PE Contrarian

Bringing a much needed dose of reality and occasional humor to the world’s most loathed industry

[PE Contrarian @PEContrarian]

@raqisright Boca

[the dutchess of bushwick @ktrivs]

you can’t even get a bagel in nyc anymore bc they’re all owned by private equity

[PE Contrarian @PEContrarian]

@johnkonrad Curious if Whitey Bulger is included in the Air Force number

[PE Contrarian @PEContrarian]

@lsferguson I feel the same…but considering who the alternatives were (Algore and John Effing Kerry), we can forgive ourselves

[PE Contrarian @PEContrarian]

@grok The Mason-Dixon line is a historic boundary in the eastern United States that forms parts of the borders between four states: Pennsylvania, Maryland, Delaware, and West Virginia.
Main location
•The best-known portion is the east-west line along approximately 39°43′ N latitude. It serves as the southern border of Pennsylvania and the northern border of Maryland, running about 233 miles (375 km) from near the Delaware River westward.
•It continues westward into what is now the border between Pennsylvania and West Virginia (then part of Virginia).
•Additional segments include a mostly north-south line that forms part of the Delaware-Maryland border, plus related arcs and tangent lines around New Castle, Delaware, that help define the Pennsylvania-Delaware boundary.
It is not a single perfectly straight line. The east-west section is a polygonal chain of short segments that stay between roughly 39°43′15″ N and 39°43′23″ N.
Historical context
English surveyors Charles Mason and Jeremiah Dixon surveyed it between 1763 and 1767 to settle a long-running colonial border dispute between the Penn family (Pennsylvania) and the Calvert family (Maryland). The line later became a symbolic dividing line between free states to the north and slave states to the south before the Civil War (though Maryland itself was a slave state south of the line).
Many of the original limestone mile markers (and larger “crown stones” every five miles) still exist along the route today.
In short, you’ll find the Mason-Dixon line running primarily along the Pennsylvania–Maryland border, with related segments involving Delaware and West Virginia.

[junkbondinvestor @junkbondinvest]

PE firms can’t sell their portcos. So what do they do?

Sell a minority stake in the mgmt company.

The opportunity is mostly in the mid-market, where 90%+ of the 4,000+ firms have never done it

[Will Schryver @Will_Schryver]

“Good business, bad balance sheet”

Private equity-backed Roofing Co handed over to lenders

$330M revenue and $60M EBITDA
70% Storm Response / 30% Retail

Stronghouse was one of the first Roofing platforms to emerge in early 2020s M&A wave

Roofing owners rolling equity into a PE-backed platform need to understand that equity sits behind the debt

Bad balance sheets can turn $ millions of equity into $0 even for good companies

Credit @homeprosnews for breaking the story

For M&A insights
👇🏼
https://t.co/nZKRKancXy

[PE Contrarian @PEContrarian]

@raqisright Receiving a wedding invitation in the mail is like getting a $3000 bill for dental work your insurance didn’t cover. Except at least then you got dental work out of it.

[Boring_Business @BoringBiz_]

20 pieces of advice for junior finance analysts and associates, many of them learned from personal experience

1. Health is wealth. Successful careers are marathons, and the most important part of them is staying in the game by avoiding burnout.

2. Perception matters way more than you think. People notice the small things, much more than you think.

3. You must be confident enough to come off as reliable but humble enough to know when it is time to listen and follow instructions

4. There is no way to avoid long hours in your 20s if you want to be successful. It is the rite of passage

5. Excel matters for the first few years. Then it is all about relationships. Who you know > what you know

6. Raise your hand for the most complex transactions and situations you can get yourself staffed on. The experience gained will be more valuable than the short-term suffering endured

7. Reputation carries with you through the entire industry. Finance is a small world

8. Most tasks given to you early on will be incredibly mundane. Doing the boring things well is how you get to do the more exciting things.

9. Having the right mentor can change your life. A mentor is someone who vouches for you in rooms that you don't have access to

10. Your job is to make your boss look good in front of their boss

11. Successful analysts tend to be maniacally organized and are incredible at juggling multiple tasks/deals at once

12. Ability to tell a coherent story matters more than how accurate or precise your numbers really are. More fiction is written in Excel than anywhere else

13. No forecast models are accurate. Some are useful.

14. Specialized knowledge makes you valuable to your firm. The fewer people who can do what you do, the better your chances of moving up the ladder.

15. There is no excuse for errors made twice. Everyone messes up the first time. But once you are shown how to do something, remember it.

16. Having a great elevator pitch still matters more than you might think, especially in roles where you are interacting with new people on a daily basis

17. Information edge is rarely gained by just sitting behind your desk. Go outside and talk to people. Attend conferences and develop your network

18. Accounting is to finance what history is to futurists. To forecast the future, you must learn the past. In business, the past is written in accounting statements.

19. Life is shorter and more unpredictable than you might think. Save some money along the way for a rainy day. Your 40-year career plan can get very easily derailed by a bad injury or accident

20. The most valuable thing you will leave the industry with will never be the money. It will be the relationships you built along the way

[PE Contrarian @PEContrarian]

@RonDeSantis I disagree. We should increase the pension, but make it so it can only be collected if leave after 3 terms and you automatically lose it if you ever come back.

[PE Contrarian @PEContrarian]

@raqisright You’ve eliminated 95% of men in Miami-Dade, Broward and Palm Beach Counties. Best advice yet!

[PE Contrarian @PEContrarian]

@GordonGChang This page?

https://t.co/BRc6qmUCHS

[PE Contrarian @PEContrarian]

@CynicalPublius Florida HOA board member here. Yes, it’s weird and a waste of their time.

[Will Schryver @Will_Schryver]

“M&A is on hold. We’re not doing any deals for the next 12 months.”

I’ve heard this from half a dozen of the PE-backed HVAC, plumbing, & electrical platforms

Why?

Underperformance across the platform.

Acquired brands start underperforming, EBITDA deteriorates, and leverage gets extended.

Sponsor prioritizes getting the existing assets back on track over more add-on acquisitions.

[Boring_Business @BoringBiz_]

Ironically, this is a good reason why private equity firms like adding debt to their portfolio companies

Beyond just enhancing equity returns, a constant stream of interest payments tends to keep executives much more operationally disciplined in terms of their spend

While short term underperformance might be fine for a debt free business, companies with a massive debt load are forced to focus on cost cutting and margins so they can meet their quarterly interest payments

This obviously has second and third order effects, and can lead to underinvestment for the long run in some cases

But in majority of cases, CEOs and CFOs tend to execute much better with a little bit of debt on the balance sheet

[PE Contrarian @PEContrarian]

@raqisright Happy Indigenous People’s Day!

[Restructuring__ @Restructuring__]

Perfect explanation of why Private Equity Carry Is Hard To Realize:

1) Carry is calculated off of fund-level IRR (very different from deal level IRR)

2) Carry is calculated off of fund-level NET IRR (which includes all expenses)

3) Carry is subject to a preferred hurdle rate for the LP

4) Time & Claw-Backs (distributions are very back-weighted / at risk of clawbacks)

5) You need to be in the seat to realize carry (definition of golden handcuffs)

[PE Contrarian @PEContrarian]

@raqisright Elbows up!