Nov 11, 2024 · 56m · capital-allocators
Chris and Rob Michalik - Twin Tackle of Private Equity at Kinderhook (EP.416)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Chris and Rob Michalik, identical twin co-founders of Kinderhook Industries, exploring how their blue-collar roots, mutual trust, and disciplined operational model built an $8 billion middle-market private equity firm.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 19.9% of the talking time here. How this is scored →
Ted as informed peer 3.8 Guest teaching 2.9 Guest disagreement 0.4 Ted pushing back 0.8
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 32:20 Pushing Back on Anti-PE Healthcare Narrative
Chris firmly rejects the popular political narrative that private equity degrades healthcare, calling it a much-maligned perspective that overlooks systemic government pay structures and hospital consolidation.
Hardest push from Ted ▶ 42:23 Challenging Healthcare Regulatory RiskTed directly challenges the guests on how they can underwrite an asset when hostile regulators and politicians can alter policy with the stroke of a pen to ruin economics.
Biggest teaching moment ▶ 34:00 Masterclass on Provider Reimbursement RealitiesChris walks through the stark operational math facing independent doctors, explaining why low insurance reimbursement rates and administrative compliance make standalone practices structurally unviable.
Ted holds their own ▶ 45:47 Pressing on ROI in Low-Margin Healthcare AssetsTed demonstrates sharp industry awareness by drilling into how Kinderhook expects to generate private equity level returns on substantial capital expenditures in an inherently low-margin business.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Intap DealCloud and Celeste AI Coworker | 0 | 0 | 0 | 0 | Segment consists solely of sponsor messages and advertisement copy read by the host. | |
| Episode Introduction and Private Equity Overview | 0 | 0 | 0 | 0 | Host monologue introducing the guests, Kinderhook Industries background, and post-election political commentary. | |
| Detroit Upbringing and Blue-Collar Work Ethic | 3 | 2 | 0 | 0 | The guests recount their blue-collar upbringing in Detroit, driving trucks, and running paper routes. The host asks open introductory questions in a collegial atmosphere. | |
| Identical Twin Dynamics and Mutual Trust | 3 | 2 | 0 | 0 | Guests share personal stories about identical twin dynamics, shared living for 26 years, and entering investment banking. Ted facilitates with conversational prompts. | |
| Post-MBA Private Equity Journeys and Mentorship | 4 | 3 | 0 | 0 | The brothers outline their early private equity careers, dealing with mentors, and learning asymmetric risk dynamics. Ted prompts them on career transition points. | |
| Genesis and Early Deals of Kinderhook | 4 | 2 | 0 | 0 | The guests discuss the founding of Kinderhook with Tom Tuttle and initial deals. The exchange is warm, descriptive, and collaborative. | |
| Three-Legged Stool Strategy and Specialized Verticals | 5 | 4 | 1 | 1 | Ted probes into how Kinderhook finds value in a crowded PE marketplace. The guests detail their three-legged stool approach and specific sector specializations. | |
| Operational Execution and Collaborative Firm Culture | 4 | 3 | 0 | 0 | Discussion centers on executive assessment, low financial leverage, and long-term operating partner retention. The dialogue remains cooperative and informative. | |
| Ridgeline Sponsor Message on Asset Management Tech | 6 | 7 | 2 | 2 | After an ad break, Ted brings up public criticism of private equity in healthcare. Chris delivers a comprehensive defense and tutorial on healthcare economics, reimbursement dynamics, and doctor burdens. | |
| Acquiring Stewardship Medical Group Out of Bankruptcy | 5 | 5 | 1 | 1 | The guests detail their opportunistic acquisition of Stewardship Medical Group out of bankruptcy at a steep discount after UnitedHealthcare stepped away. | |
| Healthcare Regulatory Risk and Turnaround Strategy | 6 | 4 | 1 | 4 | Ted pushes back by asking how Kinderhook underwrites regulatory stroke-of-pen risk in politically sensitive states like Massachusetts. The guests emphasize provider quality and necessity. | |
| Value-Based Care and Measuring Long-Term Success | 6 | 5 | 1 | 3 | Ted presses on margin expansion in structurally low-margin businesses. Chris explains the mechanics of value-based care and scale-driven risk contracts. | |
| Teamwork Lessons from Football and Future Growth | 4 | 2 | 0 | 0 | The conversation shifts to sports metaphors, offensive line accountability, and team trust for institutional longevity. Tone is mutually supportive. | |
| Rapid-Fire Questions and Career Reflections | 3 | 1 | 0 | 0 | Closing rapid-fire questions covering personal hobbies, brotherly banter, mentors, and life advice. |
Statements from this episode (17)
Michalik: Service jobs teach real-world business better than finance internships
“Everybody wants an internship today at a private equity firm or an investment bank, and I would call it the school of the real world. I think there's nothing better, be it working as a waitress or a waiter in a restaurant or working in a service business or wo…”
Michalik: Ownership aligns incentives with efficiency far better than hourly wages
“There's a lot of ways to make money, but if you're a paperboy as an example, or you own something, you get the job done in 10 minutes and you make 20 bucks to do it in 10 minutes. If you get paid by the hour, like we were in our Teamster jobs, hardworking jobs…”
Michalik: Starting PE careers at smaller firms accelerates learning and networks
“Going into smaller, new firms like my brother and I did when we started in the investment world really made us entrepreneurial. We were not in environments where it was wrote, put together a certain type of model to put together a certain type of presentation …”
Michalik: PE downside is capped at 1x while target upside is 3x-5x
“Ultimately Frank taught us a simple point, which was you can only lose one times your money. And in our business, we're looking to make three to five times your money. So if you're afraid to shoot, you're never going to score.”
Kinderhook: Zero VPs or Above Have Ever Quit in 21 Years
“Everybody that's a managing director today has been with the firm and started as an associate has been promoted internally. We don't bring in lateral hires. Over 21 years that we've been in business, anyone that's made vice president above has never quit the f…”
Kinderhook: UnitedHealthcare, Molina, and Humana Passed on Acquiring MCS
“Most everyone in the United States in the industry looked at buying this company from private equity firms to UnitedHealthcare to Molina, Humana, and they all passed. And we bought the business in 2021. We actually signed a letter of intent to acquire it in th…”
Kinderhook installs operating partners as CEO in 70-75% of acquisitions
“75, 70% of the time when we buy a company, we're putting in one of our operating partners as the CEO. The other 25, 30%, we're back in the incumbent management team.”
Operating partners invested $100M at full fees in Kinderhook's last two funds
“If you look, the last two funds, operating partners invested a hundred million dollars. They're paying full fees, full carry.”
Michalik: 55% to 60% of US healthcare is government-funded
“As you look at what's happened over the last 30 years, over 55 to 60% of all healthcare in the United States is paid for by federal and state programs.”
Michalik: Health systems, not PE, lead provider consolidation
“If you just take providers over the last three or four years, there's been a rapid consolidation of Primary care, as well as specially providers of health care services, and it's been done by private equity, but it wasn't led by private equity. People forget t…”
Michalik: Doctors are the weakest party in US healthcare bargaining
“If you think about the big three forces of healthcare, it's these HMOs negotiating to keep rates down and provide access. Hospitals are negotiating to bring in as many patients as they can and get the highest prices they can to cover their fixed costs in their…”
Michalik: UnitedHealth Agreed to Buy Steward Physician Group for $850M
“United Healthcare ultimately agreed to acquire those assets for eight hundred fifty million dollars, and in May, Stewart filed for bankruptcy.”
Kinderhook Signed $245M Deal in August 2024 for Stewardship Assets
“So we signed a purchase agreement in August of 2024 to acquire the assets of stewardship publicly announced two hundred forty five million dollars.”
Michalik: Over 300 Massachusetts Providers Supported Kinderhook Stewardship Bid
“We've had near universal support from the over 300 employed providers in the state of Massachusetts that they want Rural Health Group slash Kinderhawk to be the acquirer of these assets.”
Michalik: Gavin Newsom vetoed private equity healthcare oversight bill in California
“Gavin Newsom recently vetoed legislation in the state of California to put Further oversight in the acquisition of healthcare investments in the state of California.”