This episode of The Private Equity Experience dives deep into the crucial and often dramatic world of business valuation in private equity deals. Hosts Emily Sander, Rory Liebhart, and Ed Barton explore the complexities, emotions, and strategic considerations determining a company's worth during the "buy phase." They discuss key valuation methodologies (revenue multiples and EBITDA multiples), the importance of revenue recognition, and how "corporate hygiene" (organized and accurate financial records) directly impacts perceived risk and, ultimately, the final valuation. The hosts emphasize that getting the valuation right is paramount, as it sets the tone for the entire private equity hold period and impacts the relationship between the seller and the PE firm. They use the analogy of selling a house to show how expectations and values can differ. The episode explains the importance of understanding your audience in pitches.

Timestamps:

00:00 Introduction: The High-Stakes Deal
00:16 Structuring the Deal: Key Considerations
00:41 Valuation Methodologies and Emotional Factors
02:33 Real Estate Analogy: Setting Expectations
03:34 Investment Bankers: Bridging Perception and Reality
04:50 Revenue Recognition: A Critical Component
07:27 EBITDA Explained: Understanding the Basics
08:34 Adjusted EBITDA: The Art of Creativity
14:43 Choosing the Right Investment Banker
21:45 Corporate Hygiene: Preparing for Valuation
26:27 The Importance of Accurate Valuation
28:43 Conclusion: Setting the Table Right

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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In this informative episode of the Private Equity Experience podcast, hosts Emily Sander, Rory Liebhart, and Ed Barton break down the complex world of private equity, venture capital, and series funding. Learn the differences between VC and PE firms and how to navigate the ecosystem to secure funding for your startup. Discover the importance of assembling a strong team of advisors and resources, including investment banks, financial advisors, and startup accelerators like Y Combinator and Startup Grind. Get insights on preparing for private equity investment and learn about essential books like "On Ramp to Exit" that can help you on your journey. Tune in to this episode to gain a deeper understanding of the private equity landscape and take the first step towards securing funding for your business.

Timestamps:
00:00 Introduction and Acronyms Galore
00:52 Understanding Private Equity and Venture Capital
01:33 Differences in Investment Strategies
02:47 Success Rates and Baseball Analogies
05:23 Fund Structures and LP Investors
07:40 Venture Capital vs Private Equity: Key Differences
09:50 Series A, B, and C Explained
11:13 The Transition from VC to PE
13:54 Bootstrapping vs Seeking VC Funding
15:57 Optimism in Startups vs Financial Plays in PE
16:27 Different Perspectives in Early-Stage Companies
17:00 Final Thoughts on Investment Strategies
18:00 The Importance of Consistency in Performance
18:21 Understanding Private Equity Hit Rates
18:36 The Concept of Zombie Companies
19:20 Private Equity vs. Venture Capital Strategies
23:53 Navigating Board Seats and Ownership
30:47 Advice for Founders Seeking Investment

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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Description: Delaware has been the go-to state for incorporating businesses due to its business-friendly environment, strong case law, and lack of business taxes.

The recent court case involving Elon Musk's compensation package has raised questions about Delaware's predictability and has prompted some companies to consider alternative states like Texas, Wyoming, and Nevada.

While Delaware will likely remain a popular choice for incorporation, especially for larger companies, the changing landscape prompts companies to consider their options and consult with legal and financial advisors.

Businesses must focus on their core operations while being aware of the legal and financial implications of their structure and location choices.

00:00 Introduction and New Year Greetings
00:50 Reflecting on 2024 Achievements
01:06 Trending Topic: Delaware's Business Appeal
01:25 Elon Musk's Compensation Controversy
02:43 Why Delaware? Historical Context
05:49 Recent Legal Shifts in Delaware
07:02 Emerging Alternatives: Texas, Wyoming, Nevada
12:59 Legal Nuances and Case Law
19:51 Practical Implications for Businesses
27:07 Future Outlook and Strategic Considerations
28:58 Advice for Founders and Business Owners
33:19 Conclusion and Final Thoughts

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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In this episode of the Private Equity Experience podcast, Ed and Rory dive into due diligence, a crucial step in buying or selling a business. They explain what due diligence is, how it works, and why it's essential for determining a company's valuation. The hosts also discuss the importance of working with experienced professionals, such as investment banks and financial advisors, to navigate the due diligence process and ensure a successful transaction. Learn the importance of due diligence in buying or selling a business and how to navigate the process with experienced professionals. Get tips and resources for finding reputable investment banks and financial advisors.

Show Notes:

• What is due diligence, and how does it fit into buying or selling a business?
• The importance of due diligence in determining a company's valuation
• How to conduct due diligence on potential partners or buyers
• The role of investment banks and financial advisors in the due diligence process
• Tips for working with experienced professionals to navigate the due diligence process
• Resources for finding reputable investment banks and financial advisors

01:14 Understanding the Due Diligence Process
07:14 Costs and Challenges of Due Diligence
09:08 Green Flags and Red Flags
22:34 Common Pitfalls and How to Avoid Them
28:02 Preparing for Due Diligence

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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The Private Equity Experience podcast discusses the buy phase of private equity, focusing on the preparation required for business owners to sell their companies. The hosts, Ed Barton, Emily Sander, and Rory Liebhart, emphasize the importance of assessing one's personal and business situation, identifying motivations for selling, and assembling a team of experts, including investment banks and wealth advisors. They also stress the need for corporate hygiene, including getting financial records in order and addressing regulatory gaps. The hosts encourage listeners to ask themselves "why" and "what" questions, know their goals and motivations, and proactively prepare for the sale process.

Timestamps:

00:00 Introduction to the Private Equity Experience Podcast
00:34 Hosts' Personal Anecdotes and Fitness Talk
01:37 Preparing to Sell Your Business
03:27 Understanding Your Motivations and Goals
05:38 The Role of Investment Bankers
10:50 Assembling Your Advisory Team
19:53 Crafting Your Business Narrative
23:31 The Importance of Founder Self-Awareness
27:05 Managing Team Dynamics During Transition
33:40 Preparing for Due Diligence
34:22 Interviewing Investment Banks
36:09 Conclusion and Key Takeaways

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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In this episode of PEX, the hosts explore the private equity selling process, comparing it to a dating game to illustrate the stages from initial teasers to detailed due diligence. They cover critical concepts like Confidential Information Memorandums (CIMs), virtual data rooms, and essential legal mechanisms such as drag and tag rights. Additionally, the discussion highlights the challenges founders face when adapting to new roles post-sale and offers practical insights into managing these transitions. Overall, the episode provides valuable guidance for navigating the intersection of entrepreneurship and private equity.

00:34 Host Banter

01:17 Reasons Founders Consider Selling

05:23 Understanding Drag and Tag Rights

12:47 Evaluating Private Equity Partnerships

17:52 Understanding the SIM Process

19:12 The Role of the CEO in Initial Meetings

20:10 Virtual Data Room and CFO Involvement

23:02 Navigating Private Equity Relationships

26:24 Challenges for Founders Post-Sale

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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In this episode, hosts Ed Barton, Rory Liebhart, and Emily Sander dive into the world of management fees in private equity. They discuss how PE firms make money, what founders and management teams need to know, and the importance of understanding management fees in deal negotiations.

Key Takeaways:

• Management fees are a crucial aspect of private equity investing, and understanding them is essential for founders and management teams.
• PE firms use various fee structures, including management fees, carried interest, and carried capital.
• Management fees can be a significant source of revenue for PE firms, but they can also be a major source of stress for founders and management teams.
• Understanding management fees is critical for navigating deal negotiations and ensuring a successful exit.

Actionable Tips:

• Founders and management teams should understand the management fee structure used by their PE firm.
• PE firms should be transparent about their management fee structures to ensure a smooth deal negotiation process.
• Understanding management fees is essential for navigating the complexities of private equity investing.

Timestamps:
00:34 Diving into Management Fees
02:56 Impact of COVID on Private Equity Funds
10:22 Current Market Challenges and Strategies
24:05 Navigating PE Firm Funding Challenges
25:48 Understanding Carry and Management Fees
29:36 Strategic Advice for PE Firms
34:35 Impact of Debt and Interest Rates

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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Ed Barton and Rory Liebhart join Emily Sander to discuss the implications of President Trump's election for a second term on the private equity industry. The hosts discuss historic impacts, potential changes in legislation, shifting demographics, and the potential for a US-China conflict.

Key Points:

The show's hosts, Emily Sander, Ed Barton, and Rory Liebhart, reflect on the implications of Trump's re-election and the potential impact on the private equity industry and the broader economy.

They discuss the importance of demographics, cultural shifts, and geopolitical events in shaping the economic landscape.

Topics covered include:

-The 2017 Tax Cuts and Jobs Act, which reduced corporate tax rates, increased standard deductions, and lowered capital gains tax rates, is set to expire in 2025.

- Lower corporate tax rates provide more money for reinvestment or distribution to investors.
Increased standard deductions (for individuals) and lower capital gains tax rates make investing more attractive.

Trump's victory was more sweeping than anticipated, giving him control of both houses of Congress, which could impact the renewal of certain tax provisions.

- Interest rates have decreased, allowing private equity firms to leverage more debt for their investments.

- Baby Boomers are aging out of the workforce, and there may be demographic and cultural shifts that impact the economy and politics.

- Dark Horses (Surprising but Possible Scenarios):

Rory: A Trump administration that fully delivers on its pro-capitalist platform.
Ed: Escalation of conflict between the U.S. and China over Taiwan or North Korea, potentially dragging China into a conflict with the U.S.

Who We Are

If we haven’t met before—Hi! We’re a team of professionals who’ve worked together at multiple companies, seen private equity from all sides, and are here to share what we’ve learned to help you succeed. Ed Barton brings decades of tax and financial strategy experience; Rory Liebhart is a finance and M&A pro with a track record of high-growth exits; and Emily Sander is a former Chief of Staff, multi-time author, podcast host, and founder of Next Level Coaching, helping leaders and organizations accelerate their growth.

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