Entrepreneurship Through Acquisition

Two Friends, One Search Fund: Buying and Rebuilding PalCare

Prefer audio? Listen to the full episode on the Search Party podcast, or browse more conversations on the Oberle Podcasts page.

Who is in the room

This conversation comes from an episode of the Search Party podcast, hosted by David Snow. It brought together four people who each saw the same acquisition from a different seat. Casey Schuler is the CEO of PalCare, and Hutson Prioleau is its president. Dustin Sellers is a managing partner at Next Coast Legacy, the firm that backed their search. I handled the insurance diligence on the deal as the founder and CEO of Oberle Risk Strategies. I have since become a fellow Wisconsin transplant and a friend of theirs.

PalCare, legally PalatiumCare, is a senior-care technology company. In Casey's words, they are the help-I-have-fallen technology for the B2B world. Walk into an assisted living or memory care community and you will see pull cords on the walls and pendants on the residents. PalCare is the system behind the scenes. When a resident calls for help, it turns that signal into an alert at the nurse call station.

Why two friends chose a partnered search

Casey and Hutson met at TCU's business school in Fort Worth. Their friendship and partnership came first, long before they settled on a business idea. Hutson grew up in Texas and played tight end at Texas A&M. He spent a couple of years in oil and gas before going back for his MBA. Casey came from a supply chain and consulting background. He had also worked inside a private-equity-backed physician practice roll-up, which gave him his first real look at private equity. The two had always wanted to build something together. After cycling through a few bad startup ideas, a friend's self-funded search introduced them to entrepreneurship through acquisition. It snowballed quickly. What started as an idea became quitting their jobs and raising a search.

I call searchers like them "boomerangs." They met ETA during an MBA but were not ready to jump straight out of school. That early-thirties profile is becoming the prototype. They arrive with a little more time in the world, more P&L experience, and a clearer conviction that they do not want to be corporate.

"When a partnered search works, one plus one does not equal two. It equals four or even five." Dustin Sellers, Next Coast Legacy

Dustin notes that solo search was in fashion for a while. A single searcher could keep a much larger slice of the equity. The pendulum has swung back toward partnered search, and the Stanford data supports it. The catch with going solo is simple. It is very hard for one person to hold the full skill set the seat requires. You do not know what you do not know until you are sitting in it.

Choosing a business you actually want to run

Their first filter was not financial. It was whether they would actually want to spend the next five years running the thing they bought.

"The first question is not whether it is a great business. It is whether you want to run it every single day for the next five years." Hutson Prioleau, PalCare

Their second filter was fit. They wanted a business that needed the skill sets they actually had. The two filters are connected. It is very hard to be successful in an industry or a place you cannot get excited about. I always knew I wanted to run an insurance business, so I put it to the group plainly. People who force a deal in an industry they dislike rarely make it work. Most searchers do not pick the exact industry they end up buying. Instead they triangulate toward a place and a type of business where they can be happy.

Casey and Hutson learned that firsthand. They came close on a business that provided commissary services to prisons in Louisiana. It had strong recurring revenue, and they had it under LOI. Then they looked at each other and admitted they did not actually want to do it. Backing off a deal they could have closed was itself part of finding the right one.

Winning the PalCare deal by showing up

The deal came the way many do, through a mix of process and plain luck. A friend of Casey's working in lower-middle-market private equity came across PalCare and passed it along. As Hutson jokes, they could have golfed for six months and still found the business. Even so, you have to make your own luck. You still have to script the first twenty plays of the game, even if you cannot predict what happens once you are in it.

What set them apart was effort. The seller was in Wisconsin and talking to several groups. Casey and Hutson were the only ones who got on a plane.

"Everyone else was talking to the seller. We were the only group that flew up to meet him and his family in person." Casey Schuler, PalCare

Casey had a natural connection to the region. He went to undergrad at Marquette and had family ties in Wisconsin. The two ended up staying until midnight pulling pull tabs with the seller and getting to know him as a person. They met his son and his daughter. That willingness to show up in the middle of the country and honor what the seller had built is a large part of why they prevailed.

What the friendship revealed under pressure

When PalCare was acquired, it sat about an hour north of Milwaukee. For the early stretch, Casey and Hutson commuted together five days a week, two hours a day. Those ten hours a week in the car turned out to be one of the most important parts of surviving the first years.

"Ten hours a week in the car together is how we got through the early years. That was where we solved problems, decompressed, and celebrated the few wins we had." Hutson Prioleau, PalCare

They had always known they were a complement rather than a copy of each other. Casey's instinct is to take a problem, fix it, and make it repeatable. Hutson brought the sales and relationship mindset. That difference is a strength, but only on top of trust. Both men are opinionated, and their opinions often do not line up. What lets them move quickly is a shared baseline. When a decision is contested, each can fall back on the fact that he trusts the other to make the right call.

"I threw a pen at Casey once. But real trust means the fight is over in two minutes and we move forward." Hutson Prioleau, PalCare

Dustin's read is that the most galvanizing part of the whole journey is not running the business. It is trying to get the deal done. Roughly two years of searching together is where partners really get into each other's shoes. They either bond or they break. Casey and Hutson bonded, and that is a big reason the partnership has worked.

Buying a senior-living business right before COVID

They closed on PalCare in late 2019, just before Christmas. The seller handed over the keys almost literally. He sat down at the conference table, said he had a flight to catch, and that was effectively the last real conversation. The plan for the first hundred days was the classic one. Learn the business, learn the people, and do no harm. Then February 2020 arrived.

What started as a distant news item compounded fast. Senior-living communities locked their doors. No one could get in, and the installation projects that drove much of the business came to a halt. Within the first three months, roughly 80 percent of the business went on furlough. Casey and Hutson had to do it having built almost no political capital with their new employees. On top of that, senior living became the tip of the spear in the press. The stigma lingered for years as families hesitated to move parents into senior-living communities.

"You never learn how resilient a business is until a crisis hits. Then you find out what you really bought." Dustin Sellers, Next Coast Legacy

What saved them was the shape of the revenue. PalCare's economics were straightforward. A community that installs a roughly hundred-thousand-dollar system is not going to rip it out. Instead it spends several thousand dollars a year maintaining it. Every install generated something like six to eight thousand dollars a year in recurring revenue, with almost no churn. Even in a pandemic, buildings cannot remove their emergency nurse call systems, so the base held.

Compressing a five-year plan into one

Strategy looks great on paper. PalCare had a tidy plan to build recurring revenue over three to five years. Six months into COVID, they decided to do it in one.

"COVID forced us to become sharp operators. We squeezed every penny out of the business and came out far more efficient." Casey Schuler, PalCare

Big installation projects were frozen, so they leaned into the services communities could not live without. They cut roughly 30 percent of expenses, automated heavily, and went to market faster than originally planned. They also reshaped how revenue reached customers. About 40 percent of revenue had come through PalCare's own sales team. Two channel partners accounted for roughly 30 percent each. Casey and Hutson set out to make the entire business direct. Now, buying a PalCare system means working with a PalCare employee rather than a distributor. That shift has paid real dividends in the years since.

The insurance side of a healthcare deal

My role began the way it usually does. I got a call after the LOI and before closing, when Hutson was assembling the deal team and asked me to look over the insurance. For a healthcare or senior-care business, two coverages carry the most weight.

• Professional liability. In healthcare, the exposure is real and claims can be severe. This is the first place a careful review focuses.
• Cyber liability. A technology platform handling resident data carries meaningful cyber risk. A single claim can be significant.
• The surprises you cannot predict. Diligence exists to surface potential pitfalls before closing. Even so, some risks only appear later, which is why the resilience of the business matters so much.

"In healthcare, the claims that really hurt come from professional liability and cyber. Diligence catches most pitfalls. It never catches all of them." My rule of thumb after hundreds of deals

Dustin adds a through-line. When portfolio companies stumble, it is rarely for lack of talent or effort from the searchers. It is the resilience of the business that decides whether a company survives a shock. The bigger danger is a one-trick-pony risk, such as capitated revenue that can be cut in half overnight. Casey and Hutson deliberately steered toward a private-pay market and away from CMS reimbursement risk. That choice is part of why PalCare weathered its first year.

Where PalCare is now

Several years in, the founders describe a business on the precipice of turning into something great. They have grown the team and hired a COO who started in January, along with a CRO. For the first time, they can hand off much of the day-to-day work. Casey estimates the majority of his time now goes to culture, vision, and strategy. That includes the big question of how AI reshapes the business, rather than firefighting.

Letting go was hard. They credit trust and a bit of luck in finding leaders who fit the culture they care about. Private-equity firms now call regularly, which makes an exit a real possibility. Even so, the founders looked at it and decided to keep their heads down and let the exit take care of itself. Dustin frames the prize clearly. Taking a company with no contractual software revenue and building it toward a recurring, ARR-based model is one of the hardest things to do. It is also where the value really compounds. For now, Casey and Hutson are betting on the business they built, and on each other.

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