Best of LinkedIn: Private Equity Insights CW 26/ 27

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00:00:02: Based on the most relevant LinkedIn posts about private equity in CW-twenty six and twenty seven, Fretnis supports PE backed manufacturers with a market intelligence needed to unlock revenue from idle production capacity.

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00:00:23: Super Return Asia Twenty Twenty Six.

00:00:34: Super Return CFO COO.

00:00:39: So we've got a lot of ground to cover today.

00:00:41: We

00:00:41: really do!

00:00:41: Welcome to the deep dive.

00:00:42: everyone, Today

00:00:49: Right, specifically calendar weeks twenty-six and twenty seven.

00:00:52: Exactly!

00:00:52: And our mission today is really to cut through all the noise.

00:00:55: we wanted to distill the actual operational leadership and structural shifts that are dictating PE returns right now in the second half of twenty-twenty six.

00:01:03: Yeah because if you're navigating a strategy M&A or investment space Today The game has fundamentally changed.

00:01:09: You can't rely on old playbooks anymore.

00:01:12: No...you really cant.

00:01:13: Which brings us into first massive theme.

00:01:15: We pulled from sources.

00:01:17: Operational value creation is now the main return engine.

00:01:20: The era of easy money is completely over.

00:01:23: Oh, totally dead!

00:01:25: You used to be able just buy a company right away with multiple expansion.

00:01:29: do some basic financial engineering and exit looking like a genius?

00:01:33: Right But those days are gone.

00:01:35: And what's wild is how AI has actually accelerated this shift?

00:01:38: I saw a great post from Aaron G about this, he was talking about the commoditization of AI in diligence.

00:01:44: Yes!

00:01:44: I read that one too.

00:01:45: He was at a gathering with investors from Apollo KKR CVC The real heavyweights

00:01:50: Exactly and the consensus there Was that large language models have just collapsed.

00:01:54: the cost Of investment analysis.

00:01:56: It so true!

00:01:57: I mean LLMs make it So cheap and fast to reach A consensus view on any given asset.

00:02:02: Speed doesn't buy an edge anymore.

00:02:04: Right, if everybody can process a data room in five seconds diligence is effectively commoditized.

00:02:09: Yeah you don't get a prize for being the first to figure out the basic math.

00:02:12: Exactly.

00:02:13: it's like If AI gives every single PE firm The exact same high-powered GPS?

00:02:20: The map isn't a secret any more!The only way you win the race Is by having faster car and much better driver.

00:02:26: That is great analogy.

00:02:28: And Francisco Lara posted something that perfectly captures building that faster car.

00:02:33: He called it the H-II, twenty-twenty six gut check.

00:02:37: Oh I saw where boards are just totally over theoretical stuff

00:02:41: Exactly!

00:02:41: Boards aren't looking at shiny strategy decks anymore.

00:02:44: The standard hundred day plans and quick wins.

00:02:46: That's all old news.

00:02:48: Laura said they want to see actual EBITDA growth.

00:02:50: They weren't pricing initiatives completely finalized.

00:02:53: Right you don't get credit for having a plan You're getting credit with the delta of an actual change.

00:02:56: Yeah

00:02:56: if the needle didn't move your plan doesn't matter And Greg Head backed this up too.

00:03:00: he emphasized E just doesn't fund vague growth stories anymore.

00:03:04: No, they want concrete math like show me the three year revenue sick yards?

00:03:08: Show.

00:03:11: And Greg shared this brilliant example that really stuck with me.

00:03:14: A fifty million dollar business, That was running on six different CRMs.

00:03:19: Six?

00:03:19: Oh man I mean...I guess it happens with bold-on acquisitions but still Right!

00:03:23: It's a mess.

00:03:24: But he pointed out that simply consolidating those six CRMs into one would save them a hundred eighty thousand dollars annually.

00:03:31: Wow and more importantly..it could cut the sales cycle by eleven days.

00:03:37: That is kind of gritty unglamorous operational fix that actually drives value now.

00:03:42: So, okay here's my question for you though if literally everyone in the industry knows that operational value creation is the only way forward why is there still such a massive execution gap?

00:03:52: Well

00:03:53: that brings us right back to your car analogy.

00:03:55: it's all about the driver.

00:03:56: talent and leadership are moving to the absolute front of the value agenda.

00:04:00: If operations or the engine human workforce as the transmission

00:04:03: Okay, so if the transmission slips all that horsepower means nothing.

00:04:06: Exactly and there is a huge workforce effectiveness gap right now.

00:04:10: Wayne Marhelsky highlighted this using some really stark FTI consulting data.

00:04:14: What did they say?

00:04:15: It measured work force effectiveness Which they define as the capacity of a portfolio company to actually absorb initiative load.

00:04:22: Basically, how much change can the team handle before they break?

00:04:25: Right.

00:04:26: Change fatigue is real.

00:04:27: Oh totally.

00:04:28: and FTI found that fifty three percent of high-performing companies exceed expectations on this metric But for everyone else it's just twenty seven percent.

00:04:37: That is a massive separator.

00:04:38: It's the ultimate separator.

00:04:40: but The irony here in Paul Press pointed This out Is that PE firms know exactly what makes A great value creation professional

00:04:47: right.

00:04:47: They don't hire for

00:04:48: Exactly.

00:04:49: Press studied sixty-six liters and found that PE firms don't actually test for those crucial traits during their hiring process, they still just hire on instinct

00:04:57: Which is wild when you consider the stakes at the C-suite level.

00:05:01: Like Dario Furman noted a CFO making three hundred to four hundred K a year.

00:05:05: They don't quit over a minor money dispute

00:05:08: No!

00:05:08: They quit when they lose faith in leadership Right...they

00:05:10: leave when CEO stops listening.

00:05:13: And on the tech side, David Mackey pointed out that for a PE-backed CTO being fluent in finance is just nice to have.

00:05:21: Yeah I loved his take on this.

00:05:23: What matters isn't if the CTO can build perfect financial model.

00:05:27: what matters is execution.

00:05:29: instinct

00:05:29: Exactly!

00:05:30: The ability.

00:05:31: drop into broken engineering org diagnose cultural issues week Build trust and actually ship product.

00:05:38: But getting that top tier talent is getting harder because the operators are waking up to their risks.

00:05:44: Tracy Abbots shared a wild story about this.

00:05:46: Oh, The CEO offer she turned down?

00:05:48: Yeah!

00:05:49: It was a CEO role with a five hundred thousand dollar pay-to play requirement

00:05:53: Basically asking her to buy your own job Right.

00:05:55: She rightly pointed out if a company needs you cash investment before they even get leadership That asymmetric risk is massive red flag Totally...the

00:06:03: alignment has be there but apparently it's not.

00:06:06: Ted Billy's revealed this huge, forty-five point gap in how Portco CEOs rate their own leadership teams versus how the PE backers rate those exact same teams.

00:06:16: A forty five point gap and expectations.

00:06:18: that is just brutal

00:06:19: it really isn't.

00:06:20: I want to pushback on this a bit or at least look at The Operating Partner dynamic because they have Cobra posted about

00:06:25: oh yeah the structural challenges of that

00:06:26: role right operating partners are basically expected to parachute in And deliver these cto level massive transformations.

00:06:34: But they have no CEO sponsorship, No direct mandate and no dedicated teams.

00:06:40: It's a recipe for burnout.

00:06:42: So how do they realistically bridge?

00:06:45: A forty five point expectation gap with one hand tied behind their back?

00:06:49: Well

00:06:49: it's incredibly tough.

00:06:50: They have to rely entirely on influence rather than authority.

00:06:54: Which is why hiring the right personality so critical.

00:06:57: but let's say they do figure out.

00:06:58: Let's say you fix the operations You align the team.

00:07:00: The company is humming.

00:07:02: okay

00:07:03: You still run into the biggest bottleneck in the market right now.

00:07:06: Liquidity engineering, you still have to sell business.

00:07:09: Right and liquidity engineering is moving totally mainstream because of the current drought.

00:07:14: Andrea Carnelli Dompe shared some JP Morgan data that it's honestly a little scary for LPs.

00:07:20: The distribution numbers?

00:07:21: Yeah distributions are stuck at fifteen percent which is way below historical norms.

00:07:25: Meanwhile capital calls were sitting up at thirty five percent.

00:07:28: So investors having to pump more cash.

00:07:29: but they aren't getting nearly enough cash back

00:07:32: Exactly, and it's forcing some extreme measures.

00:07:35: Leila Kunimoto noted that firms like Partners Group are actually capping redemptions in their mature funds.

00:07:40: Wow!

00:07:41: And Snorkelford Hansen from Pitch Book confirmed the macro picture.

00:07:45: Dealmaking in Q-to-twenty twenty six dropped to its lowest point since Q-two twenty twenty four.

00:07:50: The exits just aren't happening organically.

00:07:53: So Since exits are stalled we're seeing this massive boom in continuation vehicles or CVs.

00:07:59: Oh, CVS is everywhere right now?

00:08:01: Lima came pointed out that GP led secondary volume just hit a hundred and fifteen billion dollars.

00:08:05: That's fourteen percent of all exits.

00:08:07: now,

00:08:08: And for anyone listening who isn't deep in the weeds on this Maxwell Salazar described CVs In The Most Vivid Way.

00:08:14: he called it selling your house to yourself.

00:08:16: It's the perfect description.

00:08:17: The firm sets the price, moves the asset into a new fund keeps it and just keeps collecting fees for few more

00:08:23: years.".

00:08:23: Okay wait let me push back here.

00:08:25: yeah if success means you as an operator build absolute money printer of a business but your reward is that the GP just rolls your company into a continuation vehicle and your exit payday gets pushed back another three to five years as sales are noted?

00:08:39: Yeah aren't we incentivizing operators?

00:08:43: That is a very real danger.

00:08:45: You risk burning out your talent, and it's not just the people who suffer—it's the companies!

00:08:50: Philip Kraft warned about this concept called Operating Model Drift.

00:08:54: Operating model drift?

00:08:55: What does that mean in practice?

00:08:57: Well because these continuation vehicles are pushing the average hold period past six-and-a-half years.

00:09:03: now... ...the company has to suffer from accumulated complexity.

00:09:06: Ahhhh

00:09:07: right… More years more technical debt, more fragmented management attention Exactly….

00:09:12: It gets bloated Which is why top performers are entirely changing how they look at exits, which brings us to the next theme.

00:09:20: Exit readiness is turning into an always-on discipline.

00:09:23: Right because traditional windows or slow and CVs complicate the timelines.

00:09:27: You can't just wait for the market to improve anymore.

00:09:30: No you have to internalize exit readiness as a daily habit.

00:09:35: Alexander Mariani made a great point about this.

00:09:37: She said that execution risk not asset quality drives exit outcomes today.

00:09:44: It's all about preparation, not market timing

00:09:46: exactly And Andrea Gorzoni referenced an EY exit readiness study showing that eighty-six percent of GPs see improved valuations when they start preparation early.

00:09:56: Eighty six percent is huge, and Bill Mastin chaired his own experience with this leading a company through an eighteen month PE exit process.

00:10:03: He said you have to realize You aren't selling the business you have today?

00:10:07: You are selling The Tomorrow Business.

00:10:08: I

00:10:09: love that phrasing!

00:10:09: The tomorrow business.

00:10:10: Right...you're demonstrating what the Company can become under their next owner But proving that is getting intensely difficult.

00:10:16: Sharna Barrett pointed out that exit prep now involves commercial redesigns, carve outs AI optimization all way before the transaction phase even starts

00:10:24: and providing the evidence for All.

00:10:26: That Is a massive challenge.

00:10:28: Arcus Jacobson added that especially in the Nordics The toughest part is substantiating your value creation with diligence ready financial evidence.

00:10:37: You have to clearly link every single initiative To EBITDA.

00:10:41: It's

00:10:41: huge mindset shift.

00:10:43: Like Cord Stonkey from EY observed its super return.

00:10:46: The question isn't when should we exit anymore?

00:10:50: It's if an opportunity arises tomorrow, are we truly ready or

00:10:54: mathematically ready exactly?

00:10:55: but

00:10:55: I have to ask how does a company balance that radical prioritization for future buyer without completely neglecting their current customers today?

00:11:04: well That's the tightrope Isn't it?

00:11:06: The most successful firms are bridging that gap by targeting specific sectors where new technology inherently improves margins for both the current customer and the Fetcher buyer.

00:11:15: Which brings us to the final cluster of insights, evolving markets AI realities and sector led deals.

00:11:21: Yeah let's talk about AI in the P&L because Nick Bradley had a great warning about this.

00:11:25: yeah that having AI on a pitch deck is very different from having AI in a pnl

00:11:29: completely different.

00:11:31: Graham Cox noted raised capital precisely because PE firms need actual AI capability now, not just slide decks from consultants but real working tech.

00:11:43: Right they needed tangible margin expansion and looking ahead Asif Raman had this mind-blowing prediction.

00:11:49: he said that by twenty thirty a top portco might have exactly two human employees...and two thousand bots.

00:11:56: It sounds like sci fi But it's where the math leads.

00:11:59: He even says its going to require totally new job role The bot whisperer.

00:12:03: I

00:12:03: mean, if you have two thousand autonomous agents running the operation somebody has to govern them.

00:12:07: it completely hollows out middle management.

00:12:08: It's fascinating but while we wait for the bot whispers to take over P is aggressively rolling up very human-centric sectors right now like CPAs.

00:12:17: Oh!

00:12:17: The accounting space is seeing a massive land grab.

00:12:20: Hibbet Imran highlighted that PE has poured two billion dollars into CPA.

00:12:23: firms recently buy and flip

00:12:25: Like New Mountain selling Citroen Cooperman to Blackstone

00:12:28: Exactly, and we're seeing it in facility management too.

00:12:31: Sebastian Esser detailed how PHM Group grew ten X to a one point three seven billion Euro platform by doing over two hundred Facility Management buy-and-build deals.

00:12:43: Okay but hold on I need to connect this what we talked about earlier.

00:12:45: We just established that PE needs deep long-term operational value.

00:12:50: Yeah, so don't these rapid CPA and facility flip strategies totally contradict that?

00:12:57: You're just taking a human relationship business and turning it into a spreadsheet optimization exercise.

00:13:02: Well It works in those fragmented services sectors because the individual local units Don't really have to integrate deeply to generate cash.

00:13:10: Oh, okay.

00:13:10: But contrast that with software.

00:13:12: Nils Suisen noted that software buyouts represent twenty percent of the US market but exits there have dropped significantly.

00:13:19: because if you roll up five software companies to actually integrate the code

00:13:22: exactly The technical debt crushes You.

00:13:24: If we don't Actually do the hard operational integration?

00:13:27: You can't just staple them together like you Can With local plumbing Companies or CPAs.

00:13:30: That Makes total sense.

00:13:32: Before we wrap up, We have to touch on the massive structural update out of India.

00:13:36: Krishna Tiberall shared this one.

00:13:37: Oh!

00:13:37: This is huge.

00:13:38: Yeah On February thirteenth twenty-twenty six The Reserve Bank Of India Quietly Legalized Leveraged Buyouts

00:13:45: Which Is Going To Change Global Capital Flows Entirely Seriously.

00:13:50: They're Allowing Banks To Lend Up To Seventy Five Percent Of A Deals Value.

00:13:53: Now This Just Opened Up A Four Trillion Dollar Economy To Classic Debt Fueled PE Mechanics For The Very First Time.

00:14:01: The scale of that opportunity is just staggering.

00:14:04: But you know, listening to all these trends from India opening up to the AI bot whispers through this permanent continuation vehicles it leaves me with one really provocative thought to mull over.

00:14:14: What's that?

00:14:14: Well if hold costs and CVs are making holding periods virtually permanent.

00:14:19: Yeah And we're moving toward a future where AI bots run daily operations Are actually witnessing slow death of traditional ten year PE fund cycle.

00:14:28: Wow Think about If the end game is just compounding AI-driven platforms that never actually exit, The entire incentive structure of private equity... ...the way carry is calculated.

00:14:41: The way LPs get paid.

00:14:43: All it will have to be completely rewritten.

00:14:45: That's a massive paradigm shift.

00:14:47: to think about An endless hold period driven by A.I.

00:14:50: We'll leave you with that to Chew On!

00:14:59: Thanks so much for listening.

00:15:00: Thank you and don't forget to subscribe.