Business Titans
How do you go from scrambling for funding in a shared office space to building a private equity empire with over $50 billion in combined sales? In this episode of Uncorked, host Bill Green sits down with Rodger Krouse, co-founder and co-CEO of Sun Capital Partners, to unpack the gritty reality of operational turnarounds. Listeners will walk away with a masterclass in value creation, learning the exact strategies needed to navigate market crashes, scale global operations, and pivot effectively when an initial business plan fails.
Rodger pulls back the curtain on three decades of mergers and acquisitions, revealing how a daring move from Wall Street to South Florida sparked his legendary track record in corporate carve-outs. He breaks down the brutal leadership lessons learned during the 2008 financial crisis, explaining why a company’s survival often relies on outrunning the "bear" of technological obsolescence. You’ll also hear his aggressive framework for utilizing artificial intelligence in traditional sectors to instantly multiply profits, but you'll have to tune in to discover the surprising psychological trap that holds most founders back from securing a massive exit.
If you are ready to elevate your entrepreneurial game and gain exclusive insights into the highest levels of private equity, be sure to subscribe and leave a five-star review. Don't forget to check the show notes for episode resources, guest links, and more unmissable conversations on business and life.
Episode Resources:
Introduction
Bill Green:
Welcome back to Uncorked: Wine, Business, and Life. I'm your host, Bill Green, and today's guest is someone I've had the pleasure of knowing for over 20 years. We first met through a mutual friend when the private equity world looked a lot different than it does today.
Our guest is a fellow Wharton alum—well, I wouldn't say fellow, I couldn't get the SAT scores high enough—and a former Lehman Brothers senior vice president who decided to leave New York in 1995 to build something legendary right here in Boca Raton, Florida.
He's the co-founder and co-CEO of Sun Capital Partners. To give you an idea of the scale we're talking about, since they started the firm, they've overseen over 570 investments with combined sales exceeding $50 billion.
From iconic brands such as Boston Market and Friendly's to the current portfolio of 28 global companies he's managing today, he's the master of the corporate carve-out and a true titan of operational turnarounds. But behind the balance sheets, he's a student of culture and a major force in philanthropy.
We've crossed paths a few times in the last two decades, but today, we're finally sitting down to pull back the curtain on three decades of the evolution of leadership and what it's like to build a global empire from South Florida. Rodger Krouse, welcome to the show.
Rodger Krouse:
Pleasure to be here.
Early Life and Family Business
Bill Green:
So Rodger, I always like to start these things off because there's a lot of our viewers and listeners, especially that emerging entrepreneur cohort, who think that we had some magic bullet. Give me the early years, like high school. What were you thinking about? Did you think it was going to be business?
Rodger Krouse:
Always thought it was going to be business. I grew up in a family business, home heating oil, which my grandfather started. Actually, it was a coal business, then went into home heating oil. My father joined it, and I thought that was going to be my destiny as well.
But with gas heat taking over, oil was a declining business. My dad encouraged all his four sons to go find something else to do. We all went into something very, very different, but business always had its appeal to me.
Bill Green:
I know your brother, Brad Krouse. He worked for Klehr. He didn't get the memo to go into private equity?
Rodger Krouse:
I tried to get him to go, but he wanted law instead. I have another brother who's a cancer surgeon and then someone else who's been in not-for-profit for years. It's been very different things based on what's appealed to us.
Founding Sun Capital and the First Deal
Bill Green:
So you start in '95. When did you get your first deal? Let's talk about you and Marc Leder. What did you do, set up a little room?
Rodger Krouse:
It was pretty much a little room. It was a shared office space. It was before they had WeWorks, but it was something akin to that, just not so fancy.
We were trying to figure out how to get something going, kind of like the two mice in *Who Moved My Cheese*. We were just scurrying around trying to find something that would make sense for us. We wanted to buy a business.
After losing out on a lot of opportunities because we weren't willing to pay up for them, our thought was that maybe we could buy companies that weren't doing as well. And that's how we got started.
Bill Green:
And you didn't have a fund?
Rodger Krouse:
We didn't have a fund. It was the proverbial pass the hat. We would find a deal and agree to buy it, and then we would scramble around to get some financing for it.
Bill Green:
How long before your first deal?
Rodger Krouse:
We started in the spring of 1995 and our first closing was December 30th. It was the same year, but we kissed a lot of frogs before we finally got something done.
We actually bought the two leading companies in the carbon paper market. Now, that was a declining business, but we could buy it really cheap. We bought it at 1.8 times cash flow.
Our view was that we would do our best to stave off decline. The only people using it were people who needed to use it, so maybe the decline would stop. In the meantime, we would generate a lot of cash flow and optimize. And we did.
Bill Green:
You exited successfully?
Rodger Krouse:
We did. It was interesting because it helped fund some of our other early activity. In fact, the next company we bought was in computer peripherals. Our mantra then was that we go from the trailing edge of technology to the leading edge of technology. It went on from there.
Navigating the 2008 Financial Crisis
Bill Green:
Let’s talk about 2008. That was a big-time wake-up call for your business.
Rodger Krouse:
Oh my god.
Bill Green:
Looking back at the companies that went through the crash versus the ones that didn't, what was specific about the DNA of the survivors?
Rodger Krouse:
Going back there, it was a real call to action for us. I remember we figured there’s this really stupid joke that I told a million times during that period.
Two guys are in the woods and along comes a bear. One drops down to put on his running shoes. The other says, "You'll never outrun a bear." He says, "I don't have to, I just have to outrun you."
We said some companies are going to survive in every industry no matter what, so how are we going to survive? We had to be really aggressive at cutting costs down to the bone everywhere. We absolutely did our best from that standpoint.
But not every company made it. It was interesting because not only did you have this downturn, but you had emerging technology. Suddenly, where there was previously a spectrum of companies from the best ones to the worst ones, it became more bifurcated.
There were going to be winners and losers because technology was going to hurt some companies harder than others. It was a huge lesson for us. The ones that we couldn't save were usually losers from a technological standpoint.
Bill Green:
They weren't up to speed?
Rodger Krouse:
Either they weren't up to speed or changing technology was going to hurt them. There were a lot of consumer companies we were involved with. You could turn around consumer companies at one point, but then with e-commerce and social media, you couldn't do that so easily.
Again, that was an industry where there were winners and losers. We just said there are certain industries we can't be in anymore. We can't be in industries where there’s wind in our face; we want either no wind or wind at our sails.
Value Creation and Partnering with Founders
Bill Green:
I sold my first company, a distribution business, in 1995 to Summit Partners. I remember it like it was yesterday, sitting in the managing partner's office. It was an amazing deal for me and them. Ten months later we went public, and I've done lots of acquisitions and played in the private equity space since. What's the one question you ask a founder or a CEO about why they should sell to Sun Capital?
Rodger Krouse:
A lot of it is what they want to achieve with the business. There are a number of founders who want to continue with the business and want a partner who can help them achieve something they're not able to achieve alone.
We bought an HVAC business called Horizon Services. They're a Philly company; they do great commercials. It was a wonderful transaction for us. They needed help making acquisitions and thought we could be helpful there.
What they didn't count on is that we could be really helpful in their core business. The margins and profitability of the core business went up as well. We think really fondly of Horizon Services. It was a great investment for us and for the founder. While they sold us the majority interest, they made more money on the sale of the business later with their minority stake than they did when we originally bought the majority. That was really perfect for them.
Bill Green:
And I remember what year you did that, but there were a ton of HVAC roll-ups. That was a big deal.
Rodger Krouse:
It was an important one. We dramatically improved the profitability of that business, more than tripling it in a three-year period. By virtue of the growth and the size, the multiple went up dramatically as well.
Bill Green:
These are the guys that say, "If you're not early, you're late" in the commercials. They have really great commercials.
Rodger Krouse:
Yes, exactly.
Managing a Global Empire
Bill Green:
So, when it’s just you and Marc Leder in the room, how do you control 28 different companies and thousands of employees worldwide? What are you thinking about?
Rodger Krouse:
First of all, let me tell you, at one point it was over 90 companies. It got really large during the downturn. What I used to say is I feel like a hockey goalie with 98 nets. It was crazy.
At 28, it’s obviously not just us. We have a team of great people and we have a great process. There's a way that we go about it in terms of working with management, monitoring the companies, and guiding the companies.
It's people within Sun Capital who have been with us a long time and know our methods. Of course, we have great management teams at all the companies.
Bill Green:
And that's what you're buying in most cases.
Rodger Krouse:
Sometimes. But sometimes we're buying what we think is a great company and there have to be changes with the management. As we like to say, it's great if we could buy a great horse and a great jockey, but many times we're just buying a great horse. We have to either work with the jockey or sometimes make replacements.
Bill Green:
Managing different entrepreneurs or separate businesses is kind of like parenting. The way you talk to one CEO or founder is different than the way you talk to another. You go into a meeting and give good constructive advice; one guy's going to throw you out of his office for telling him about his business, and the other one's a sponge.
Rodger Krouse:
It's all about the people and about understanding people. It's just so key. When we hire folks, a lot of it is IQ, but a lot of it is EQ as well. That is absolutely true.
Relocating to Florida and Strategy Evolution
Bill Green:
Let’s go back to 1995 when you and Marc Leder decided to come down to Florida. The weather's great, but it was different then. Did you really think you were just going to get away from the competition of Wall Street?
Rodger Krouse:
That was basically what we thought. We thought, you know what, there are so many people in New York. We could go to one of the big buildings in New York and there’ll be a whole bunch of private equity firms just in that one building.
Why don't we go to the Southeast? It continues to grow, there are a lot of businesses and a lot of people, and we could be without the competition of everyone around us.
What we didn't count on—and you probably would have warned us—is that even though things seemed to be under the radar for us in terms of size, people were coming from all over the country. We originally had a regional strategy that wasn't working. We are affectionately known as the "failed strategy."
That's where we said, let's find companies that other people don't want and see if we can roll up our sleeves and fix them. And that's how we started.
Bill Green:
I mean, that is a giant set of balls. Turnarounds.
Rodger Krouse:
Well, thank you. It was being aggressive and confident, but it was also fear of failure. It was like, "Oh my goodness, we left our jobs on Wall Street, let's see if we can make it."
Our first strategy isn't working, let's pivot and see what can work. When we got close to a handful of businesses and saw what the issues were, we said, "I bet we can fix them." We just got very involved in all the details of the companies.
The Mechanics of a Turnaround
Bill Green:
Is there one that stands out that was in trouble when you bought it but turned out to be wildly successful?
Rodger Krouse:
I'll tell you about one right now that we're really excited about because we actually own a law firm in the UK. You can't easily own law firms if you're not a lawyer in the US, but things are changing. You can outright in Arizona, and under certain structures otherwise, but most firms you know are owned by lawyers.
In the UK, it's different. We bought a traditional law firm and started running it like a business, which has been great. It was around $8 million in EBITDA when we bought it, and most recently it's around four times that within about three and a half years.
Another element that's really exciting about it is that it has 14 people in artificial intelligence right now. We have unbelievable talent in AI, and we are going to probably triple or more that number. We're using AI to transform how law is done.
Bill Green:
Is your firm, Sun Capital, employing AI?
Rodger Krouse:
The law firm is. At Sun Capital, we're working towards that as well. One of our firm goals this year is to really be at the leading edge from that standpoint. There's a lot we're doing internally and a lot we're outsourcing, and we are going to be hiring internally for AI.
Bill Green:
I joke with my attorney all the time because I’m writing little agreements by myself with AI, then reading and summarizing them.
Rodger Krouse:
And then there are the strategies you can use, even deciding which lawsuits to take. You can look at all the facts in your entire history and see potential success. AI has a huge impact from choosing the case to working through the different elements of the process. This is a business we're really excited about.
Bill Green:
Are there any companies in your portfolio now that you think have a risk of being disintermediated or becoming obsolete because of AI?
Rodger Krouse:
There are definitely businesses that AI can impact in either a positive or negative way. Frankly, I think overall private equity is one of those, where it's almost like Pac-Man. If you move quickly, you can eat, and if you move slowly, you can be eaten.
Part of the fun of private equity is the real focus on results and excellence, and not worrying about whether ideas were invented here or what's been done before, but really what's going to be the best result. All of us are scrambling to best use AI, so our own industry is going to be really interesting.
Bill Green:
At my farm, I have 80 employees, mostly on the hospitality side and a pretty young group. It is wild how some of these young folks—I guess they're the ones who stopped drinking wine and are killing my business—they say, "Oh, that's just a fad." I tell them they should have never started using the internet or email in '99.
When I was on my IPO roadshow, someone at MassMutual asked if I owned my company URL, walmart.com. I said no, I couldn't get it. They said I had to get it. I asked if they really thought the internet was going to be a thing. That's what I feel like saying to these guys now about AI.
Rodger Krouse:
It's totally going to be a thing. There are a lot of themes that are a tribute to success that I've been able to learn through hard knocks. You mentioned some of the disasters; from a psychological standpoint, I try to repress them. I try to learn from them and not dwell on them so much.
But one of the secrets is to really be in reality. So many people mismanaging businesses are in the past or in a place where they think they'd like reality to be. Part of the beauty of AI is it can offer you reality. People come in with confirmation biases, but if you have all the facts, AI can tell you what the logical conclusions are.
Bill Green:
How many times do you ask someone in a portfolio company, "Why do we do it that way?" and they say, "Because that's the way we always did it"? If you take that statement and put it into AI, you're going to have five more ways to do it.
Rodger Krouse:
Exactly. Or you say, "How about we try it this way?" and they say, "We tried that before and it didn't work." Well, one, has the world changed? Two, have you tried it properly? You just keep going.
Investing in Professional Sports
Bill Green:
Let's talk about some fun stuff. You and Marc Leder made a decision—I guess you knew Josh Harris?
Rodger Krouse:
We knew Josh through business. Josh was at Apollo.
Bill Green:
And David Blitzer?
Rodger Krouse:
David became a new friend and a really great friend by virtue of this. Josh and Marc Leder and I were at Lehman Brothers; we called on Josh.
When it became public that he and David Blitzer were buying the 76ers, I shot him an email with my credentials as a Philadelphia sports fan. He said, "If you're serious, come on in." We talked about it, and Marc Leder and I were part of the group that got started with the Sixers.
Bill Green:
With Michael Rubin.
Rodger Krouse:
Great fun.
Bill Green:
And Michael Rubin sold to my good friend, David Adelman.
Rodger Krouse:
Yes, Michael Rubin was part of it. Martin Geller, too. We got to know them.
Bill Green:
I was trying to put together a group at that time and it didn't work out. I think they were at $305 million and I was at $310 million. Then the Sixers said, "Now let's see who's writing the $35 million check." I thought I had it lined up and it fell through. I scrambled all over Philadelphia; I wish I would have known you then.
Rodger Krouse:
I wish you'd have thought of me at the time.
Bill Green:
They were burning $22 million a year at the time. Everybody thought you were nuts. Now the team's got to be worth $6 or $7 billion.
Rodger Krouse:
Forbes just came out with a big number. Look, that's worked out. The Devils have worked out, although it was a struggle the first time the puck dropped between the Devils and the Flyers. As a kid, I went to the Flyers parade and all that. It was tough.
Bill Green:
A good friend of mine, Stan Middleman, bought into the Phillies. It’s a Philly thing.
Rodger Krouse:
It's a Philly thing. I didn't know that, but everyone loves it.
A Commitment to Philanthropy
Bill Green:
Rodger, I have a saying. When you get some level of success, you've got to give back. I don't personally view it as an obligation or a tax write-off; it's a privilege. I know you're deep in philanthropy. Talk about your viewpoint on that.
Rodger Krouse:
I think it's really key and I think it's personal. You have to figure out how you want to give back. Hilary and I started personally giving, and then we created a foundation. We're really thoughtful about it. We try to run it kind of like we run a business.
We have our causes and I would recommend for everybody to do it that way. There is nothing more gratifying. We have a foundation at the firm where we give locally. Shout out to Boca Helping Hands, which is one of the great groups in our region that’s helped so many people.
We also have a program where our folks tell us what their causes are. The other thing we do is we double and triple what people give to their causes if they're part of Sun Capital.
Bill Green:
I read that. An employee can give a thousand bucks to a cancer site and you match it?
Rodger Krouse:
Exactly. Our thought is we want to make their dollars go further. What's important to them is important to us as well. It encourages more people to give and lets us participate in something they really like.
Art, Curiosity, and Leadership Values
Bill Green:
Outside of giving away money and investing in sports teams, I think you have another passion: artwork.
Rodger Krouse:
Well, Marc Leder is really the art guy.
Bill Green:
But you're smiling.
Rodger Krouse:
I just bought some stuff recently, but I admire what Marc Leder does more than anything. We remodeled our office and it's really fun. We have a game room with a ping pong table, pool table, darts, shuffleboard, and air hockey. We have a room to watch sports with a TV the size of a wall.
The other thing Marc Leder did is bring in his art collection, so our place looks like an art gallery. The artists I like best, I looked into more and more and I just last week bought some of their art. But Marc Leder is really the guy.
Bill Green:
When you run out of walls, you find some new ones. You’re a man who speaks Chinese, you collect art, and you manage 28 companies. Most people would say those have nothing in common, but I suspect there's an eye for detail there. How does your love for art influence the way you paint the picture for your company's future?
Rodger Krouse:
Everything is related. Everything that involves human endeavor involves key attributes that link up. Excellence everywhere is somehow related. Knowledge of anything gives you a lot of knowledge of everything. Attributes that work across everything I've come to learn are curiosity, humility, and gratitude. You can recognize it in work and you can recognize it in people. Those are some of the links I find.
Bill Green:
570 deals. You're probably going to do another 500?
Rodger Krouse:
That's the hope. It's fun and I'm going to keep doing it. We have a big team.
Bill Green:
From a personal and business perspective, is there anything left that you want to prove to yourself?
Rodger Krouse:
I don't know about proving, but I love it. I love learning and there's constant learning. You're constantly learning about new things, new industries, and new mistakes you can make. One of the things I try to say is, "Let's make new mistakes." Don't repeat your old ones.
Bumping up against reality constantly makes one better. I always want to be better. One huge motivator for me is being in the business world while AI is transforming it. I want to be part of that. We want to be towards the front end of it.
Real Estate and the Next Generation
Bill Green:
Any kids in the business?
Rodger Krouse:
None at Sun Capital. I have one who is a software engineer and a founder of a software company that's VC-funded. He's doing amazing. We actually served as a design partner for them with regard to AI, and they were very helpful to us.
Another son is actually investing in real estate with me; that's a separate thing we're doing. I was expected to be the third generation in my family business, but the business changed so much that it wasn't attractive. I think it's really hard to pass down businesses from generation to generation. Real estate is not easy, but it's easier. What I want to do for our family’s next generation is real estate related, so my son and I are working on that.
Bill Green:
Done right, it's a great place to park long-term capital. Being a Philadelphia guy, you probably know Mitchell Morgan?
Rodger Krouse:
I don't really know Mitchell, but I know his sons, Jason and Jonathan, and we actually have a little money with them.
Bill Green:
Jason and Jonathan are great guys. Mitch just announced about a week ago that he was passing the baton. Those guys are really well-deserving. Mitch is an unbelievable entrepreneur.
Rodger Krouse:
He's enormously accomplished. We have other partners in the Philly area and around the country. We really like real estate and we've come to learn a lot about it.
Bill Green:
Not through Sun Capital?
Rodger Krouse:
Not through Sun. This is personal.
Bill Green:
You probably want to see mortgage rates come down a little so you can get some better financing. I'm getting nosebleeds from these rates when we're used to borrowing at three and now they're talking about six and a half.
Rodger Krouse:
I find that there are opportunities in every market. Sure, lower interest rates help you in some ways, but higher interest rates cause problems which provide opportunities as well. We have two or three opportunities right now that are really interesting in this environment. Like our private equity business, every environment gives you opportunity.
Conclusion
Bill Green:
This has been fantastic. Thank you so much.
Rodger Krouse:
For me, too. Real pleasure.
Bill Green:
I'm glad we were able to get together. You don't drink wine, so we'll have to catch a Sixers game instead. I sit right near those guys.
Rodger Krouse:
Anytime.
Bill Green:
The playoffs are coming, let's hope we do it.
Rodger Krouse:
Love to sit with you at a Sixers game. That'd be great. Thanks.
Bill Green:
Friends, thank you for joining us on Uncorked. This is Bill Green. We'll see you next time.
Rodger Krouse:
Thank you.
