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Capital Club Radio Hosted by Michael Flock
Guest: Matt Maloney
Male Speaker: Broadcasting live from the Business Radio X Studios in Atlanta, Georgia, it’s time for Capital Club Radio, brought to you by Flock Specialty Finance.
Male Speaker: Hello and welcome to another edition of Capital Club Radio, where Flock Specialty Finance. I'm the producer here today, Ryan McPherson, and it’s my distinct pleasure to welcome our host, the dynamic Michael Flock.
Michael: Thank you, Ryan. We are absolutely delighted to be with you this afternoon and our loyal listeners. We are really pleased to have as our guest today Matthew Maloney. He and his family have a long, exciting and colorful history in the collections and debt buying industries. Matt is going to talk to us today about what he has learned in the past and how that is going to help drive him in the future. He is the cofounder, chief investment officer and president of a group of companies now called the First FAM 360 Group.
He’s responsible for the strategic growth and development of the company, and has in fact raised nearly $250 million in investment capital over the years, with receivable assets aggregating over $15 billion. He’s active in all the industry trade associations: ACA, DBA, Experian, holding multiple positions on the boards and panels as a presenter. He’s also coauthored one of the industry’s official due diligence guideline manuals for debt buyers, which was published by ACA.
So today, Matt, we want to start by you sharing with our audience what you have learned over the years. Your father was the original founder in 1970. He started in 1970 and then founded a couple businesses, acquired several businesses over the years. 1970, were you born then?
Matt: No.
Michael: So you were literally born into the industry.
Matt: Literally.
Michael: Both your parents and your mother Mary is also a key officer and leader in the company. What a rich history you’ve got. And yet, over those decades, so much has changed. What have you learned in the past from your parents and all the ups and downs that they experienced, and how has that driven you to the strategy that you’ve got today, which is much different; focused on healthcare, collections and debt buying, analytics, revenue cycle management. Wow, such a radical, new direction. Can you give us all some background, how you went from the past, what you learned then and how that’s applied now to the future?
Matt: First of all, that was a mouthful, wasn’t it? That was great. I'd like the audience to know this. I come from a background of serial entrepreneurs. As you said, Michael, my father has been an owner and operator of every company that he has ever been with. He’s been in ownership, either wholly owned or partially owned. And so coming from a background of serial entrepreneurs and having a fairly small family – I’m an only child – one of the things that really was instilled in me in a young age was hard work, ethics and values.
My parents taught me never to take anything for granted. And the things that they were able to achieve and accomplish over time as they grew in their careers, owning small companies and then eventually larger companies, that it all came with hard work. So the hard work and ethics and the values were instilled in me at a young age. What’s interesting is as I've seen the business transform, and as you mentioned, I was literally born into this industry. Initially, I didn’t even want to come and work in the industry because I'd been around it my entire life. Initially after I graduated undergrad, I didn’t work in it but then I came back to it.
Michael: You probably wanted to strike out on your own, do your own thing for awhile?
Matt: Yes. And the story goes, I was literally sitting around the Thanksgiving table in November of 2001. I came to the family and said listen, I want to start a company that buys and finances or invests in accounts receivables. At the time, I didn’t think I wanted to build an operation in receivables management or collections like they had done; I just wanted to buy and finance it. At the time, my father said: I'll tell you what. Our non competes are about to be up from selling our prior company.
Michael: Which one was that, the prior company?
Matt: Bomar was the platform, which became Compass International Services Corporation when they took it public, and then they sold that to NCO Group. I believe they sold it in ’97 or ’98; I can't remember exactly when. So he said: I'll tell you what. My non compete is about to be up; why don't we start this business together? And so that’s what we did and the rest is history. We formed first Financial Asset Management shortly after acquiring a very small capacity called First Financial Services. It was in Atlanta, Georgia. That gave us the systems, the licensing and the platform we needed to ultimately drive our business growth.
Michael: Didn’t you acquire one in Arizona?
Matt: That was in 2004, Fidelity Risk Solutions, two years later. Two years after we started the business; about a year and a half to two years later. One of the partners in that business, Steve Goldstein, is actually a current partner of ours today, and he actually lives out in Phoenix. We have an office out there. I could spend days with a list of all the things I've learned, both positive and negative but I think one of the key things is understanding that you can’t take things for granted, and nothing comes easy and it all starts with dedication and hard work.
Michael: And things for granted, do you mean like capital resources or customers or employees, or all of the above?
Matt: Great question. Really, I would say all of the above. I have a very strong faith-based platform for myself in how I approach my business affairs and so faith is a big part of my business. But you can’t take for granted the things that the good Lord puts in front of you, both positive and negative because they’re all learning experiences. The relationships that we have with our capital partners, the relationships that we have with our clients and customers, those don’t come easy. They come with hard work, only hard work, and it’s important to always know where you came from before you can understand where you’re going.
Michael: That’s a great quote. Are there any particular stories that are still riveted in your mind that you’ll never, ever forget, good or bad?
Matt: There are a few; actually there are probably many. The first that I mentioned earlier is how we started the business, which literally was sitting around the Thanksgiving table with family, and then started the business with family. I'll say it this way. There were four events, four major events in my life that really I think are noteworthy of mentioning and that shaped who I have become not only as a person but as a business professional and a business leader. I think a lot of people take these for granted but they were four important events for me.
The first was my marriage; marrying my wife who was also my high school sweetheart, which is a whole other story. That event shaped who I have become as a man, as a husband, and as a business leader. Her ability to really just present thoughts in an unfiltered way that gets to the point, I tend to be a little long winded; she tends to be a little right to the point. But she’s helped shape me in that, and that’s helped shape who I am in business. The other three events, they’re kind of in the same vein but they were the birth of each of my three children.
When we had our first child, I started thinking about who I was as a person, who I was as a husband and who I was in my business, and what did I want my children to know about me in our business and in my career. There’s a concept that’s called legend versus legacy. When I first started my career and we first started this business, I would say that I was more focused on the legend. What could I do, what can I accomplish, what’s the legend of Matt Maloney? As time has gone on, that has shifted more from the legend to legacy.
And legacy is what impression can I leave on the people that I work with, that work for me and with me. And what can I leave behind even when I'm growing my career, and eventually when I'm gone in my career, and how have I impacted those people’s lives? That’s one of the core values that we have in our business today, which is really birthed out of my family and particularly with my wife and my three children. It is that I want to build a business that has a lasting impression on the communities in which we operate in not from a legend mindset but from a legacy mindset.
And yes, a for profit business is about what we accomplish and how we grow our business. But I think it’s equally and perhaps even more important to focus on how we impact the communities that we operate in. What I mean by that is the industries that we operate in. That was one of the reasons why I started moving towards healthcare.
Michael: So you’re saying the legacy is more the service that you’re providing to the customers, investors and employees?
Matt: Absolutely.
Michael: Healthcare, that’s a logical segue, Matt. Now, your parents’ companies were mostly in the credit card and auto, the traditional, charged off consumer debt world which was dominated by credit card/auto. Consumer installment loans; the traditional stuff. Healthcare, then, was not – I don't think hospitals were even selling, right, back in the ‘80s and ‘90s?
Matt: If there were any sales of any patient responsible, bad debt receivables or other types of patient responsibility accounts receivables, if there were any back then it was very far and few between, and probably not.
Michael: So how did you go, then – I’m trying to connect the dots. It’s logical, then, in the healthcare community with some of the challenges that we’ve got with insurance and compliance and so forth, how did you come up with that direction? What was it that drove you to healthcare? Was it the size of it? Was it the complexity, service? What was it?
Matt: There were two things fundamentally that were going on in our business. Number one, we saw the industry was starting to constrict and change. It was change that was taking shape in the industry and in the industries that we serviced, which at the time was not healthcare. As you mentioned, we were in auto, consumer financial services, card products, those types of things. We started looking at some of these changes taking shape and we said if we don’t make a concerted effort to start developing other alternative marketplaces, we could be standing here five years from now with a business that has shrunk significantly because of various challenges that were going on in the industry.
Sometimes you’d rather be lucky than smart, and I think there was a little bit of luck and there was a little bit of genius of this in both respects. We looked at healthcare and said wait a minute; in a prior life our organizations, our companies had been in healthcare but our existing company, we had never been in healthcare. So we started looking at opportunities of how we were going to move into healthcare. There are two routes to grow; you can grow organically or you can grow through acquisition. So we decided at the time that we were going to identify a small company, a small platform just as we did when we started our business.
We wanted to identify a small platform that we could purchase and that would give us the background, the pedigree that we needed to enter the healthcare space and then subsequently grow. We actually identified two very small companies, one that was mostly focused on what they call early out or extended business office services, doing more insurance follow up and patient billing and collections. Then we found another one that was really more focused on managing charged off or bad debt receivables.
Within a fairly short time period of one another, we closed the acquisition of both of those companies and it gave us essentially about a 20 year background in healthcare.
Michael: Were these the companies in South Carolina?
Matt: One was in South Carolina and one was in Brunswick, Georgia, actually. So we used that background, that pedigree to basically fuel our future growth. Immediately we started building a business plan around how we were going to approach those existing customers, and then how we were going to reach out to the healthcare community at large and present our swath of services, which included a product that we call reimbursement guarantee; kind of a fancy way of saying we buy the receivable.
We started talking to those hospitals and other healthcare providers in the community. We knew that there wasn’t a lot of competition on those companies that were out there purchasing receivables. There were a couple of companies out there that had been in the space for quite some time. They were solely focused on either buying receivables, and of course most of the healthcare revenue cycle management community was focused on servicing the revenue cycle, whether it was billing or collections. But there were a few that purchased receivables.
We wanted to take the approach that we could offer a broader menu of services and not only offer the ability to purchase patient responsibility receivables, but create a vehicle that allowed us to help the healthcare providers with other financial classes by purchasing those receivables and pulling forward those future cash flows so that they could realize the net present value of those receivables.
Michael: Is that the primary value, then, to the creditors of what you do? Moving forward with the cash flow and accelerating their cash, is that the primary or are there other intangibles?
Matt: Great question. One thing that differentiates us is that we bring a more holistic approach than what we believe our competitors and maybe peers do. Because we have the ability and we have the infrastructure and the foundation and the capital to be able to purchase patient responsibility receivables, commercial and managed care insurance, TPL and motor vehicle accident claims; all types of financial class accounts receivables or AR within the healthcare revenue cycle. Whereas some of our competitors are more homogenous in that they focus on we’ll just buy patient responsibility.