Private Equity folks care deeply about industry experience. That is their very first acid test. I cannot tell you how many people don’t even mention industries in their resumes. They talk all about being a great leader, what metrics they’ve achieved, and their education, but nowhere is their industry expertise. To PE professionals, your industry subsectors matter at the get-go more than anything since that’s how they know which bucket you belong in. Please position yourself in your industry right up front.

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The other critical number in private equity is 20%. Generally, in addition to receiving the entire principal back, the LPs receive 80% of the returns generated (the money made over and above the principal invested) and the PE GPs take home 20% of the returns. AND, despite the best efforts of some legislators, that 20% return is still only taxed at a Capital Gains rate of 20% (assuming they hold their investments for 3 years - they just dodged a bullet trying to increase that to a 5 year hold), so they only have to pay 20% instead of income tax rate of closer to 35%+. Being a GP can be very lucrative. The LPs can make great returns for their shareholders/stakeholders, and the GPs make a buck in the meantime. IF they do well. What happens if they don’t?

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You say toe-may-toe, I say toe-mah-toe…

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“Industrial IOT companies with low key employee turnover and high recurring revenues are commanding the highest EBITDA multiples of 25.3X across all of the tracked industries. Translated, that means if a company had $25 million in EBITDA, and it sold for 25.3X, the sale price would be $632.5 million!”

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We’ve established where the money comes from - the Limited Partners (LPs), but where is it going? And, how is money made on that money by the General Partners (GPs)? There are a number of different strategies firms use - to boil it down, private equity firms buy companies. Most of the time they buy majority control positions in those companies to control the board of directors. Although there are also PE firms that will buy into minority positions. Each firm applies their own proprietary “strategy” in deciding which companies to buy, and once acquired, they then execute a carefully developed plan for that company to generate a return on their investment. This is a gross simplification. There is a LOT more to it, but that is the gist in the simplest of terms.

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If you are looking for a role on an Executive Leadership Team for a Private Equity-backed company, then please join us on August 27 from 12pm - 4pm EST for a workshop on how to market yourself to Private Equity firms.

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It's been a highly emotional couple of weeks that I cannot let go unacknowledged, particularly given that one of Thrive Resources’ deepest values is rooted in Diversity and all that means.

We see you, we hear you and we stand by you.

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Thrive Resources CEO, Susanna Madden, participated in Strategy & Resources Executive Roundtable discussing an Industry in Transition

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