CEO should earn more than the Independent Sponsor
Sir Alex Ferguson, former manager of Manchester United, had a clause inserted into his contract that stipulated no player should
M&A
242 posts
Please roll the closing fee
Most independent sponsors (GPs) roll their entire closing fee (1-2% of EV) into the deal, and often they'll
"Bumping" into 50% of deals
After 12 platforms and 4 exits I was surprised to hear that Rick Apple just “bumps into” half of their
The Rise of Family Offices
The rise of Family Offices is an enabler of entrepreneurial private equity: (i) Compared to institutionals, FOs have flexible mandates
Monster IS deal raised €350-400m of debt & equity
Independent sponsor deals aren't confined to the lower-middle market and <$10m EBITDA. This monster deal raised €350-400m
Advisory board for accountability
An advisory board is a great accountability partner. Advisors don’t need a formal arrangement or hefty compensation. Weekly emails,
VC + LBO = IS deal
Zack Miller and his high school friend Johnny Lieberman combined their distinct backgrounds to launch Worklyn Partners, a dual platform
Initial trajectory define the investment
The first 6-18 months often define the trajectory of a PE investment. If successful, with stability & retention, the initial
15-year time horizons
For a PE investment, you need a positive 15-year time horizon for the target company: 0-5: You own it. 5-10:
Searcher recapping SBA7a loan
"My capital structure is starting to get pretty complicated…" - Searcher after 3 years and 2 add-on acquisitions
Independent Sponsor Bingo
Independent sponsors often pitch themselves as “different." But their talking points are often the same. If you're
"Very bullish" on US equities
Why I am "very bullish" on US equities: • The new tax bill incentivizes capex spend by accelerating depreciation
Seller notes can be renegotiated, after the fact
Seller notes can be renegotiated - after the fact. Last year we had a $2.2m outstanding seller note that
Ep24: 24 Add-Ons in 24 Months
Episode 24: 24 Add-Ons in 24 Months Clever way to start: Luis Reyes hired an analyst to research industries and
"I would never invest in a friend"
“I would never invest in a friend” must be one of the dumbest things I have ever heard. I get
Earnout Poetry
Earn-outs can be contingent on improved performance (growth) or stable performance (don’t decline). Earn-outs can be based on overall
When independent sponsors break up 💔
The flexibility of the deal-by-deal model also manifests in break-ups. 💔 Traditional partnerships tie up equity, control, roles, and obligations in
SBICs & Warrants
SBICs & Warrants: SBICs usually invest 10-25% of their funds as equity alongside their core product which is mezz debt,
The cost of capital placement agents
Placement agents help independent sponsors raise debt and/or equity, but at a cost. If the deal is cheap, it
When to hire a capital placement agent
The 3 situations where independent sponsors should consider engaging a capital placement agent to help with the fundraise: #1: First
Estimated deal expenses for independent sponsors
Deal expenses: • Legal: $100-300k • QoE: $20-70k • Misc.: <$100k • R&W insurance: ~1% (uncommon) • Closing fee: 1-2% of EV
Underwriting key people risk
Key people risk is especially difficult to underwrite if: (i) The founder controls the revenue (relationship-based, project-oriented, etc.). (ii) The
"Strategic generosity" to build trust
Examples of strategic generosity as a way to build long-term value & trust: • Yield on GP terms if capital partner
Bankers as Free Advisors
Industry-leading investment bankers can be your best advisor - for free. Ping them once you're under LOI. Bankers
