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Private Equity

Green, Yellow, Red: What Signals Investors

What’s not often discussed is the soft side of a deal - the people, their behavior, and what it signals to potential investors. It’s impossible to do a good deal with bad people, which means the personalities, proclivities, and oddities play a large part in dealmaking. 

We’re fortunate to see a lot of opportunities, over 2500 just last year, and are constantly in conversation with executives. This affords us the ability to recognize patterns and develop specific criteria of behavior that provide insights into an owner’s motivations, and subsequent corporate culture. Here are some of the signals and how we interpret them. 

Compounding Knowledge and Returns: 2016 Year in Review

Read about the lessons we learned at throughout 2016 as we reviewed acquisition opportunities in the private markets, continued operating and investing in our portfolio companies, and tried not to screw up too often. 

Why We Love to Buy Boring Businesses

We’ve had the opportunity to evaluate and invest in all types of companies, including some “sexy” businesses — ones with high growth, brag-worthy products, or screw-the-rules teams with an average age of 25. While the “sexy” factor is never why we choose to invest, it can certainly be exciting. But the other end of the spectrum also attracts us; it contains what we call “boring businesses,” the almost invisible layer of the economy that hums under the radar, quietly supplying you with what you want and need.

Welcoming Shane Parrish

We’re excited to welcome Shane Parrish to the team. Shane is coming on as the Chief Operating Officer and Chief Technology Officer. He’ll be working with portfolio company leaders on ways to optimize and use technology more effectively, to improve our business processes, and to make acquisitions. 

4 Frustrating Initial Approaches of Investment Bankers

We’ve worked with investment bankers that, to put it frankly, have frustrated us to the point that we don’t want to pursue an opportunity — even a seemingly perfect fit — because the idea of continuing the process with them would require too much effort, patience, or both. Here are four approaches we’ve categorized from these frustrating encounters that we would like to offer up for consideration.

Questions Investors Ask on a Management Call — and Conclusions They Draw

When we are interested in an opportunity, we build two lists of questions: one data-specific list for written response and one with largely open-ended questions for discussion on a management call. We actively avoid processes in which we are not permitted to ask questions before submitting an indication of interest.

A good financial package provides the facts, a great CIM provides the story, but our questions for intermediaries and sellers are not just trying to gather additional details. Here’s what we’re trying to learn, but not explicitly asking, in those question sets:

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11 Reflections on M&A in 2015

As 2015 came to a close, we at had a chance to take a breath and think about what we observed, and learned in the past year. These reflections were generated from reviewing over 2000 investment opportunities, of which we deep-dived on 397, leading to 17 indications of interest, 5 letters of intent, and three acquisitions. We hope these thoughts prove useful in adjusting strategies and expectations in the new year. 

From 2000+ to 3: Our 2015 Investment Recap is entering the new year wiser, stronger and a great deal larger. In the course of making 3 late stage acquisitions and 27 early stage investments, the future of, and who will contribute to it, became a bit more clear in 2015.

The Small Business Crunch

The next 15 years will be the largest intergenerational transfer of private businesses in the history of the world. 2012 marked the first year that “Baby Boomer retirement” was the primary driver of business sales in the private lower middle market. Researchers have estimated that more than $10 trillion in business assets may be transferred by 2025.

We are in the beginning of a transition within the American economy where more than half of all businesses with employees will need to sell, restructure, or close their doors. The numbers are finite and inescapable. Mortality is a real thing. Liquidity issues and estate taxes don’t take care of themselves. Without a plan, the likely result is a legacy of chaos and confusion.

How I Evaluate An Investment

Over the past ten years, I’ve participated in both the public and private markets, investing in over 50 late-stage private companies, early-stage startups, and pieces of real estate. This is how I’ve learned to evaluate investments.