no problem selling businesses when it makes sense.  But the belief that quality businesses are hard to find.  And good old thing of business also is typically not a five to seven year affair.  And so, we kind of take that, we do take that off the table.  We bolster up the balance sheet also  that private equity typically does not uh pay attention to, although with their tight timeframes,  I get that.

03:56
And we believe the balance sheet, culture, our people are really the things that drive a business long-term. There's obviously two names that have done pretty well out of the whole long-term hold of Charlie and Warren. But what was it that inspired you to adopt that model as opposed to following the herd? I think there's a couple of things. So one, having been an economist by training.

04:23
So having a little bit more kind of long-term view in terms of what are the right business decisions and how it works. ah Second is having started in private equity, it was very fortunate. mean, we did old school private equity buyouts  and uh obviously like most investors,  Warren Buffett is one of my idols  and I've read as much as I can, tried to learn from him.  So we certainly didn't invent it,  but those ideas were out there.

04:51
And especially as private equity has become much more competitive over the last 10 years, an efficient market,  prices are very high, that if you're able to find opportunities ah to invest with a great team, a great business model, a good market, um why would you sell? ah You have to pay taxes on it. You  have to reinvest the money. Now it plays into the typical private equity model because they like to raise fund over fund over fund.

05:20
ah But to me, it's not really investing. It's more capital aggregation,  which you see today  with the KKRs and the Apollos  of Carlisle's where they're just getting the money out. ah And it's been lucrative, uh but then they just keep fundraising. So we take a very different approach. We also focus on the SMB market, the small and middle market,  small and middle market businesses, which  typically have been overlooked. They've gotten more action lately.

05:48
because of platform businesses reaching down, trying to grow.  But we believe the small middle market businesses are the backbone  of the United States,  which has the most dynamic  economy in the world.  And we think it's really important that these businesses are supported  because that's what drives our community and our economy. Interesting. So  how does that work from a, you know, do you guys not therefore work in fund cycles?

06:18
And I'm assuming that your LPs will have a different expectation additionally from there as well. So it's a great question. think one of the key differentiators, we don't have any institutional capital. So we do have funds.  We're on our third fund  today, over 19 years. So that also tells you a little bit how we're different than most private equity funds. Most would have probably twice that or three times that.  And  so  we work with a fund, but it's only high net worth individual investors. The fund does not have a uh

06:47
It has a period of investment, but then it has no time period for holds. And as I mentioned, investors like it because we distribute cash on an annual basis. So it's not their only holding. This obviously is a part of a diversification strategy among high net worth individuals. And so fortunately, the returns are there. And then also I think there's the emotional part too. These are people who are wealthy.

07:15
And they want to be investing,  they want to make money, but they also want to see positive outcomes uh that are good for our community and our world. And  I believe that capitalism, small and middle market business, we're the most powerful forces in the world for uh creating wealth, for impacting people's lives, creating jobs,  impacting the communities.  And we love it. So, and then from a talent perspective, you know, I run an executive search firm, so...

07:44
I'm always thinking about your executive teams and your portfolio companies, you referenced that earlier, the importance of it. Those guys are all predominantly chasing the big liquidity event because that's where their payout happens. How are you structurally things differently given that long-term hold in order to incentivize and obviously attract the best people to grow the companies that you've  acquired?

08:08
So we're big believers in  equity  for management, for top management, not necessarily for all management, ah but then also  having bonus programs annually in terms of the success of the company.  I'd say one of the mistakes I made early in my career is being too analytical, maybe more my economist uh hat, and not realizing that fundamentally the success of a business, especially over the long term, is people.

08:33
And so we've become quite critical  and I think a lot more intelligent about the underwriting  of the people. It starts with the leader,  but also the team around them. And that really plays into culture.  And what kind of culture are they creating? And we find that certainly there's lots of entrepreneurs who want to uh grow a company quickly, get the big pop. There's nothing wrong with that.

08:58
But there's leaders out there too who are a little bit different, who have spent 15, 20, 30, 40, 50. We have a company that's 93 years old building with their employees and their family. And so yes, the big pop is important. People like it. But at the same time, you're throwing your company into the wood chipper potentially of private equity. And what's that going to do to their people? What's going to do if they put a bunch of debt on it?

09:23
And ah certainly I don't fault anyone for taking the big pop, but this is an alternative. No different than I think  another alternative is ESOPs and where  a  leader, an owner will choose to do ESOP.  There's certainly some upsides and downsides to ESOP. um I think  we're an alternative under that vein.  Someone who doesn't, we say it's kind of like having your cake and eating it too, uh or another bite at the apple or first bite at the apple where

09:51
You know, you can take some money off the table, bolster up your balance sheet, little growth capital, and if you want, you can sell it in a number of years.  But it really depends on the psyche of  the owner and the entrepreneurs. Sorry to interrupt. Just a quick mention of a longstanding partnership with Grata. As you will probably know, the private equity scene is constantly evolving and DealFlow is moving now to proprietary and data-driven processes. Grata provides you with the data and information

10:20
of over 7 million private companies. So if you're looking to improve your proprietary deal flow and improve the data access, then reach out to Grata today. Now back to the podcast. Having been in a, what I would assume Morgan back then was a highly leveraged environment with the portfolio companies. What, what, you know, when we talk, we just use the term free cashflow for simplicity. What's that like from a portfolio company perspective when

10:49
The worry isn't the interest payments. The  constraint doesn't sit on having to get your dollars to work probably as hard as you should do,  or you have to because literally  the cash is so constrained.  What does that change as a, you mentioned the term culture, but what does that change as an organization not having that, or just let's put it in the positive frame, having free cash flow and not having the highly leveraged debt burden sat above your head?

11:19
I would call it simplicity, it's freedom.  You have the freedom to make the right decisions, the right long-term decisions. um And with debt, and I think most private equity guys, well, that's good because it sharpens your focus and makes companies really perform. But at the same time,  that could be true. But when you're talking excessive amounts of debt that are eating into your free cash flow, businesses need to build their balance sheets. Businesses need to invest in their people. um

11:48
And it's, it's, it strangles you. Uh, you're making decisions for how can I last for the next 30 days, 60 days, six months, two years. And I would say not only debt, but also just gearing up to sell the business. You run a business very differently if you're planning to sell it a year from now, as opposed to keeping it for 10 years. And one of the things that we think about in one of our investment criteria is it's a business that we're going to want to own 10, 20 years from now.

12:14
Um, that, and that I think drives us to, good decisions debt. Um, while if used properly, it can certainly juice your IRRs. Uh, does, is not a positive relative to a business and how it's a run. Um, it can maximize shareholder return if done right, but it's also asymmetrical risk and forces with bad decisions. So, uh, we were not fans. I would rather take a IRR, a little bit lower return with a lot less risk.

12:43
and especially over a much longer period of time because the beauty of compounding cash flows, have a 13 % IRR over 10, 15 years. That's a very impressive return in terms of the actual dollar amounts. Now with debt, you could have a great IRR, but actually not have that big of a return relative to your multiple of investment. And so that I think is...

13:09
uh And so that maybe that's a difference too, is people,  the debt really focus you and gets you to focus on that IRR number.  We say we focus on piles of money. ah And that's, that's over the longterm.  And I have to give, I have to give credit to Ed Mathias, one of the founders of Carlisle Group, who actually told me that term,  piles of money. We focus on piles of money. I think that's, that's pretty clear as to what that means. So I'm always intrigued because.

13:39
The  private equity world, when we look at the big players and the kind of more longer term players, which private equity is still a  relatively new term  really in new industry.  if we look at portfolio companies, there was a period of time, there's probably still is a lot of this around chasing the ex-Danahurb people and chasing the kind of big blue chip world-class manufacturing, the Cernier place  for people that have had that experience  and  value that.

14:06
You've obviously had some of that, I would guess, within Morgan Stanley and that exposure. What was something that you experienced at Morgan Stanley that you went,  do you know what I really liked, whether it be the pace, whether it be the  standard of operation, the quality of work, whatever it would be, what was the kind of a single thing or a couple of things,  you must, that was, I'm glad I learned that from that institution, that business? Oh, it was, was first of all, just from the educational standpoint.

14:34
to go in as your first job. And anyone interested in business, and I know it's harder today, but to be able to go into an analyst program  and work there and learn from people,  it was just incredible. ah just in terms of how to value businesses, what free cash flow was, um how to  model,  I think these things are incredibly important, especially in the age of AI,  because you need to keep your critical thinking.

15:01
And  I'm a bit afraid that that's going to go out the window.  think it was really, and the other thing with Morgan Stanley,  really,  as I mentioned before,  it's the ability to, if I look at what private equity does fundamentally, it basically greases the wheels of capitalism. If you're doing it well, you're allocating capital  in a  capitalist system to better outcomes,  which is better outcomes for everyone.  And I love that.

15:30
I love the intersection of capitalism and community outcomes and growth. And I think there's a lot of negative around capitalism and I get why, because it's certainly everyone's boats need to rise. But I think it's still one of the most powerful forces. that really, I got that at Morgan Stanley. And it was also, this was in 1996, so things were...

16:00
Um, you know, the, even though private equity kind of started in the late seventies, this is really the beginning days of private equity. So it was, it was a lot of fun. I just didn't like the, um, and there's definitely a place for the Danahers and you know, whether it came out of GE or, but we,  I love the thing. It was a little bit impersonal, uh, cause it was so big. Uh, you're making big investments and I love working with multi-generation businesses.

16:27
that maybe aren't as complex as a chemical manufacturer, but are just as important in our communities  and  really have a more,  are more at the ground level, I guess, because I've been in the communities for generations.  And to me that  was the thing that I guess that it was kind of my aha moment saying I really love what I do, but I want to do it a little bit smaller and a little bit differently. And  that was my conclusion. So you've got something else that's

16:54
fairly unique and not something I've seen before.  that's, well, the accelerator program isn't a unique concept, but the middle market accelerator program, as you guys have referenced on your website, certainly is.  Tell us about it. Tell us about the outcomes. Tell us about how it's going. So I have to give credit. The accelerator idea was from my partner, Kai,  who had been involved in an accelerator and then actually ran an accelerator.  And  obviously there's not been any middle market accelerators. uh

17:23
PE firms acquire companies, so it wouldn't really make sense for a company to come into an accelerator to be acquired. We don't acquire companies. We look to invest, as I mentioned, acquire 30%, 40 % of a business. And so it was just a perfect fit relative to bringing in, and we decided to focus initially on Washington, DC. We had our first cohort this past year. We brought in three businesses that were all excellent businesses. I would say...

17:51
They're  the small middle market businesses don't quite receive as much attention from the private equity industry.  And it was a huge success. We were able to impact them in ways over a couple of month program  that I think that they appreciated.  And then we were obviously able to work with three exciting businesses.  So we're definitely going to do it again next year.  And um it's just the small and middle market businesses, we call them two kind of boring businesses, which means they're profitable and make money.

18:20
Um, so me, it's not boring at all.  Uh, but that's kind of the term within private equity  and we love to focus on that. And you certainly hear it more and more now, I think, as, uh,  you hear some stories of,  private equity kind of moving into that space, but, uh, that, that focus on the accelerator has done a great job, got our presence out there telling our story. It is unusual, uh, our story relative to not wanting to control a business, not wanting to throw a lot of debt on it, no timelines. And so the accelerator is a way for us to, uh, celebrate that.

18:49
and then also Impact three companies. uh So we thought it was a great success and look forward to doing it again. So what do you read,  listen to, you recommend others to check out please? So I've been reading the Wall Street Journal since I think I was 15. I um do read, uh I'm a big believer in reading everything.  I say there's always three sides to the story,  their side, your side and  the real side.

19:16
So I'm in Washington, DC. do read the Washington Post. uh do uh Apple News,  which I highly recommend to anyone, uh aggregates  tons of different publications.  I'm a constant reader of books.  I'm constantly reading. uh I love CEOs' bios and talking about what their path and mistakes that were made.  I love reading oh anything about Warren Buffett, Charlie Munger. uh

19:46
Any,  any types of books  we believe in this gets into also how we invest in terms of the people we believe in Kaizen culture,  self actualization is what we call it, but constant improvement, right? I mean, we're all fallible. We all make mistakes. To me, it's not where you are. It's what direction you're moving  and constantly trying to improve and get better.  So we're, we're voraciously uh readers.

20:13
Um, I watch occasionally the podcasts, uh, do watch all, uh, the all in podcasts, which I think a lot of people watch, but I tend to be more of a reader. I'm 53 years old. Uh, so I still like feeling, feeling a book, uh, and then spend probably about an hour to two hours a day reading, uh, just the news and what's going on. do think in private equity, you have to be quite astute about, about what's going on, whether it's political business, um, other outside events, uh, because these businesses are impacted by.

20:43
by many things. How, if anybody wishes to get in touch, do they get to reach out to you,  Well, the easy way is Andrew at Mauloainc.com, M-A-U-L-O-A-I-N-C dot com.  always, I've said I've never had a bad meeting  and I'm always willing, I've built my career on business karma, so always constantly willing to help people if I can. um And  always excited to talk to entrepreneurs.

21:12
Well, thank you very much for coming on to the Private Equity Podcast, Andrew. Thank you for having me. It's been a pleasure. And thank you very much for everybody for listening. Till the next time, keep smashing it.