Have you ever heard the phrases “hair on the deal,” “goat rodeo” or “snap the chalk line”? How about, “You’ll never get a black eye on the phone”?
When Michael Magliochetti, a 1986 Northeastern University graduate and chemical engineer-turned-CEO, shifted into private equity, he didn’t know them either.
So he kept a journal, documenting unfamiliar or clever expressions he heard in meetings with partners, investment bankers and other private equity firms.
“I wrote down what it was, what it meant, how it was used in a little bit of a blurb about the situation,” says Magliochetti, an operating partner at Riverside Partners, a private equity firm with more than $1 billion under management.
Last month, he published “Dancing Between the Toes of Elephants: Clever Private Equity Idioms and Anecdotes from an Outsider’s Experience on the Inside,” a book of 237 short stories that blend lessons from his private equity career with industry-specific jargon. He wrote it as a guide for business students, rising private equity professionals, founders, seasoned investors and executives who can appreciate its insights and humor.
Magliochetti calls himself an outsider because he started his professional journey as a scientist. He earned his bachelor’s degree in chemical engineering from Northeastern and his doctoral degree from the University of Massachusetts at Amherst. He later came back to Northeastern and completed an MBA program in 1992.
“I realized pretty early in my career that a lot of the decisions made in a company are not based on the scientific potential, but more on the financial aspects,” he says.
This pivot set him on a path to general management. He spent the next 20 years in senior operating roles, executing three successful sales as CEO of companies financed by venture capital and private equity.
As CEO of Claros Diagnostics, a Massachusetts-based company that developed a novel microfluidics blood-testing system later acquired by OPKO Health, Magliochetti joined Riverside Partners’ Health Care Advisory Board. The board, made up of executives across the health care sector, advised on due diligence for potential investments and helped identify new opportunities for companies in Riverside’s portfolio.
Five years later, Magliochetti was ready to go from being “a player to a coach,” he says, and Riverside offered him a role as a partner.
“I picked my head up, and 13 years have gone by,” he says. “If you like what you do and who you do it with, the time just goes by.”
Riverside focuses exclusively on health care, investing in founder- or management-owned companies with $20 million to $60 million in revenue and $3 million to $10 million in earnings before interest, taxes, depreciation and amortization. Its investors include pension funds, university endowments, funds of funds that invest in other private equity funds and high net-worth individuals.
Private equity, Magliochetti says, requires discipline and diligence.
“We look at about 300 investment opportunities a year. In a good year, we’ll make two or three platform investments,” he says, meaning companies that the firm views as a starting point for more acquisitions, or add-ons, in the future. “We have to believe, above all else, that we can add value to an investment.”
The book’s title came to Magliochetti during a deal review. His team was evaluating a company that offered a tech-enabled health care service complementary to electronic health records used by hospitals. While industry giants like Mass General, Mayo Clinic and Cleveland Clinic were adopting major EHR systems, this company focused on smaller hospitals.
During due diligence, Magliochetti consulted Riverside’s Health Care Advisory Board and contacts at large competitors. Some warned him that once big EHR companies moved into that market, they would give away similar services to gain more customers for their core products.
“That was really concerning,” he says.
But the team was ready to move forward.
“As you’re going through diligence, you’re investing more and more time, there’s something that sometimes arises, called deal fever,” he says. “You get emotionally invested. You like the founders, you can see yourself working with them, and it just snowballs.”
When Magliochetti shared his apprehension, the team seemed frustrated. One of his partners put his hand on his forehead and said, “Mike, you know, you worry too much. You haven’t been at this long enough. There’s a business here dancing between the toes of elephants.”
Magliochetti wrote the phrase down immediately — he had found his title. But he still voted against the investment.
“I felt that when these large companies, when these elephants, want to take market share, they’ll take it at any cost, and they would squash that [business],” he says.
Ultimately, Riverside walked away from the deal.
As an operating partner, Magliochetti uses his deep operational and industry expertise to strengthen portfolio companies, increase their value and prepare them for an exit.
“I love to engage on the business development front,” he says. “If you want to build trust and credibility quickly, help them win new clients.”
He’ll often leverage the Health Care Advisory Board, which he now chairs, to open doors and make introductions.
He especially enjoys helping build or refine business development functions — sales teams, marketing leadership and strategies for growth. Once a company is stable, Riverside may pursue acquisitions to expand geography, technology or client base.
Working with founders, he says, still gives him the same adrenaline rush he felt as a CEO.
“I get that same sense of ownership. It’s a wonderful feeling,” he says.
Magliochetti’s book is for sale at the Northeastern bookstore on the Boston campus and on Amazon.