Stax Boston Senior Managing Director Interview – Paul Edwards

Never heard of Stax? That changes today. We got the chance to sit down with Stax Boston Senior Managing Director Paul Edwards to discuss the firm and Paul’s career journey. Paul leads the Stax Boston office and the firm’s private equity practice.

In the interview (read below), you’ll find out why he joined Stax, why he stayed, how the firm has evolved in the past 15+ years, and so much more. We can’t wait for you to continue to learn about Stax and the great work the firm is doing. Interested in joining the team? Get more details – and apply today – on the Stax careers page.

Table of Contents (click to jump to section):

1. Paul’s background
2. Stax culture and evolution
3. Stax value proposition
4. Private equity consulting vs commercial consulting
5. Private equity investing themes
6. Engagements at Stax
7. Promotion pathways at Stax
8. What Stax looks for in candidates
9. Stax links

Stax Boston Senior Managing Director Paul Edwards – Transcription

MC: Namaan Mian

I’m thrilled to be joined today by Paul Edwards, Senior Managing Director at Stax. Paul, welcome to Management Consulted. I’m really excited for you to share more about the firm and your journey into and through consulting with our audience.

Do you mind kicking us off by sharing an overview of who you are professionally speaking? What is your background, your core competencies, and your role at Stax?

Paul’s Background

Stax: Paul Edwards

Thanks, Namaan. I’ve been at Stax for 17+ years and have led our Boston office since 2012 and Private Equity practice since 2013.

Before Stax, I received my undergraduate and MBA degrees in the U.K. and started my career in big box consulting. I soon realized that although I loved the work, I wanted to be part of a firm where I could serve the same types of clients but be part of driving the development and evolution of a firm.

The culture at big box consulting wasn’t necessarily for me. It fits a lot of people, but I didn’t feel like it was scratching the entrepreneurial itch that I had to grow a business, not just grow a career. I moved into smaller consulting, which was more specialized, specifically around aerospace, Homeland Security, defense, etc. I liked the idea of the firm-building pieces that came with that type of consulting and services, but obviously, with a narrower subject matter focus.

Fast forward to 2004, I was introduced to Stax founder – Rafi Musher. He outlined his vision for Stax, who the firm was serving, and where potentially Stax would be in the future. It was compelling because at that stage, Stax was an eight-year-old business that still had a startup feel but evolving credibility within the private equity world. Stax was doing interesting work for a very smart, challenging client base and attracting intellectually curious people to the business, who were seeking to challenge themselves in serving those private equity clients and situations, all while driving the evolution of the business and alignment with its clients. Frankly, Stax had more of an insurgency sort of mentality to it – the idea that clients should and could be better served through a different model.

Stax was doing work in places and competing with firms who had more well-known logos and challenging ourselves against the best and brightest from a private equity and corporate strategy standpoint. It certainly scratched the intellectual, as well as the entrepreneurial itch. The fact that the work was across sectors and industries, allowed a bit more of a ‘choose your own adventure’ than most folks in their late 20s or early 30s get the chance to think about in professional services.

MC: Namaan Mian

You mentioned that the firm had an insurgency feel and underdog type of mentality while doing fantastic work. Do you feel like that culture has persisted over the last 15 years? Have things evolved at Stax? Does the firm have the same value proposition today that it did for you in 2005?

Stax Culture and Evolution

Stax: Paul Edwards

I very much like to think so. We’ve grown infrastructurally and matured as a business, but that culture of continual betterment and improvement is something that still exists today and drives the business and its people forward. Although our Boston office is eight times the size it was 10 years ago, I like to think 10 years ago, when there were 10-15 of us, if you walked into the office then it had exactly the same feel as today. The same camaraderie and culture that attracted diversity of backgrounds, but commonality in intellectual curiosity. People wanting to challenge themselves in a nurturing and fun environment.

We’ve always lived by the mantra of ‘good people, doing good work, for good people.’ With all the growth we’ve experienced, Stax has managed to keep everything together culturally, even as the business has evolved, grown, and frankly, gotten much more recognition for our work. And with this recognition came the strategic platform investment by our equity sponsor Blue Point Capital Partners at the end of 2021, who is supporting all the growth avenues we seek to take the business on our next stage of evolution, for our clients and our people – new offices, new geographies, and new products.

MC: Namaan Mian

I’d like to talk to you a little bit about the ‘good work’ piece of that ‘good people doing good work for good people.’ At a high level, can you remind us of the type of work the firm engages in? What sets Stax apart in the market?

Stax Value Proposition

Stax: Paul Edwards

We decided a decade ago to align ourselves with private equity. Private equity has been an evolving asset class for the last 20+ years, but private equity, like Stax, has grown up and matured. It’s moved a little bit away from financial engineering and is more focused on ‘how do you grow a business?’

As a result, private equity has sought out firms like Stax, more as partners, not just to provide confirmatory considerations or backup for what they’re saying, but to collaborate on building investment cases and theses. For Stax, what’s been effective has been as the industry has evolved, and the needs of our clients have evolved, so we’re one of the few companies that decided to truly listen to our clients, and our products and services have evolved with the way these firms want to do business. Our job is to be an effective partner to our clients, but also to make working with us feel hand-in-glove for them.

Ten years ago, the answer to every question was “4 guys, 4 weeks, $400,000” – whatever your question was. We didn’t believe that was the way our customer wanted to engage with consulting support, even though they had been trained in that manner.

By spending considerable time at the customer interface, we were able to evolve our product and approach, and evolve what we thought was not apples-for-apples with what’s in the market but something that was genuinely differentiated, that ties itself to data, original research, high integrity, and works in partnership with our clients throughout a deal process. Not someone who disappears for four or five weeks and shows up with a report.

As a result, Stax has grown, not just our product, but also our people and client base along those lines.

MC: Namaan Mian

That’s a great way to build service offerings and lines of business! Listen to what your customers have to say, and then build in response to that. It sounds simple, but it’s not. It seems like the firm has been rewarded for that level of integrity and service and the ability to customize what clients and customers are asking for.

Stax: Paul Edwards

Exactly. Not all clients are created the same nor are they looking for the same level of service. Being as emotionally intelligent as we can about our clients, and empathetic about their needs, allows it to feel very natural for them to call and discuss what’s on their mind or what’s landed on their desk. And that’s always the goal of any service provider. It doesn’t matter how smart you are, if it doesn’t feel natural to have you on board, it’s always an uphill battle.

Private Equity Consulting vs Commercial Consulting

MC: Namaan Mian

Absolutely. For the uninitiated in our community, can you talk to us a little bit about how private equity consulting may differ from other types of commercial consulting? What are the types of problems you’re looking to solve? What are the questions that clients are asking you? How are consulting engagements structured?

Stax: Paul Edwards

We categorize our services into two main buckets: deal and non-deal. There are engagements where there may be a transaction in play, either someone purchasing an asset or someone selling an asset. Or there are situations where there isn’t, which is more about ownership and growth. How do we think about new markets, new products, new customers, etc.?

The private equity investment cycle is often: think about spaces and a thesis, understand what makes you attracted to that market, find assets, and pursue them. Ideally, sign one up and buy it, execute a vision for value creation, and position it well for the next stage of its growth, be that in the public markets, another private equity firm, management buyout, etc.

Our products map to all those stages. At the start of an investigation or a client’s thinking, this idea of thesis is built in. More private equity firms are now being built and funds being raised on the back of themes, not just to “get smart people, give them money, and they’ll do it right.” But themes – what are we betting on?

Are we betting on the automation of certain industries, adoption of software among small businesses within the U.S. economy? We’re seeing themes that equity sponsors are looking to underpin their interest within the deployment of capital. Frequently, we’re being asked to validate those themes, provide a viewpoint as to yes, this makes sense. This is really where you should be focused, or there’s going to be ample opportunity to do that. We’re also advising our clients more on the idea that, “the theme makes sense, but you really need to slice and dice the market opportunity like this.”

This will be the type of business that will be above the curve, in terms of performance going forward, given the way the market is shifting, given the way customers and competitors are shifting. Essentially getting the crystal ball out to some extent. Then as you move towards whether there’s an asset in play, a private equity firm may ask, “we’re early with this company, can you help us?” Frequently in that early-stage deal because the certainty to close is so low, they may be one of 30 firms looking at the business.

Now it’s more about discerning if they want to lean in. Those questions tend to be more about risk but confirmatory in nature. Is the market growing, is it sizable, is the customer happy, is there risk of disruption? Things which are a little bit more binary, almost red flag questions. Things that if you did find them at any stage in your investigation would give you cause for pause.

As you move later in the process, the field is narrowed down to one of one, or one of two firms, to buy a business. You now need to understand not just how the business looks today, but how it’s going to look tomorrow. And often you value a business on the vision of that business in the next three to four years. Frequently, even though it’s before the deal, we’re helping private equity understand the growth avenues, organic or inorganic, and their viability.

We also pressure test how management or the investment bank describes the business. One of the best things about businesses is they’ll articulate 38 ways they can grow. One of the worst things about businesses is they’ll articulate 38 ways they can grow. Often our role is to identify the three or four which can really move the needle, provide data and research behind them for validation and quantification so that our client can decide if they want to lean in, but then realize how hard they should lean in from a valuation standpoint.

That’s one of the changes we’ve seen in the last four or five years, given where valuations have gone. It’s more of a hybrid now between diligence and value creation. Previously there would be a lot of unanswered questions which private equity would tackle at their first board meeting. Now, private equity has a 100-day and value creation plan when they close the deal. That’s something we’ve benefited from again, as we listened to our clients and built a product and process to support these needs.

Further in the investment lifecycle when you own the business, you’re thinking how do we grow it? A lot of top-line initiatives. How do we think about changing our pricing strategy, our pricing model? How do we think about our customer base? Where are the more or less profitable customers? How do we think about markets and geographies? Where should we open next? Can we take this product serving enterprise customers and put it in the mid-market? Can we take the mid-market product and put it in enterprise? How do we think about those angles for growth?

At Stax, we don’t focus on cost or cost cutting. Obviously, there’s implications around costs from our work, but how do you grow a business strategically, and where do you focus. Later in ownership, and more frequently now because of Covid, private equity needs to better understand how businesses look today versus how somebody assumed they looked two or three years ago when they bought the business.

We are seeing more work around re-diligence or early-stage exit planning.

Pulse checking the strategy and opportunities which are in place and whether the business is on the right path. If the equity sponsor is looking to exit the business in 12 months, are the avenues they taking the right avenues? What are the things they should double down on for EBITDA today? What are the growth initiatives they should start to execute? What factors will sell the dream to the next investor? Organizing these ideas can really help focus an investor in the middle and late innings of ownership.

Stax also works with investment banks as they prepare businesses for exit. Our sell-side work has increased over the last two or three years as these processes have become more data driven. It’s become more about integrity, less about marketing. Helping someone understand the business through fieldwork and research. We currently serve 15-20 investment banks and 60-80 exit plans and sell-sides a year.

We also have specialized products to assist private equity firms and their management teams throughout the investment lifecycle. For example, our Data Analytics offerings have become a valuable resource for private equity firms, portfolio management teams, hedge funds, and investment banks to quickly appraise businesses, understand growth avenues as they exist during ownership, as well as in bringing companies to market. Through a combination of proprietary tools, specialized teams, and deep knowledge of data analytics software and infrastructure, our Data Analytics offering helps investors gain a better understanding around what’s happening with the customer base, what’s happening with the supply chain, how to think about leveraging analytics to better understand where they should go next, and predict along those lines.

These specialized offerings were built because we listened to our clients who said that the world is becoming more data driven and we need to make sure that we’re not just putting a finger in the air and figuring out strategy. We’ve got data behind it.

MC: Namaan Mian

The common thread that I was picking up throughout that explanation of Stax’ offerings and your approach is that you help your clients prioritize and focus on what’s most important. We live in a data heavy world, but a lot of our businesses aren’t data driven, because there’s a difference between drowning in data and using it to focus your priorities and move in one direction, which I think is so valuable.

Stax: Paul Edwards

Exactly! Private equity isn’t short of money, private equity is short of time. I spoke with a client at the end of last year where I was apologetic because we worked with this client 15 times last year, and we killed – or they passed on – about 13 of the deals in front of them, primarily because of our work.

He said, “What are you apologizing for? To be honest, our average throughput is more like six or seven deals or pursuits a year with my team. The fact that we were able to make good decisions around 15, we wouldn’t have got to the two we closed, had we not passed the 13. Your work allowed us to hasten our progress through those processes which allowed us to see more and close two deals.”

That’s a very different way to look at it than maybe if you’re thinking in a transactional manner as a consultant, but he was exactly right.

MC: Namaan Mian

Every closed door leads to the next open door.

Stax: Paul Edwards

Exactly.

Private Equity Investing Themes

MC: Namaan Mian

You mentioned private equity investing by theme, and I am curious: Are there certain themes or focus areas that you see that are attracting outsized investment or interest in 2022? I would expect that maybe the digitization of education would be one of those spaces, for example, but that’s just a hypothesis on my part. Are there places or spaces like that that you see are attracting outsized investment?

Stax: Paul Edwards

You’re correct on EdTech. If the last two years taught us anything, it’s how do we think about the digitization of content, curricula, classroom experience and the value, or at least the perceived quality of value, between remote and in-home learning.

That applies to the workplace as well, given the volume of people who are now working remotely. These types of themes now have catalysts around them. Others may be things which genuinely change the trajectory of their business as well. I mentioned automation, and what I’ll call the “’techification” of small business in the U.S.

The idea that your four-person pest control business now has a CRM, takes payments through the phone, and has a schedule, or you can subscribe to the business. That’s all empowered and driven by software and technology, and in this process of techification, we still have a long way to go across industries.

The other factor that certainly was an issue prior to Covid, but that’s an increasing issue in today’s economy and environment, is the availability of certain skilled labor. Everything from your nursing staff to truck driving to people who fix kitchen equipment in McDonald’s.

The availability of skilled labor is much scarcer than it has been previously. The cost of labor has also grown significantly. The idea of technology software or processes which allow not the replacement of that labor, but the supplementing of that labor, allows you to manage your nursing staff more effectively because of the way you can manage scheduling, or because you’ve moved toward a mixture of institutional and in-home care.

It also affects how you manage your routes from a distribution standpoint because you’re able to predict traffic patterns more intelligently. It affects the way that you’re manufacturing product to serve the McDonald’s kitchen. All these considerations have knock-on effects for not just software, but the way products are designed, how supply chains work, where product is sourced, and the method in which the customer is making decisions.

Those dynamics aren’t going away, they’ve just been accelerated. Private equity sees a good opportunity to be part of supplementing that – or making previous processes that were less intelligent, more intelligent. And those have certainly been themes that we’ve seen consistently over the last 12 months.

MC: Namaan Mian

That’s really interesting. We’ve been talking a lot about the content of the work at Stax (i.e., the type of work that you do). I’d like to move a little bit more to the logistical nature of how you operate, and then what recruiting looks like at the firm as well.

Can you talk to us a little bit about how these PE engagements are structured? Let’s say I’m joining your team. Can I expect to be one of two or four analysts on a team? You mentioned that the “four folks for four weeks for $400,000 model” is not something you subscribe to. What is the makeup of a typical engagement: length, team size, etc.?

Engagements at Stax

Stax: Paul Edwards

On length, I’d say probably 80% of our engagements fall between three and six weeks in duration. One of the advantages of private equity consulting is you’re not travelling to the same client, working on the same project for nine months. You’re constantly learning about new spaces, industries, etc., and moving on.

MC: Namaan Mian

A very accelerated learning curve.

Stax: Paul Edwards

Exactly. An average year at Stax, you may work on 10-12 engagements, and over two or three years, you start to see themes and connections between verticals, spaces, and situations and it fuels that intellectual curiosity. For us, it’s a balance. In some cases, private equity always wants things yesterday. But when we’re working closest with our clients, we’re able to predict questions and requests, and leverage previous experiences to allow us to be highly efficient.

The product of a good relationship is a client who wants to lean on you earlier, who says, “what do you think about, have you seen, can you explain to me X?” If you’re having those conversations earlier, you can identify key issues earlier, develop approaches, and allow teams to begin the process. You can genuinely deliver three or four weeks of work comfortably in short timeframes.

We protect our teams as much as we can. In other words, we don’t take on projects less than about two or two-and-a-half weeks in duration because of the risk-reward – it’s often more about avoiding failure than success. You’ve got to protect your teams from burning out. That’s been part of our design, to make sure that there’s this even pace utilization.

Our team size is ideally between three or four and sometimes up to seven or eight people as a core team. What differentiates Stax from other firms, every project consists of functional support groups such as primary research, desk research, survey design, data analytics specialists, data visualization, slide production. All these teams come in and out of the engagement as that particular need is in play.

While the core team may be three or four, there could be 20 people who touch the engagement over the duration of the project. Take the data visualization team, for example. You’ve cracked the case, you’ve got your slides, you know what you’re going to write in your exec summary. You’ve got it mapped out with all the data. It’s seven o’clock at night.

Our teams are hitting send on an email to our data visualization team in Colombo, Sri Lanka while other firms are starting to open PowerPoint and start writing. Our team’s gone out for dinner and having a drink, and coming back in the morning, and those slides are written and in their inbox from our team overseas.

It’s a great value proposition for our clients and our people. The more your people are focused on the thinking pieces of the engagement, the better the engagement. Our entire focus – how do we limit the amount of repetitious tasks for the core team and have them singularly focused on the so-what’s in an engagement.

Our teams work very well and closely together. We recruit for that. Egos don’t last very long here. We don’t have an up or out model, a churn and burn model, a competitive promotion model.

If you’re good and you’re doing good work, you’re going to make great progress here. That’s allowed us to create a genuine meritocracy, which is embraced by the team. It also means individuals can see their colleagues as peers, friends, and people who are going to make their life easier, rather than someone they need to continue benchmarking against or feel competitive with.

MC: Namaan Mian

Paul, does that mean there is no defined promotion pathway? You’re just promoted when you’re ready? Or is there a defined promotion pathway, but you can hit those benchmarks at different times?

Promotion Pathways at Stax

Stax: Paul Edwards

There are defined promotion pathways, but we don’t believe in holding people back as they build tenure or capping quotas for promotions – when you’re ready, you’ll be elevated. We have a sophisticated mentor and buddy program, as well as a talent development program. We also have resource management which ties your project work to your learning experience requirements. We obviously do a lot of other training and development outside of project work, but there’s no better place to test these skills as well within the project work itself.

Creating and nurturing a better work-life balance is very important to us. We track utilization to ensure we’re providing that balance. Between flex days and making sure PTO is taken, we aim to remain 10-20% below industry. We have a robust talent development program built on mentors and buddies, and a project staffing function which aligns by interest (vertical), as well as development focuses, to ensure people feel they are developing and growing on every project. Our teams, through our talent development team, are always thinking about three things: performance, progression, and development.

I strongly believe in ensuring everyone can operate in the top half of your circle, so you’re always trying to operate half a level above where you are today. It’s great way for people to edge a little bit out of their comfort zone but do so in a supportive environment. And then prove to themselves that they can do the next level work. I think that oftentimes professional services forget that they are people businesses, and the people are the product, which is something that’s never left us.

MC: Namaan Mian

Consulting is a human capital driven business at the end of the day. That’s your competitive advantage!

Stax: Paul Edwards

Absolutely. The more you can provide your people with the greatest opportunities to grow, develop, and feel supported, the more likely they’re going to see themselves as leaders of the firm. We’re pleased that our churn rate is about half of our peer group.

Consulting is the ultimate apprenticeship for you individually. It’s also the ultimate apprenticeship for a consulting firm. You never stop getting better, you never reach the end state. Next year needs to be better than this year, and the year after will be better again, but it’s never going to be perfect. We need to continuously move ourselves forward.

MC: Namaan Mian

So, would you say as you’re evaluating candidates, that mindset of continual learning and improvement is really the most important thing you’re looking for? Or are there other attributes or skills you’re also looking for as you evaluate talent?

What Stax Looks For in Candidates

Stax: Paul Edwards

Yes. One of the throwaway lines is always ‘intellectual curiosity.’ But it’s true. You’re looking for people who want to ask “why?” People who want to question what we’re doing on a project, question why our client may be doing something, and even question how we’re running the business. We get better when we do that – challenge the status quo and make suggestions for improvements. For us to be less task oriented, and more thought oriented, makes for a better product and a better business. And therefore, trying to find people through our interview process who lean in like that is critically important.

It’s consulting, so there are more 50-hour weeks than 40-hour weeks. You’re looking for people who are going to accept that’s the case, but also see all the benefits from being at a firm like this. Stax has always tried to ensure we can provide the best possible landing spot for people who want to do consulting. We’ve done a really good job providing some of the best and most intellectually challenging clients and projects, while maintaining an industry leading commitment to work-life balance for our people.

MC: Namaan Mian

Paul, I think you’ve laid out a compelling case for why Stax is a great place to start or continue a career. Short and focused projects, a tight knit culture, broad industry exposure. Are you currently hiring? And if so, how do folks learn more about you? How do they apply? And what does the recruiting and interview process look like?

Stax: Paul Edwards

Yes, we are hiring at all levels.

For information on job postings, please check out our website stax.com. For anyone who is reading this, reach out to someone who works here, via LinkedIn or even reach out to me. Our team, from top to bottom, is always happy to connect, explain what we do well, and have a conversation about life at Stax.

We take the idea of recruiting seriously, not just from the fact that we want to do it right, but we want to do it right by the candidate. It’s a significant responsibility to be an employer, especially in today’s environment and job market. No one will ever say that you’re asking too many questions or you’re looking for too much information. We love that because recruiting is a two-way process.

MC: Namaan Mian

Amazing. So, what you’re saying is networking actually works!

Stax: Paul Edwards

Here it does for sure! We love it when people touch base and ask questions. It’s part of our business and part of who we are from a culture standpoint.

MC: Namaan Mian

And I think that’s a key point as well. Networking is not just a way to get your foot in the door from a candidate’s perspective, but it’s a way for you to conduct research as well and see if a firm is the right fit for you. What better way than talking to folks who are actually at the firm.

Stax: Paul Edwards

It’s an unvarnished point of view. We run the business in the way where we have structure, infrastructure, hierarchy, but it’s a very de-layered business. The best idea can come from the day one Associate as much as the grey-haired Senior Managing Director. We want to ensure that as we grow, we’re true to our vision, but very open to redirect as our people suggest and we’ll make this a better business for our clients and our people. It’s a little unique in our industry, but it’s basically been how we’ve evolved for two decades – constantly challenging ourselves to build a better business for our clients and our people.

MC: Namaan Mian

To be able to have that level of ownership and voice from a junior level, and the exposure to working with someone like a Senior Managing Director, that’s also unique.

Stax: Paul Edwards

Absolutely. We’re de-layered at the client interface as well. We’re all client facing, we’re all talking, meeting, Zooming with them. I’m so happy when a Managing Director of a private equity firm calls one of our Associates by name on a call or remembers them from a prior engagement. It’s a great opportunity for people to get that level of exposure and ownership much earlier in their career. As the firm grows and with the support of Blue Point and expanded resources, we see increased opportunities for internal support and promotion across our current offices and new geographies. Exciting times that everyone gets to be part of as we shape the next steps for the firm.

MC: Namaan Mian

Paul, thanks so much for sharing more about Stax with us, as well as your own story and thought leadership around Private Equity. I’m really excited to continue to recommend the firm to folks in our community who are interested in consulting. Thank you so much.

Stax: Paul Edwards

Fantastic. Thank you for your time.

 

Additional Resources:

• Stax Firm Profile
• Stax Careers
• Stax Podcast
• Stax LinkedIn
• Case Interview: Complete Prep Guide