Podcast: Scale, Culture, and Staying Humble With Flor Kassai of Inflexion

[00:00:02] Flor One of the things that I’m really focused on is making sure that the team continues to believe that we are the underdogs and doesn’t fall into the trap of, you know, “Oh, now we’re market leaders,” you know, “Everyone should come to us. We deserve the call.” No, you don’t deserve it. You’re only good today, and you have to earn your right to be great tomorrow. And the only way you do that is you stay humble, don’t drink your own Kool-Aid, keep your feet on the ground, and, you know, work as hard as, you know, harder than you worked yesterday because you don’t see the competition that is coming behind you that is about to overtake you.

[00:00:38] Phil Welcome to Capital Revolution, the podcast that brings you conversations you won’t hear anywhere else in alternative capital. My name is Phil Adams, I’m President of Houlihan Lokey, Europe, and I will be today’s host for this episode. I’m excited that today I’m joined by Flor Kassai, Managing Partner of Inflexion and head of their Buyout Fund. Flor joined Inflexion in 2011, having previously worked at Hg Capital, Bain, and J.P. Morgan, and Flor and her team recently closed a €4.5 billion raise for their Fund VII, an outstanding achievement in the current environment. Inflexion was founded over 25 years ago, and as our listeners will know, is one of Europe’s leading private equity houses. Today, we are going to cover a wide range of topics from Flor’s personal journey to Inflexion’s strategic plans, the current market environment, and everyone’s favorite topic, how AI is impacting deals and the way we run our businesses. So let’s start. Welcome, Flor.

[00:01:49] Flor Hi Phil, thank you very much for having me.

[00:01:52] Phil Great to be with you. I thought we’d start with an easy one. So I’d love you to tell us a little bit about your backstory. So, can you tell us how you came to be in private equity? Because I think it wasn’t necessarily a typical journey.

[00:02:05] Flor It wasn’t typical indeed. So I’m originally from Argentina, and I studied industrial engineering, and I always thought I was going to end up working in a factory, which is what you do when you study engineering. And in fact, before graduating, I came to the U.K., and I took an internship in ICI Paints in Slough, and that was my experience working in a factory for three months. And I realized that I was not made for that. I had to take a different turn. I wasn’t sure, therefore, of what I was going to do, but then, as it happens in life, luck struck. There was the largest private equity firm in Latin America that had one of the alumni of my university that was running the consulting arm, and he came to my university and asked for the top 10 students to be interviewed, and I was in that group, and I got the job. I didn’t know what private equity was, I didn’t know anything about finance, I was good with numbers, and so I learned everything on the job. I loved it. I discovered it there, and I loved it. So I went to business school, I went to Wharton, and then I took a lot of debt to pay for business school, and therefore, going back to Argentina was not an option. But I had this Hungarian passport through my grandparents. So with that, I came to Europe. That was how we came to London. So Ian Armitage gave me a chance—I always will be grateful to him for that. I was there for five years helping them start up the business services team as a junior. And then five years later, I met John and Simon, who had started Inflexion 10 years before, but was increasingly growing, and I was employee number 23. That was the beginning of my history with Inflexion, which has been a phenomenal ride. I joined as an Investment Director and then made Partner. Then they gave me the opportunity to be the Head of Buyout. And then two years ago, they asked me to join the two of them as Managing Partner.

[00:03:55] Phil Wonderful, it’s great that you learnt about leverage so early in Europe.

[00:03:59] Flor Personally! So what you said about that—I know what it means!

[00:04:04] Phil Fantastic. And obviously, 2011, I mean, Inflexion’s had an incredible journey, but can you just talk a little bit about what was different then, and I guess what’s the same, which is probably the heart of how you operate? Yeah, I’d love to hear how you reflect on then and now.

[00:04:22] Flor Yeah, so look, many things have changed. So, 2011, we were a U.K.-only firm. We were generalists, so each partner or each director was basically bringing in deals, and—tech deal, the next day could be a business services deal—and if you fast-track to today, we are organized across sectors, but we go a lot deeper than that. So we have six sectors through which we operate, but each sector actually focuses only on a very narrow number of verticals, and they go very deep into each of those verticals. So we are essentially a group of subsector experts. So that’s a key one. I would say the second one is our European expansion. So five years ago, we started our expansion into continental Europe. So we opened offices in the Benelux, then in the Nordics, DACH, and, more recently, we opened in New York. So today we are investing across Northern Europe with a strong footprint now in the U.S. to help our portfolio grow in the U.S. So that’s a big difference. Actually, you walk around my floor—I work in the open plan because I like to be connected to the team—but it’s, you know, whereas in 2011, you would only hear English, now you hear five or six different languages, I get a buzz out of that. Then the other big difference is also how we’ve expanded our strategies, because when I joined, we only had one strategy, which was a buyout strategy. Since then, we launched our minority-partner strategy, which we call Partnership Capital. We then launched our Enterprise Fund, which is our lower-mid-market proposition. So quite a lot of growth across different vectors. So all of that, I would say, are the things that have changed. In terms of what remained the same, the number one thing is the culture. So, and it’s something that I am very passionate about, we are passionate about as a leadership team, is making sure that we don’t dilute what we believe is our secret sauce as we grow. Because it’s easy to dilute it as you bring in people, inevitably, people from different places, because you don’t have enough talent internally that you can read quickly enough to take these positions as you grow. So we are very focused on protecting that culture. It’s a culture of—we call it entrepreneurialism—I describe it as proactivity. It’s just, don’t wait for things to come to you, you know what you want, and go and look for it. Don’t wait for the phone to ring. But we really are a firm that prioritizes teamwork. For example, when we did our European expansion, it was very important to me that the way we win in the regions is because we team up a sector partner with a regional partner. So we can offer to that local management team both the cultural connectivity—the deal delivered in the local language with someone that is geographically close to them—alongside all of the many years of sector expertise that have been developed through the sector lens and the playbooks that have been already trialed and tested in other companies. So that collaboration is quite unusual in private equity, but it happens with us and you see partners working together, which is really nice. And it’s a culture also of constant improvement. And I talk a lot about this with my team, about when I joined Inflexion in 2011, we were the underdogs, right? The business almost didn’t have a right to exist because the private equity industry was already very established in the U.K., and there was no real room for a newcomer. And so when you believe that you don’t have a right to be there, to be at the table, you have to work twice as hard than anyone else to prove that you have a right. And I think that as we have grown, one of the things that I’m really focused on is making sure that the team continues to believe that we are the underdogs and doesn’t fall into the trap of, you know, “Oh, now we’re market leaders,” you know, “Everyone should come to us. We deserve the call.” No, you don’t deserve it. You’re only good today and you have to earn your right to be great tomorrow and the only way you do that is you stay humble, don’t drink your own Kool-Aid, keep your feet on the ground, and, you know, work as hard, as you know, harder than you worked yesterday because you don’t see the competition that is coming behind you that is about to overtake you. And so, I think all of those things have persisted across the years, but we have to be, as I said, we have to continue to protect it because it’s easy to dilute it.

[00:08:53] Phil I’d love to drill a little bit deeper into one of the topics you talked about. I’ve seen in my career many U.K. firms fail with their international expansion. Could you just give us a little more detail about how you went about it? You touched on why you think it’s worked, but I’d love to hear a little bit more about that side of the business.

[00:09:11] Flor Yes, so I think the first point was around taking the first step in a market that was culturally closest to the U.K., so that we would maximize our chances of getting it right, and as we trialed the new model, because it was something that we were doing for the first time. So go where you minimize risk. So we chose the Netherlands because the Netherlands is not just geographically very close—it’s less than an hour travel—but it’s also: everyone in the Netherlands speaks English, its culture is very close to the U.K., and then, pick the individual there to run that office that actually fits the culture. So we took a year to find Sander, but he’s been phenomenal. And then from there is work up the right model, because it was very easy to see how this would evolve if we were not careful, right? In the sense that the next business services deal that would land in the business services team that was placed in the Netherlands would be attributed to the individual that basically found that business. And so I said, “Look, I don’t care if you are the brother, the sister of the CEO of that business, you’re going to work with your counterpart. Your counterpart is going to either be a sector colleague if you’re regional head, or a regional head.” And so, once also you mandate it from the top, there’s almost no point of debating or trying to, you know, find a way around it, because well, if I’m going to be sharing the incentives, then I might as well maximize my chances of winning by bringing that person fully on board. And so you fast-track to today, and there’s actually sort of no discussion as to how we work, because everyone knows that this is the way we work. And we avoided all sorts of internal, sort of, conflicts and, you know, battles that I’ve seen in other firms, and as I said, continue to protect the culture that way.

[00:10:58] Phil Yeah, super interesting. I mean, it literally mirrors exactly how we think about our business with sectors and geographies. And moving on to your recent fundraising, which was pretty phenomenal looking at it from the outside in, given that it’s not the easiest market. Could you tell us just a little bit about how you feel you were able to make it so successful?

[00:11:19] Flor Look, I think in today’s market, the number one priority for investors is DPI, so it’s returning capital, and we’ve been incredibly focused on that metric. So, and the way we run our business also is that, of course, the partners that run the deals have a big say, but at the end of the day, we look to optimize outcomes at a fund level, not at an asset level. Therefore, we have a realization committee that meets every week, and we go—with different cadence depending on where each portfolio company is in its life with Inflexion—we look at the best way to crystallize a frequent flow of cash back to investors. And so we’ve been doing that consistently. Of course, being in the mid-market helped because we have many exit options. We don’t rely on IPOs. We can sell to other private equity firms. In fact, we build businesses. When we invest in new businesses, our thought process is about selling to trade. So we build them to sell to a specific pool of trade buyers that will need this business. What ends up happening is that half of the time, private equity comes in and says, “Oh, you know, we’ll have it,” and they’ll do a faster deal at a higher price, and so we end up selling half to private equity, half to trade. But the point is, having had those abilities to exit business, of course, helped—not every part of the private equity market had that optionality over recent years. So I think our focus on DPI was very important for the fundraise. And I think the other point which investors find very important is consistency of returns. So, actually looking at the detail of performance track record and showing that the average return that you have delivered, which has been exceptional for Inflexion, was not reliant on one or two incredible exits and then the rest mediocre to poor, but actually is very consistent across the board. And so that gives them the confidence that there is a system, there’s a process, there’s a methodology sitting behind, you know, there’s a machine that actually will be able to reproduce and continue to produce these results with new funds.

[00:13:28] Phil Was there any major shift in terms of the LPs, in terms of where they came from, geography, et cetera, or was it pretty much a mirror of what you found with previous funds?

[00:13:39] Flor It was very much, very similar to what we had with previous funds.

[00:13:43] Phil Yeah, okay, that makes sense. Just moving topics slightly, but I’ve heard you talk about intelligent capital, which I love as a phrase, but I wonder if you could describe it as you would to, if you were meeting an entrepreneur for the first time who’s never dealt with private equity, how do you think about intelligent capital?

[00:14:00] Flor Yeah, I think there’s different aspects to intelligent capital. One is finding the right solution to the problem that the entrepreneur is trying to solve. So, and that requires listening a lot and not trying to push a product, but actually taking a step back, listening, understanding the situation, and then having the flexibility to adapt the solution to that specific problem. And so I think what we have is—with the options that we have available to us in terms of whether it’s a majority situation, or a minority situation, or a structured equity situation, or a small-cap situation—we are not trying to fit it into a bucket, we’re just listening and then finding a solution. And so that means that I think we can be a lot more relevant to a lot more situations, a lot more people with this approach. I also talk about intelligent capital in the sense of going back to this point of subsector specialism. We are not coming to learn about your industry and about your business through this specific investment. We, because we do a lot of investments in the same vertical, we are quite proficient and well-versed in the playbooks at work, actually the mistakes to avoid, and how to get to a result faster. And so we’re able to come in and add more value, always understanding that we are investors and we are not running businesses, so being very careful about where the line lies between operations and non-executive. And we’re squarely in the non-executive camp. But yes, I think, in many cases, entrepreneurs want you in because they’re facing a challenge: “I need to professionalize,” “I want to go into a new market,” or “I want to launch a new product; I want to do something different and it takes on, it requires more risk, and I don’t know how to do it. So can you help me do it?” And that’s where we come in. And so having that ability to bring in that expertise, that playbook, and apply it in that situation also goes to that intelligent capital. And I think the third lens is very practical support. So we have a value acceleration team, which is essentially hands that we can lend to the business for free to help them implement some of these changes that they need to go through. So it has different aspects, but hopefully it’s not just writing a check, but it’s being a value added to participant.

[00:16:30] Phil And just going back to yourself for a second, how have you found the transition to Managing Partner? Have you dealt with the juggling that comes with that role?

[00:16:38] Flor It’s been fascinating and I love the job. It is incredibly intense. It is full on. It is 24/7, seven days a week. There’s always something happening. Surrounding yourself with a really good team to make sure that I can rely on other people so that it doesn’t—everything fall on me—but loving it.

[00:16:58] Phil That’s good, great to hear. And just moving on to the market, how are you seeing the European deal market and competitive landscape at the moment?

[00:17:07] Flor So I think it’s a very bifurcated market in the sense that you see—see if you agree with this Phil—but a bifurcation between really great businesses that are going for very high multiples in very competitive processes, and then everything else that either doesn’t trade or trades very slowly with very thin pools of potential buyers. And I think that the skill of exiting business has become a lot more important now than what it was, you know, three years ago. So that market bifurcation is very strong. I think on the fundraising side, I also see a bifurcation in the market in terms of firms that—I think LPs are significantly reducing the number of relationships that they want to hold across the world, and so they’re picking their winners in the mega buyout, in the mid-market, in Europe, in the U.S., in Asia. And so, if you’re not in that bucket, then you’re going to really struggle to raise capital. So a bifurcation of the market in every sense, both on the deal side, but also the LP side.

[00:18:16] Phil Yeah, and we’re seeing it literally the same. I was chatting to one of our team yesterday, and he was saying how some deals are moving like lightning, lots of other deals, you can set a timetable as much as you want, but people are moving at their own speed, and so many, kind of, bilateral processes, et cetera. So it’s just, it’s a, it’s definitely a much more challenging market, and it takes more of a kind of versatile approach, I think. Just moving on to another topic, I’d love to explore in two ways, really, the hot topic of AI, I guess. Firstly, which we’ve seen, is like the impact on investing and how you think about, particularly, how it impacts certain sectors, and I guess your own portfolio. How have you, as a house, thought about?

[00:19:00] Flor So from a portfolio perspective, we’ve done an analysis of our entire portfolio in terms of how AI could impact each business, but it’s not just—both in a positive way and in a negative way, right? So, you know, which businesses or which part of the business could potentially be at risk if we don’t do anything, but also what upside could we get if we get AI right in these specific opportunities? And then based on that sort of categorize the portfolio into different buckets and we’re tackling them in different ways with different degrees of prioritization. I think we were lucky in that our exposure to software is minimal, and so, therefore, from that perspective, I think software is at the tip of the iceberg in terms of AI disruption, and we don’t have that. But like always, as I said at the beginning, I’m not complacent, we’re not complacent, and we’re on everything because eventually every business will, you know, should adopt and will have a degree of either disruption or support based on AI, and we want to be at the forefront of that. But I think we’re starting from a strong position. In terms of new investments, we have designed a framework that we use to analyze each opportunity, whether it comes from services, or industrials, or whichever sector. On the GP side, sort of on the Inflexion side, we’ve done a lot. So, the first thing for me was to drive adoption. So we made all tools available to everyone, no limits. And then the next thing was to start from the top. So I got the IC trains before the rest of the team, because I thought, you guys, if you are not leading, we are not leading, and you’re not showing that you dominate these tools, then we’re not gonna set the tone from the top. So I’ve got that done. Then I got a partner group on an offsite for two days. And again, we got a hackathon done, and it was fantastic. Then, we measure everything at Inflexion. So we measure adoption, we measure categorized usage by whether it’s a super user, and we define that in a certain way, and we track that, and we show that on a monthly basis. I stand in front of the team and say, right, that’s the evolution of super users by cohort. So the partner group is still the top group, which is great. But then we also show by individual, so the ranking, from top to bottom. So no one wants to be in the bottom half. And so that also sort of incentivizes people to pick it up. And then the next big thing that we’re doing now is doing what we do for a number of our portfolio companies, which is building the data lake. Because right now we have the limitation that we have with AI is that different tools can access different silos of information within our business. But we’re going to be a lot more powerful if we can capture the entire IP of Inflexion of all of the deals that we’ve looked at over a number of years of our portfolio companies and query that information through the CRM system linked to the iLevel which has a lot of portfolio companies through the shared drive where we store all of our internal IP. So that’s what we’re doing next and the next set of tools are going to be building and querying that data lake.

[00:22:07] Phil One last point around the market, one thing that struck me many years ago, I think it was talking to John, was, I remember him talking about relationships with lenders and how it really came over more strongly than any other fund I’d spoken to in terms of how to prioritize that kind of partnership. So I just wondered, how has that changed and how are you seeing the debt markets at the moment?

[00:22:31] Flor Yeah, so look, that philosophy has always stayed. So I think we must have been the first mid-market priority from—they had a dedicated capital markets team. And we always thought about our debt partners, as you say, Phil, as partners, not as a provider of capital. And that means treating them with respect. So, if they have a chance of winning, or they don’t have a chance of winning, in the same way as we want to be treated, if we don’t have a chance on something, we want to be told that, so we don’t waste our time. But that allows you, then, every now and then, when a company gets into trouble, to have a very sensible conversation. So, that has served us really well. We feel—Edmund runs that part of the business. He has a team that is absolutely phenomenal. They get involved in every deal. And it allows us to continue to deploy, and we’ve never had issues on that side of the business. And I think to a large extent it’s because of the relationships that we’ve cultivated over the years.

[00:23:25] Phil Sort of back to the personal side a little bit. We’ve touched on this when we’ve chatted before. You’ve been incredibly successful. You’re also a mum. How have you managed to juggle the two?

[00:23:35] Flor With a lot of difficulties, the answer. And look, and I like to talk a lot about this to other women in the sector, because I think we need more women in senior positions in private equity. We have more than what we had 10 years ago, but still way below what it could be. And I think the difficulty comes, in particular, sort of when you’re in that time, mid-career, where you start forming a family, having kids. But actually, from a salary perspective, you’re not making that much money, but to be able to keep your career, you need to build an infrastructure around you because you need support. But I always had this long-term view of, you know, this is a long-term—and I think that’s the way you need to think about it is, I’m here for the long term. This is a short period of time. Because also kids grow up and then they start going to school and they, frankly, they’re then busy themselves, right? At school, et cetera. And so they have their own life. And so I think that period is critical because you’re exhausted and not feeling guilty. And I think that requires a lot of introspection and looking in and saying, right, what makes me happy? Because I knew that what made me happy was to be able to be a mom. But also, to be able to have this job. And I would have been a very frustrated mother, and therefore a bad mother, because I would’ve passed on all of these achievements that I wanted to achieve and never got to, to my kids. And I didn’t want to do that. And so, therefore, I needed to make this work. And therefore, that helped me sort of get rid of the guilt and say, no, I’m doing this because this will make me a better wife, a better mom, and then better at my job. The other thing I say to women a lot is, stop thinking about being a woman as something that is negative. Oh, you know, this because it’s difficult because you’re a woman. Yes, there’s this part that is more difficult. There’s actually—I see it as a superpower. And I think that mindset shift is important because it is a superpower, because you are different. Because 99% of the time I turn up to a meeting, I’m the only woman in the room. I have a different voice. I sound different. I see things differently. I can be warm with people when I’m talking in a town hall, which, you know, some men struggle with that. And so, you know, I can be myself and not be afraid of being myself because I know I’m different, so why wouldn’t I show that? And so when you start seeing it that way, and you see it more as a superpower than as a defect or something that brings you down, I think it’s very empowering. And so there’s many great aspects about being a woman. It is difficult, yes, but it requires, as I said, thinking about it in the long term, not just focusing on the short-term exhaustion, which will be there.

[00:26:10] Phil Makes sense. And looking forward, do you have any—what do you see as the biggest threat, biggest worry, anything in particular for the market?

[00:26:18] Flor Look, there’s so many things to worry about.

[00:26:21] Phil Yeah.

[00:26:21] Flor Aren’t there? You know, you start with inflation, interest rates, geopolitical risk. I mean, what worries me the most with all, well, AI, AI and in particular, sort of, the role that corporates, frankly, and governments, but in particular corporates, will have of reskilling people, as people, you would be, some jobs will be replaced by machines. That’s a job that all of us will need to be responsible for.

[00:26:47] Phil Couldn’t agree more. It feels like the pace of change is, I mean, we’ve lived through a lot in the last 20 years, but it feels like the pace of change is only getting faster and faster. I’m going to finish out with two more light-hearted topics, both linked to things that I love. So, I’m a big reader, so I’m going to ask you, what’s your favorite book?

[00:27:08] Flor One book I love is It. Goes. So. Fast. Her name is Mary Kelly. She’s a mom, she’s a journalist—very successful journalist—but then she realizes that—it’s a true story—that her eldest son is in his last year of high school, and how she missed out on a lot of things and how she’s now trying to sort of make up for that time, and it’s very reflective. But I think as a working mom, it was a book that really resonated with me.

[00:27:38] Phil Fantastic, fantastic. And the last one is, I’m a big football fan, so I’m going to ask you, where did you watch England–Argentina, and were you kind to your colleagues the day afterwards?

[00:27:49] Flor I watched England–Argentina at home and, I have to say, at one point our neighbors shouted to us because my son and I were screaming so much when we scored those goals that we had to close—because I thought we were going to get bombed, you know, we’re gonna get thrown, you know, tomatoes at us. Because it’s horrible, it’s horrible when someone celebrates, and you’re losing, right? I hated it when we lost against Spain. I watch it at home with my family.

[00:28:13] Phil Oh, wonderful. Listen, it has been an absolute pleasure and a privilege to speak to you today, Flor. Thank you so much for joining us.

[00:28:20] Flor Thank you for having me. I really enjoyed the conversation, Phil.

[00:28:24] Phil If there’s one thing I hope listeners take away from this conversation, it’s that scale and culture don’t have to be in tension, but protecting culture takes deliberate design. Flor has helped take Inflexion from a U.K.-only generalist firm to a multi-strategy business investing across Europe and the U.S. Pairing every regional partner with a sector partner, and mandating it from the top, removed the internal battles I’ve seen derail other firms’ international expansions. And that underdog mindset, the idea that you’re only good today and have to earn the right to be great tomorrow, is a big part of why a firm with Inflexion’s track record still feels so hungry, and why Flor herself has been so successful. The second thing is on the market. We’re both seeing the same bifurcation. Great assets trade quickly at high multiples. Everything else tends to move slowly with thin buyer pools, and LPs are concentrating their relationships in fewer managers. In that environment, the firms that win are the ones that treat DPI and consistency of returns as a discipline, not an afterthought. Flor’s weekly realization committee is a great example. The same discipline shows up in how Inflexion approaches AI, training the IC first, measuring adoption openly, and now building a data pool to capture decades of institutional knowledge. That’s what it looks like when a firm leads on change rather than reacts to it. Thank you for listening to Capital Revolution. For more insights, visit HL.com. If you enjoyed today’s episode, please consider leaving us a rating and review on your podcast platform of choice.