Find the Bottleneck, Ignore the Rest
Jimmy Watson gave me a reading assignment I didn't know I needed. In our pre-call, he mentioned
M&A
305 posts
Arrogant NDA
"Please return the signed NDA (no revisions please - we're juggling numerous potential investors and need to be
GP recap to >50% control
A GP (searcher/sponsor) can recap their way to majority control (>50%) of a successful deal, even with $0
Independent sponsor incentives are cleaner
Independent sponsor incentives are cleaner, more sustainable, and more aligned than those of traditional searchers. A traditional search deal that&
Realtors in LMM PE
Realtors would be great in lower-middle market PE. I'm surprised I don't see more (any)
3 X-Factors of a Deal
The 3 x-factors that get me especially excited about an investment: (1) Low entry. It's hard to
Beware of deal fog
Beware of deal fog: Stay vigilant during the DD. The M&A process is designed to excite you and
Deal-by-deal rollups
There's been an uptick in the # of rollups pitched over the last 6 months. However, the deal-by-
Cost of a full deal team
$1.0-1.5m per year is the cost of a fully staffed deal team at a PE fund, excluding
New vertical: understand customers
When researching new verticals/industries, it's critical to understand the customer. • How does the customer make the buying
The importance of large-caps
"99% of US businesses employ 50% of the employees and generate 35% of the revenue." This line was
How to structure carry
How to structure carried interest as an independent sponsor: Standard PE is 20% after a pref (8-10%). Most sponsors
Minority deals as an independent sponsor
Minority deals as an independent sponsors: where you acquire <50% of the company, leaving the founder with majority ownership.
Differentiate w/ 1yo baby at meetings
Differentiate by bringing your 1yo baby to meetings with sellers. "It's very disarming, and it immediately makes
Defining an industry's inning
PE investors like to acquire companies in industries that are fragmented, growing, and not yet saturated with capital. But how
Acquire HoldCo Infrastructure
Large-cap PE funds build massive centralized "ops" teams to support the portfolio. Independent sponsors can't
Don't build for your acquirer
Some PE acquirers specialize on knowing their exit: "We know who will acquire this company, so let's
Seller's rollover equity, what's the sweetspot
The amount of rollover equity from the seller affects the pre-closing dynamics, transition risks, and continuity of operations. Almost
First-time sponsor's experiences from the field
First-time sponsor's experiences from the field: "I spent a lot of time on a deal early
Cold calling for deal sourcing
Cold phone outreach = Differentiated deal sourcing Nobody does it = Opportunity Colin Stuart started his career in an outbound call center,
Finder's fee, what's market
Finder's fee ($), what's market: I've recently seen three versions: (1) Lehman formula is the
Singular KPIs
Tires per hour 🛞 That was the crucial KPI for Chandos Mahon at his waste management company. He attributes half of
Avoid 1st deal in rollup to be premium valuation
I don't love when the first LOI in a rollup thesis is at a premium valuation. "We&
Buy & Build = Faster exits?
Buy & Build = Faster exits? You might think a consolidation will require more time due to all the M&
