Podcast Summary: Locally Owned, Ep. 28

“How Private Equity Firms Work: The Story of Jon-Don”

Host: The Street Smart Entrepreneur
Date: December 12, 2025

Episode Overview

This episode of Locally Owned tells the rise-and-fall story of Jon-Don, a beloved, family-run janitorial and restoration supply company founded in 1978, and explores the hard lessons when legacy businesses are acquired by private equity (PE) firms. Through personal anecdotes and a thorough explanation of how PE firms operate—including their motivations and methods—the host provides a cautionary tale for small and medium-sized business owners considering an exit via private equity.

Major Discussion Points & Insights

The Founding and Philosophy of Jon-Don

• Two Founders, One Vision:
  • Dominic “Nick” Powell and his nephew John Powella started Jon-Don in 1978 with $3,000 home equity loans each ([00:08]).
  • Nick focused on relationships and customer service; John excelled at operations and logistics.
• Customer-Centric Culture:
  • “When your customers succeed, you succeed.”
  • Not just vendors—partners for success was more than a slogan, it was their business model.
  • Investment in customer relationships and training cemented loyalty.
  • Notable support, e.g., Nick once helped a customer find housing after a flood ([07:55]).
• Training as a Differentiator:
  • Jon-Don created industry-first, week-long business courses for blue-collar owners and prorated costs based on customer loyalty ([10:46]).
  • “They brought white collar tools to a mainly blue collar dominated industry.” ([11:31])

Personal Anecdotes About Company Culture

• Memorable Moment:
  • Host describes meeting Nick at a customer cookout—Nick, a multimillionaire, manning the grill and chatting as if he were a neighbor ([04:17]).
• Host’s Endorsement:
  • “What I do remember is how they priced it...it wasn’t just a sales tactic, it was a loyalty strategy.” ([12:19])

The Sale to Private Equity

• Transition Point:
  • In 2021, the founders sold Jon-Don to Incline Equity Partners ([15:31]).
• Host’s Motivation:
  • Personal connection as former customer and friend to several Jon-Don employees motivates the host to investigate and share the story ([02:46], [03:17]).

Private Equity—How It Really Works

• Explanation for the Audience:
  • PE firms acquire businesses, often using leveraged buyouts (LBOs)—borrowed money rather than their own—and seek a quick turnaround profit ([20:34]).
  • The acquired business absorbs the debt, not the PE firm. Multiple LLCs protect the PE firm from liabilities ([21:02]).
• Dividend Recapitalization:
  • After acquiring Jon-Don, Incline had Jon-Don borrow against its own value, saddling it with debt while the PE firm took out cash as management fees ([22:48]).
  • “John Don is now loaded with crushing debt, but gained nothing from the loan or its new owners.” ([24:02])
• The Fallout:
  • Heavy debt led to cost-cutting, aggressive growth moves, and cultural decline, all exacerbated by post-COVID financial pressures and inflation ([25:55]).

The Collapse of Jon-Don

• Downward Spiral:
  • “When debt becomes your biggest monthly expense, you are in trouble—no breathing room means no margin for error.” ([27:41])
  • New leadership, pressure for high-risk growth, and a focus on profits over relationships undermined the original culture.
• Bankruptcy and Aftermath:
  • CEO Eric Royce departs in early 2025; Jon-Don files for bankruptcy weeks later.
  • Employees, contractors, and vendors “were all shocked” ([30:41]).
  • Aramsco purchased Jon-Don’s assets, not its liabilities, via an asset sale—leaving banks, suppliers, and employees in the lurch while the PE firm remained insulated ([32:51]).

Key Lessons and Warnings

• Private Equity’s Fundamental Mission:
  • “They’re not built to nurture companies. They’re built to extract value.” ([35:14])
  • Buy low, increase value, sell high. That’s their motto.
• Advice to Owners, Employees, Vendors, and Customers:
  • Owners: Think carefully about the buyers' values if you want your company’s ethos to live on ([36:45]).
  • Stakeholders: “If something feels off, it probably is. A business can look perfectly healthy on the outside until the day it doesn’t.” ([38:05])
• Protecting the Founders’ Legacy:
  • “Nick and John’s reputations remain intact... What they built lasted nearly 50 years... It wasn’t taken down by competition. It was undone by poor financial engineering.” ([39:04])
  • The loyalty and culture the founders built “created careers, communities, and trust and overall helped raise the level of integrity of an entire industry.” ([40:17])

Notable Quotes & Memorable Moments

• On Service-Driven Legacy
  • “Nick...a multimillionaire owner of a billion dollar industry giant, is in the parking lot of one of his locations cooking burgers and hot dogs for his customers. The conversation was as simple as one you’d have with a neighbor.” (Host, [04:17])
• On Company Philosophy
  • “They weren’t just a supplier, they were a partner.” (Host, [09:42])
  • “They lived an immutable business principle that Zig Ziglar famously penned: ‘You can have everything in life you want if you help enough other people get what they want.’” (Host, [09:59])
• On Private Equity Tactics
  • “John Don is now loaded with crushing debt, but gained nothing from the loan or its new owners.” (Host, [24:02])
  • “PE firms are not built to nurture companies. They’re built to extract value.” (Host, [35:14])
• On Lessons Learned
  • “Build for the long haul. Build like Nick and John did.” (Host, [41:39])

Important Timestamps

• 00:08 – Introduction to the founders and company DNA
• 04:17 – Host’s personal anecdote with Nick
• 09:42 – “Partner for success” and the power of training
• 15:31 – Sale to Incline Equity Partners (PE firm)
• 20:34 – Explanation: What is a private equity firm?
• 22:48 – The leveraged buyout (LBO) strategy
• 24:02 – Heavy debt and the shift in philosophy
• 27:41 – The danger of overwhelming debt
• 30:41 – CEO steps down, bankruptcy follows
• 32:51 – Asset sale to Aramsco; fallout and losers
• 35:14 – PE’s real nature and mission
• 36:45 – Crucial advice to business owners
• 38:05 – Advice for employees, vendors, and customers
• 39:04 – Protecting the founders’ legacy and responsibility
• 41:39 – Final advice: “Build for the long haul.”

Key Takeaways

• Legacy companies built on relationships and trust can be destroyed rapidly by misaligned ownership and high-risk, profit-driven financial engineering.
• Understanding how private equity operates is crucial for any business owner seeking to sell—especially if the company’s long-term vision or culture is important.
• If you’re connected to a business that’s been sold, stay alert for rapid changes or red flags—your livelihood could depend on it.
• Nick and John’s vision of “partners for success” left a lasting positive impact that endures, even if the company’s name does not.