Best of LinkedIn: Private Equity Insights CW 28/ 29

00:00:00: Provided by Thomas Allgeier and Frennus, based on the most relevant LinkedIn post about private equity insights in calendar weeks twenty-eight and twenty nine.

00:00:08: Frenness supports PE backed manufacturers with the market intelligence needed to unlock revenue from idle production capacity.

00:00:15: You can find more info in the description.

00:00:17: So do kick things off for this deep dive.

00:00:20: We're basically unpacking the most critical Private Equity Insights that are you know circulating among deal makers right now.

00:00:27: Right, and there is a lot to unpack.

00:00:29: I mean we're gonna get into the paradox of this really bifurcated M&A market.

00:00:33: how AI Is fundamentally sorting targets in talent?

00:00:37: And just the brutal new realities of value creation

00:00:40: that's wildly shifting landscape right now.

00:00:41: it

00:00:42: Really is.

00:00:42: i mean you start with us.

00:00:43: imagine paying two billion dollars for an accounting firm

00:00:47: Wow yeah

00:00:47: at like fifteen times earnings and doing This in an era where You know artificial intelligence is supposedly on the verge Of replacing accountants entirely

00:00:56: which sounds complete counterintuitive, right?

00:00:58: Exactly.

00:00:59: But that is exactly the multiple Blackstone paid when they acquired Citroen Cooperman and on the surface it feels I don't know almost reckless

00:01:08: Right.

00:01:08: but underneath that specific transaction there's this massive fundamental shift in how private capital is assessing risk.

00:01:15: today.

00:01:16: Yeah

00:01:16: And return

00:01:17: Exactly yeah.

00:01:18: i mean we are looking at a complete reevaluation of what constitutes a defensible mode

00:01:22: because The old ways aren't working.

00:01:24: no Not at all.

00:01:25: The traditional playbooks where you buy a software company, leverage the recurring revenue optimize the sales team and then exit in five years those are breaking down in real time.

00:01:35: Basically the overarching theme tying all of this together is just a crisis of predictability.

00:01:40: Yes, a total crisis of Predictability.

00:01:42: well

00:01:42: let's start right there With the macro data because if you look at the numbers coming out of the latest global deal flow reports They're just completely contradictory also.

00:01:51: so looking at the analysis shared by Stephen Bubish Global private equity deal value in the second quarter plummeted like twenty two point eight percent quarter over quarter

00:02:00: which is massive.

00:02:01: Yeah, it hit a two-year low of just under four hundred twenty billion dollars.

00:02:06: But and here's the crazy part at the exact same time The actual deal count went up to point two percent.

00:02:13: I see crossing what like five thousand six hundred deals.

00:02:15: yeah over five thousand Six hundred closed deals.

00:02:18: so value is way down volume

00:02:21: Right.

00:02:21: So the market is essentially split in two, right?

00:02:24: At the top end you've got these mega buyouts that typically inflate the total value numbers and those are just frozen

00:02:31: totally frozen

00:02:31: but down in the middle market.

00:02:33: I mean The engine is humming.

00:02:34: You have sponsors executing These smaller highly strategic add-on acquisitions

00:02:39: rather than betting the whole fund on a massive platform.

00:02:42: Exactly.

00:02:42: And you know the capital certainly hasn't dried up.

00:02:44: it's Just concentrating at the very top.

00:02:46: Oh absolutely Nicola Ebbmeyer shared some data showing the top ten fund raises in the first half of year just vacuumed up a hundred and twenty nine billion dollars.

00:02:55: That is wild!

00:02:56: I mean KKR closed your... So

00:02:57: if the debt markets are, you know largely functional right now The hesitation clearly isn't about financing.

00:03:04: No it's not money issue.

00:03:05: It boils down to underwriting confidence.

00:03:08: Right?

00:03:09: Hugh MacArthur shared this polling data from Bain And showed that eighty percent of industry expects deal activity basically flat, or maybe see only really modest growth in the second half of

00:03:25: ability to accurately model terminal value.

00:03:29: Especially

00:03:29: in tech, right?

00:03:30: I mean for two decades enterprise software was the golden goose.

00:03:33: you could project subscription revenues five years out with incredible accuracy.

00:03:38: Right?

00:03:38: it's basically a math equation

00:03:39: Exactly.

00:03:40: but now You go to build a discounted cash flow model today and The variables are just entirely unknown

00:03:45: because of AI.

00:03:47: If A new foundational AI Model can Just replicate a sauce products core feature over a single weekend.

00:03:53: then your terminal value in year five isn't a multiple of EBITDA, it might be zero.

00:03:58: Exactly!

00:04:00: It's like trying to underwrite a thirty-year mortgage on beachfront property.

00:04:04: Oh that is good way.

00:04:04: look at right?

00:04:05: Like its not just about the beautiful view today but understanding coastal erosion.

00:04:10: you don't know where sea level will go into five years.

00:04:14: You can trust foundation house

00:04:15: exactly.

00:04:17: And since you can't confidently underwrite tech growth right now, that mountain of dry powder has to find yield somewhere else.

00:04:25: Right it has to go somewhere.

00:04:27: so where is the confident money actually going?

00:04:29: Well we're seeing a massive structural rotation into alternative liquidity solutions.

00:04:34: All secondaries.

00:04:35: Yeah exactly Sid Jain recently highlighted just the absolute explosion in the secondaries market.

00:04:42: I mean, Ardeen just closed a thirty billion dollar secondary fund.

00:04:46: Thirty billion?

00:04:46: Just for secondaries!

00:04:47: Yeah which is largest on record.

00:04:49: Wow and you see that term GP-led continuation funds popping up everywhere In these reports.

00:04:55: Right they're making it like half of the market volume now.

00:04:57: So mechanically what's actually happening there to make them so attractive?

00:05:03: right

00:05:04: Think of it basically as a sponsor manufacturing their own liquidity.

00:05:08: Let's say a PE firm owns a phenomenal asset, right?

00:05:11: But the traditional exit routes like an IPO or a sale to a strategic buyer are clogged Or the pricing is just poor

00:05:19: which is happening a lot Right now.

00:05:21: exactly so instead of selling the company at a steep discount The general partner creates a brand new fund specifically for that one single asset.

00:05:31: Oh, I see!

00:05:31: Yeah they transfer the company into this new vehicle and then The existing LPs are given a choice

00:05:37: like cash out or roll over?

00:05:38: Exactly you can cash-out now take your returns Or roll your equity over in to the New Fund.

00:05:43: so

00:05:43: They basically buy the company from themselves right And they bring in secondary investors to supply the cash For the LPs who want to exit.

00:05:50: You got it.

00:05:51: They get to hold onto their best performers for another five years without penalizing the investors who actually need distributions today.

00:05:57: That perfectly solves the duration mismatch?

00:05:59: It does, and it is a direct response to a frozen M&A market

00:06:04: which brings us right back

00:06:11: Because if sponsors are terrified of tech obsolescence, they're finding safety in human capital constraints.

00:06:18: It's a completely different mode

00:06:20: it is.

00:06:20: I mean when you dive into Sasha Orloff data on the CPA space.

00:06:24: private equity has funneled fifty billion dollars Into accounting firms over just the last six years.

00:06:30: fifty billion that's incredible right.

00:06:33: Well, the thesis relies on a really simple but very durable supply and demand imbalance.

00:06:38: The

00:06:38: talent shortage?

00:06:39: Exactly!

00:06:40: The accounting industry has lost roughly three hundred thousand professionals recently.

00:06:45: Wow

00:06:46: Yeah And fewer people are sitting for the CPA exam altogether.

00:06:50: But at the same time...the regulatory requirements audits, tax compliance all of that.

00:06:55: That stuff isn't going away?

00:06:56: No it's mandated demand.

00:06:58: and the

00:06:58: switching costs for a company to change its auditor or its tax strategist are notoriously high

00:07:03: painfully high.

00:07:04: so basically you have a shrinking supply of talent mandated demand in high-switching cost

00:07:09: which equals absolute pricing power.

00:07:11: Exactly, so a PE firm looks at Citroen Cooperman and realizes you know AI isn't going to replace the partner who's advising his CEO on complex tax strategy.

00:07:21: Right it just gonna automate the data entry

00:07:23: exactly making that scarce human partners significantly more profitable which

00:07:28: is huge play.

00:07:29: and sponsors are also finding safety in geographic arbitrage.

00:07:35: oh interesting how so

00:07:36: well.

00:07:36: Andreas Mollendorf pointed out this glaring valuation gap in European tech right now.

00:07:41: Okay,

00:07:42: if you look at IT software multiples the DACA region they're hovering around like eight point nine times EBITDA.

00:07:49: okay a point nine.

00:07:51: but If You Look At Companies Serving Identical Client Bases In Central and Eastern Europe CE The multiples dropped to six point seven times.

00:07:58: Wow, just by crossing a border?

00:08:00: Literally just geography.

00:08:01: you're capturing basically if thirty three percent discount on the entry price.

00:08:05: so building a platform in CE and using it to service Western European clients.

00:08:09: I mean that's a classic multiple arbitrage play right

00:08:12: but its accelerating right now because the margin for error in underwriting is just So incredibly thin.

00:08:18: yeah

00:08:18: You have find value at the entry point

00:08:20: exactly.

00:08:21: And every single one of these trends the massive secondary funds, the accounting rollups.

00:08:25: The cross-border platform bill... They

00:08:27: all stem from trying to bypass AI uncertainty?

00:08:30: Right it's a need to bypass the uncertainty that AI has injected into the market.

00:08:35: but the deep irony here is that AI is also becoming the dominant tool for navigating this exact environment.

00:08:41: Yeah let's focus specifically on the software sector for a minute because the sorting mechanism happening there is just ruthless right now.

00:08:47: Oh

00:08:47: really?

00:08:48: Kizya Co described the current environment as, The Sauce Apocalypse.

00:08:52: I

00:08:52: love that term!

00:08:53: It's fitting.

00:08:54: Sponsor-backed software exits have plummeted sixty nine percent year over year.

00:08:58: they've dropped to a hundred and two billion dollars.

00:09:01: ouch yeah...the market is actively triaging software businesses into basically three distinct buckets.

00:09:08: right you got those doomed obsolescence sort of merely survive, and then those possessing structural AI tailwinds.

00:09:16: Right!

00:09:16: And that triage process is translating directly into revenue multiples?

00:09:20: How big?

00:09:21: Well, Renee Bienek shared a McKinsey study that analyzed four hundred and seventy-one PE backed companies.

00:09:28: And it quantifies this perfectly.

00:09:29: they found that company's embedding AI directly into their core products command revenue multiples more than twice as high As companies the only use it for like internal operational efficiency Wow!

00:09:42: More Than Double.

00:09:43: Yeah.

00:09:44: So using an AI tool to draft marketing emails or you know, assist your developers in writing code.

00:09:50: That's no longer a differentiator

00:09:51: exactly that is table stakes.

00:09:53: now if You want the premium valuation?

00:09:55: The AI has to be the primary reason the customer Is actually signing the contract

00:09:59: right.

00:10:00: so ai is dictating what deals get done.

00:10:02: But it's also completely rewiring the origination process itself which is fascinating.

00:10:06: Oh totally relationship driven sourcing as being augmented and honestly In some cases replaced by algorithmic discovery.

00:10:13: Hamza Khan broke down the mechanics behind EQT's proprietary AI engine, which is called Mother

00:10:19: Brain.

00:10:20: Yeah

00:10:20: instead of relying on an investment bank to send over a pitch deck mother brain ingests tens and millions of unstructured data points

00:10:27: like.

00:10:27: what kind of data?

00:10:28: Everything from early stage funding velocity to subtle shifts in companies hiring patterns or even web traffic.

00:10:35: Wow And it actually identified this workforce analytics company called Picon before was on anyone's radar.

00:10:41: So

00:10:42: EQT got in early?

00:10:43: Exactly, EQT Got In Early and eventually Workday acquired Picon for seven hundred million dollars.

00:10:50: That's incredible!

00:10:50: We're seeing automation trickle down from the mega funds to broader market too.

00:10:56: Ian Gotwinski highlighted a platform called Mosaic.

00:11:00: It basically runs automated, leveraged buyout and discounted cash flow models on entire public watch lists twenty-four hours per day.

00:11:08: Just constantly crunching the numbers?

00:11:10: Yeah!

00:11:10: The system dynamically updates the model based on live market data... ...and then it alerts the deal team that at very moment targets valuation drops into their acceptable return threshold.

00:11:20: That is wild

00:11:21: But okay let me push back this vision of future for second.

00:11:24: Sure Because if every top tier sponsor purchases some sophisticated AI sourcing tool and everyone is running automated LBO models on the exact same universe of targets, aren't you mathematically just going to generate a faster cheaper consensus?

00:11:41: Like how do you generate a premium return.

00:11:43: How do you actually find alpha If your algorithm is spitting out the exact Same target list as your competitors machine?

00:11:49: You've hit on the central paradox of algorithmic finance right there.

00:11:53: Right,

00:11:53: it seems like a trap!

00:11:54: It is.

00:11:55: Muhammad Shaheen addressed this specific danger.

00:11:58: by definition A standard machine learning model trains unhistorical data...right?

00:12:03: Yeah Its function Is to recognize established patterns and regress To The Mean..It's literally an engine for consensus.

00:12:11: Okay

00:12:11: so if you rely solely On

00:12:12: it....You end up in a bidding war For the same asset Which drives entry multiple Up until potential for alpha completely erased.

00:12:20: Right, if everyone agrees a company is great buyout target the price ensures it becomes mediocre investment.

00:12:26: Exactly

00:12:27: So.

00:12:27: Shaheen argues that funds will actually win.

00:12:29: are the ones practicing what he calls calibrated innovation

00:12:33: Calibrated innovation?

00:12:34: What does this look like mechanically?

00:12:35: Basically human deal maker doesn't ask AI for answer.

00:12:40: They use AI to rapidly test non-consensus hypotheses.

00:12:46: Oh, interesting!

00:12:47: Yeah they dial the parameters to intentionally push past precedent.

00:12:50: you want the machine to do that heavy lifting of data processing right?

00:12:53: yeah

00:12:54: But The human must supply the contrarian angle That the algorithm would typically just smooth over.

00:13:00: as an outlier

00:13:01: I see You're leveraging the speed of the machine To validate your own edge Rather than letting the Machine dictate what the Edge is

00:13:08: Exactly...you have to Push the model

00:13:10: Man, that's fascinating.

00:13:12: Real quick.

00:13:12: before we move into the operational side of this I just want to casually remind you to hit subscribe on your podcast app.

00:13:18: if You are finding value in this breakdown of private market mechanics We drop new deep dives regularly and subscribing is really The best way to ensure you don't miss out definitely

00:13:28: And transitioning from deal sourcing two portfolio operations.

00:13:31: There Is This Severe Operational Blind Spot When Companies Rush To Bolt AI Onto Their Products

00:13:36: The Margin Trap.

00:13:37: Yes Romain and Bagramian raised a critical issue that most investment committees completely missed during due diligence, which is token costs.

00:13:46: Right the compute costs for querying those foundational models.

00:13:51: we really need to talk about how this mechanically alters software companies.

00:13:55: P&L.

00:13:55: What changes everything?

00:13:57: Because traditional saws are basically like selling at DVD.

00:14:00: Right.

00:14:01: You pay the development cost up front to shoot a movie, press the disc and after that your marginal costs to sell the next thousand copies is essentially zero.

00:14:11: Which is why software margins are so beautiful.

00:14:13: Exactly.

00:14:13: But Generative AI doesn't work like that.

00:14:15: it operates like utility It's like water bill.

00:14:18: Oh!

00:14:18: That great analogy.

00:14:20: Every single time customer clicks generate or ask the chat about question A meter spins at server farm somewhere And you pay token for compute power.

00:14:28: So wait, if a portfolio company charges a flat fifty dollar monthly subscription for their software?

00:14:35: Yeah.

00:14:35: But they add an AI feature and their power users go wild generating reports all day!

00:14:40: Then the token costs scale linearly with usage while revenue remains entirely fixed.

00:14:45: Wow so the margin destruction just happens silently

00:14:48: Silently and rapidly.

00:14:50: But Grammian noted that at scale Token compute cost can consume five to thirty percent of products.

00:14:55: entire value

00:14:56: Thirty percent.

00:14:58: So, if the portfolio operations team doesn't immediately restructure a pricing model like moving from flat subscriptions to usage-based or tiered pricing.

00:15:08: The very feature they added

00:15:13: Fixing that fundamental pricing architecture and realigning the product.

00:15:17: That requires a very specific type of operator, right?

00:15:20: Oh

00:15:20: absolutely

00:15:20: because an algorithm cannot restructure a software contract.

00:15:23: No it can't.

00:15:23: And this exact friction is sparking A massive talent squeeze across private equity.

00:15:28: Right now we're seeing a complete paradigm shift in The skills required at the executive level.

00:15:33: yeah Mari Damacino highlighted a major strategic move In the executive recruiting sector Cornfairy acquiring AMS for one point.

00:15:42: One billion dollars

00:15:43: huge deal

00:15:44: Yeah, and the underlying rationale is that cornferries internal data identified The AI operating partner as the single scarcest talent profile in the PE ecosystem right now.

00:15:55: So they bought the pipeline

00:15:56: exactly.

00:15:57: They acquired the infrastructure to monopolize That specific talent pool before most sponsors even realized their behind-the-curve.

00:16:05: It is a phenomenal leading indicator.

00:16:06: And this talent shift, it's forcing sponsors to completely redesign the C-suite of their portfolio companies.

00:16:14: Right!

00:16:15: David Mackie broke down on current debate happening in boardrooms right now... Do you hire combined chief product and technology officer?

00:16:23: A CPTO?

00:16:24: or do maintain traditional split of a CTO and a CPO?

00:16:28: Because asking one executive be both market visionary I mean that sounds like a fast track to burn out.

00:16:34: Yeah, does combining those roles actually function in practice?

00:16:38: Well Mackey says it depends entirely on the mechanism of value creation and your specific thesis.

00:16:42: Okay If AI is core driver for products revenue The technical constraints are large.

00:16:48: language models dictate product features.

00:16:50: You cannot separate engineering reality from the product roadmap.

00:16:55: So in that scenario you need a unified CPTO who can hold both the technical plumbing and the market vision In their head simultaneously.

00:17:03: because if he split them The CPO promises features that the CTO literally Can't deliver within an acceptable token cost margin

00:17:11: precisely.

00:17:12: But if AI is merely being utilized internally you know, to accelerate coding sprints or optimized database management then keep the role separate.

00:17:20: Right let a dedicated CTO manage the internal efficiency while the CPO focuses purely on customer acquisition.

00:17:27: Exactly and it's not just the tech roles.

00:17:29: The office of the CFO is undergoing an equally drastic evolution.

00:17:33: Oh really?

00:17:34: Yeah Dario Furman observed that sponsors are entirely rewriting the job description for finance chiefs

00:17:39: Like beyond just the usual spreadsheet master

00:17:42: way beyond.

00:17:43: The historical archetype was this polished executive who could manage investor relations, optimize the capital structure and eventually lead an IPO roadshow

00:17:51: which makes up.

00:17:51: but that is no longer sufficient.

00:17:54: sponsors now demand a highly technical finance leader.

00:17:57: They want a CFO who understands how to build and deploy AI close agents, an automated reconciliation tools.

00:18:05: So the mandate has shifted from someone who merely reports the financial value To someone who actively engineers value creation in the back office through automation.

00:18:14: Exactly

00:18:15: Well we've talked about the c-suite but Paul Press argues that The most critical bottleneck for value creation isn't actually at the portfolio company level At all.

00:18:24: really where is it?

00:18:25: It's the principal role at The Fund itself.

00:18:27: Oh, interesting!

00:18:28: Yeah funds are hunting for professionals with fifteen to twenty years of granular operational experience.

00:18:34: They don't want advisors who just drop a hundred page playbook on a CEO desk and walk away

00:18:40: Right.

00:18:40: they need operators.

00:18:41: Exactly, they need operators who can step into a business and take real ownership of highly specific integration milestones.

00:18:48: You know that demand for hands-on fund operators points to really structural flaw in how value has historically been realized during the whole period.

00:18:57: What do you mean?

00:18:58: Well Wayne Marhelsky unpacked some revealing McKinsey data on the life cycle of PE ownership.

00:19:05: They tracked EBITDA margins across standard five year hold.

00:19:09: Okay what does timeline look like?

00:19:11: Well, what they found is that margin improvements are heavily back loaded.

00:19:14: You typically see a robust like six percent improvement in the final year before exit.

00:19:19: okay so Year five looks great

00:19:21: right but you see only a negligible one-percent improvement In the critical first and second years.

00:19:26: wait really?

00:19:27: But if the sponsor buys The company and implements A new strategy on day One why does the margins stay flat for two whole Years?

00:19:35: Are the operators just waiting until the exit window approaches to actually optimize things?

00:19:39: No, it's not a lack of ambition.

00:19:41: It is an issue of organizational bandwidth or what Marhelsky calls the execution budget.

00:19:45: Execution Budget!

00:19:46: Yeah think about the reality in year one of a buyout The middle management layer debt integration, potential leadership turnover.

00:19:55: New

00:19:55: reporting cadences culture shock?

00:19:57: Exactly the system is already running red line just to maintain daily operations right.

00:20:02: so if the sponsors operating team swoops in and drops fifteen concurrent value creation initiatives on top of that The organization simply chokes.

00:20:11: they just can't absorb

00:20:11: it.

00:20:14: The reason you see that six percent spike in year five isn't because of a sudden push.

00:20:19: It's because the integration dust has finally settled, middle management has adapted to new systems and initiatives launched into year two have oxygen to scale.

00:20:29: Wow okay.

00:20:29: so if actively forcing change early on overwhelms the execution budget and just yields flat margins anyway, does that mean the optimal strategy for a sponsor is to actually back

00:20:40: away?

00:20:40: Paradoxically yes.

00:20:42: Do you know?

00:20:42: Michelle argues that top-decile private equity firms are adopting what he calls The Silent Partner Framework.

00:20:48: Calling A Private Equity Firm A Silent Partner feels completely antithetical to the bio model.

00:20:53: honestly It does!

00:20:55: And it requires immense discipline.

00:20:57: Instead of suffocating the executive team with constant operational intervention, The Sponsor establishes really rigid five-year financial guardrails.

00:21:04: They supply the capital required to hire top tier talent and then they take a deliberate backseat In board meetings...the sponsor speaks last.

00:21:13: Oh wow Yeah!

00:21:14: They force management teams own the operational decisions rather than just waiting for instructions from the fund.

00:21:20: That is fascinating, and that discipline directly impacts The Exit Multiple too.

00:21:25: Neha Cabra made a fantastic point about how buyers assess an asset in year five.

00:21:30: What did she say?

00:21:31: Buyers do not pay for the effort you expended trying to improve their business.

00:21:36: They don't care what initiatives they launched or how hard the operating team worked...they pay strictly for evidence

00:21:44: Exactly!

00:21:45: During due diligence A strategic buyer or a secondary sponsor is trying to strip away any temporary optimization.

00:21:52: They want to know if the margin improvements are structural, Or just cosmetic?

00:21:56: Great!

00:21:57: So exit readiness isn't about aggressively cutting costs in year four Just inflating the EBITDA right before investment bank drafts pitch book.

00:22:05: No that doesn't work anymore.

00:22:07: It requires establishing pristine data baselines on day one, meticulously tracking the ROI of specific initiatives and proving with evidence that the operational gains are permanently embedded in the company's culture and systems.

00:22:20: You have to prove that machine will continue to generate cash flow long after the current sponsor hands over keys.

00:22:26: Exactly.

00:22:28: And you know when you synthesize all these distinct signals.

00:22:32: the flight to accounting firms, the bifurcation of tech valuations.

00:22:36: The danger of token costs...the discipline of the silent partner They really all converge on one profound realization for the industry.

00:22:44: Which is what?

00:22:44: Well James O'Dowd and C. Shen Asanka both articulated this shift beautifully.

00:22:49: We are moving out an era where private capital underwrites growth And entering a time when it primarily underwriters durability.

00:22:56: Wow!

00:22:57: Durability overgrowth.

00:22:58: Yeah For the last decade, if you could show top-line revenue compounding at twenty percent year over year The market would forgive almost any operational sin and reward.

00:23:07: You with a premium.

00:23:08: multiple

00:23:08: growth was the ultimate panacea.

00:23:10: it Was.

00:23:11: but the cost of capital has changed.

00:23:14: an AI Has completely altered the threat matrix

00:23:16: so that diligence questions change complete.

00:23:19: It's no longer just you know.

00:23:20: how fast can you acquire customers?

00:23:23: What happens to your cash flow when we normalize the founder's compensation?

00:23:27: Or what happens, when a competitor utilizes an open source AI model To offer service identical to yours but at a forty percent discount.

00:23:36: Exactly and Seixon pointed this out specifically regarding agency roll-ups And professional services.

00:23:43: okay

00:23:43: if the success of your firm relies heavily on the unsystematized charisma the founder.

00:23:48: Oh, The Rainmaker!

00:23:49: Right.

00:23:50: or personal relationships that haven't been codified into institutional processes?

00:23:54: private capital will heavily discount your valuation

00:23:57: because unsystematized momentum is a liability not an asset.

00:24:01: exactly man.

00:24:02: to bring it all the way back to the beachfront property we discussed earlier you can no longer command a premium just by selling the beautiful view of Your current revenue growth?

00:24:11: No Because the buyer's assuming A storm Is coming.

00:24:13: Right.

00:24:14: You have to provide the empirical evidence that you've built a structural seawall capable of withstanding technological disruption, margin compression and talent shortages for next decade.

00:24:29: That

00:24:29: is perfect framework today!

00:24:32: The ultimate leverage for any founder or operator isn't simply driving top-line revenue, it is engineering a resilient system that functions flawlessly whether you are in the building or not.

00:24:43: Absolutely!

00:24:43: If you enjoyed this episode new episodes drop every two weeks.

00:24:47: also check out our other editions on Venture Capital M&A and Strategy & Consulting.