Mergers & Acquisitions names the 2021 PE Leaders in Diversity, Equity & Inclusion, including WIllie Woods, founder and managing director of ICV Partners.

For many people in private equity, the 2020 murder of George Floyd by a white police officer – and the subsequent reckoning on race – fueled a commitment to address the lack of diversity in the industry. But for Willie Woods, the process began much earlier. The beating of Rodney King by white police officers – and the Los Angeles riots that erupted in 1992 when the officers were acquitted – set the wheels in motion for Woods to launch ICV Partners, one of the oldest Black-led PE firms in the U.S.

At the time of the L.A. riots, Woods was a student at Harvard Business School. He conducted a field study to explore business opportunities in L.A., applying the principles of Professor Michael Porter’s book, The Competitive Advantage of Nations, to inner cities. The ideas behind the project stayed with Porter, and several years later, he approached Woods (who was then an investment banker) about launching a fund that would provide capital to businesses in inner cities. The result was ICV.

“It’s really ironic that here we are, almost 30 years later, still dealing with the same issues,” Woods told Mergers & Acquisitions. “When we founded ICV, one of my goals, in addition to great returns and a great firm, was to make sure that we got more people of color in this business.”

Founded in 1999 and headquartered in Miami, ICV invests in lower middle-market companies in business services, consumer goods and services, food and beverages and healthcare. With $1.4 billion AUM, ICV is investing out of its fourth fund of $585 million, which closed in 2018, and is reportedly raising a fifth fund now.

Woods serves on the board of directors for SG360, SirsiDynix, OneTouchPoint, American Alliance Dialysis Holdings LLC, Interventional Management Services LLC and JK&T Wings, as well as on the boards of the Apollo Theater Foundation and the Initiative for a Competitive Inner City. He is a trustee and chairman of the board of Morehouse College.

Woods shared some insights with Mergers & Acquisitions in this Q&A:

What are the benefits of DEI to private equity?
The key benefits are:
• Getting a broader, different and perhaps more diverse perspective in your investment review process, which leads to better decision making and investment outcomes. People of color and women, for that matter, often bring a different set of experiences and point of view based on their own life experience and unique situations they have faced as a result of their color and gender. These experiences may shed additional light to a new deal, offer up another voice that is missing in room. The best decisions are generally when people with different and diverse backgrounds and points of views are heard, considered and debated. An investment decision is no different.

• Gaining access to more unique dealflow and operating talent. Diverse people often have a unique set of relationships in their communities that can lead to deals that may not be highly shopped, or operating talent that may not be in the regular channels. We have experienced this firsthand.

• Lastly, to improve firm culture and talent around that, your firm reflects the makeup of our society and that you care about societal issues, and it is reflected in the culture. Diverse people, because of their backgrounds and experiences, care a lot about culture and values, and millennials, frankly, are focused on working at places that have a good feeling. A happy culture leads to higher productivity and less turnover, which is good for an apprentice business. The country is getting browner as the years go by, and I believe by 2040, the minority is expected to be the majority. If your firm is not diverse and the culture not right, you will miss a great deal of future talent and lose a lot of existing talent. Notice that these are all business considerations, but I would hope people also believe it is the right thing to do.

What steps you are taking to improve DEI at your firm?
Our firm was founded on the basis of creating more diversity in private equity. As a young investment banker in the early ‘90s who covered private equity firms, I noticed that there was no diversity at these firms, similar to investment banking. The founding of the firm had as its initial investment focus to make investments in inner city and minority-owned businesses. That focus and my own desire to create more diversity in the industry led to a focus of hiring diverse talent at every level. Today, our firm is one of the oldest minority-owned firms in the business. All of our investment professionals are people of color to include African Americans, East Asians and Latinos. When we started our two-year associate program over two decades ago, it was for the distinct purpose of hiring and giving opportunities to people of color to get in this business and have a great experience that would lead to getting in the best business schools and returning to the industry. Some of those associates returned to ICV and are now senior members of the firm, some went on to work at other PE firms, some became entrepreneurs and some started their own private equity firms. We are very proud of this accomplishment of getting more people of color not only at our firm but in the industry.

What steps are you taking to improve DEI at your portfolio companies?
This is the next frontier for us. We have always encouraged our management teams to be sensitive to the diversity of their employees and needs at their companies. A great example of this was at one of our earlier portfolio companies, it had a primarily Hispanic work force that had high turnover. Some suggestions by us to improve turnover and productivity centered around some simple suggestions like putting the employee manual in Spanish as well as English, offering up company-paid English language classes, and having our bank come out and do a financial management training session offering checking and savings accounts to the employee base. This was well received by the workforce, and turnover and productivity improved. These suggestions were obvious to us, given our own ethnic backgrounds.

As result of all the social justice protesting last year that started with the killing of George Floyd, we asked all of our portfolio companies to get better at DEI. All of our existing portfolio companies and new investments are now required to go through unconscious bias training from several resources we have retained. We now require each company to be more proactive at looking for diverse talent in the management ranks of the company. They now share the list of open management positions and the method and success in which they are using to ensure diverse candidates are being considered. Lastly, we now require that we have at least one outside board member who is either a woman or a minority. More work here to do, but the journey has begun, and we are already starting to see new management levels hire of minority candidates and more diverse board members being added.