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.

Connect with Ed

Connect with Emily

Connect with Rory