Private Equity Experience
Demystify the world of private equity with insider knowledge.
Join hosts Ed Barton, Rory Liebhart, and Emily Sander - seasoned professionals who have worked from all angles as C-suite leaders, private equity managing directors, and investors.
In this podcast, they break down complex private equity concepts into everyday language. You'll gain a clear understanding of the PE landscape, key players, and market dynamics. Expect practical insights on deal-making, growth strategies for founders and management teams, and exit strategies. Plus, hear real-world examples and real-time breakdowns of trending news stories.
Whether you're a seasoned pro or just starting out, considering selling your company to a private equity firm, or simply curious about this lucrative world, this podcast will help you navigate the private equity landscape with confidence.
Private Equity Experience
Private Equity Explained in Simple Terms: A Guide for Founders and Entrepreneurs
In this inaugural episode of The Private Equity Experience (PEX), we're taking the first step in exploring the world of private equity. We'll introduce its role in today's business landscape and explain how it's become a valuable option for small businesses.
Whether you're a founder considering private equity for growth capital or personal liquidity or simply curious about how private equity compares to venture capital, this episode provides a great starting point.
We'll cover the basics of private equity, including leveraged buyouts and assets under management, to give you a solid foundation in this crucial part of the global economy.
We'll give you a clear understanding of private equity firms, how they manage investments, and the importance of transparency and due diligence in PE transactions. You'll also get an introduction to how private equity funds are structured and how they aim to increase value through operational and financial efficiencies.
Links Mentioned:
Timestamps:
0:00 - Introduction to the podcast and hosts
2:01 - Emily's background and experience with private equity
3:51 - Ed's background and experience in private equity-backed businesses
6:41 - Rory's background in financial services and private equity
8:44 - What is private equity, and what gap does it fill in the market?
10:33 - Historical context of private equity's development
14:07 - Explanation of assets under management (AUM) in private equity
15:32 - Definition of leveraged buyout (LBO)
18:10 - Major players in the private equity space
19:45 - Explanation of limited partners (LPs) and where PE firms get capital
23:52 - How private equity firms make money (management fees and carried interest)
28:17 - Reasons why founders might consider private equity funding
32:39 - Different types of private equity firms and their focus areas
33:49 - Who is not a good fit for private equity funding
35:32 - How private equity differs from venture capital and other types of investors
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.
if you spent 15 years of your life grinding away, um, to build your business. You want to reap the benefits of that in some way. Um, so you could either sell your entire company altogether to maybe a strategic buyer and, you know, be done with it and move on, or you can sell a majority of your business to a private equity fund at a value you think, and they agree on or vice versa, uh, is fair. And so you can take some money off the table and start building that big house or buying that Maserati or whatever Welcome to the Private Equity Experience Podcast. Your backstage pass to the strategies, stories, and secrets that drive value in the PE universe. No filters, no fluff, just straight talk and expert insights to help you navigate the private equity world with confidence. And now your hosts, Ed Barton, Rory Liebhardt, and Emily Sander. And here we go. Our inaugural episode of the Private Equity Experience podcast. I am Emily Sander and I'm joined by my illustrious co hosts and co authors Ed Barton and Roy Liebhardt. This Episode is going to be quick intros from us. So, you know, who you're hearing from, and then we're kind of going to do just a private equity one on one, get the lay of the land, get the foundation that we can build off of from there. So by the end of this episode, you will know at a high level, what private equity is, what it is not, who the major players are and how a PE firm makes their money. So that can, that's what you can expect from this episode. So first off, let's do lightning round intros and introduce ourselves as it pertains to private equity, and then maybe do like a fun fact, memorable moment, or something like that. So I'll go first. Um, my name is Emily Sander. I started my corporate career. At large companies like Microsoft and Amazon, I was a tester for the original Kindle device, so the e reader, when that was a brand new thing in 07. And then I worked for a series of small to medium private equity backed businesses. And those were all pretty much in technology based businesses, and so I got opportunities in leadership roles and grew my career from there, and it culminated in a role as chief of staff for a digital marketing company, and that company was, um, backed by a P. E. firm that I had previously worked for, and they had called the C. E. O. And myself back into their investment In 2021, I started my full time coaching practice and have built that up. And because I was a chief of staff and I have coaching credentials, I specialize in coaching for chiefs of staff, for their principals, for executives, and companies who are looking to set that role up. So that's what I do full time. I also do podcasts and write books. And that is me. My memorable moment My memorable moment is mid career. I was at a board meeting and someone was like, Emily, uh, you know how to build an international client management team from scratch. Right. In my head. I was like, no, no, I don't. But out loud, I was like, yes. Yes, I guess I can. And I went back to my desk and I Googled how to build an international client management team. That was before chat GPT too. So it was even harder. You had to figure that out. Um, so that was my memorable moment and that was in a PE backed, uh, board situation. Go Hawks. So I'm the old person in the group, um, had a chance to work with, oh yes, had a chance to work with, uh, both Rory and Emily at multiple BE backed, um, companies and overlapped with all three of us overlapped at one, uh, two, That was, uh, backed by, uh, Primus Capital back in, uh, the early 2010s. Um, but I've spent most of the last 25 years of my career in private equity backed businesses as a chief executive officer, chief operating officer, chief financial officer, and then interim chief technology officer. Chief revenue officer. So I've pretty much done, if it's got a officer chief attached to it, I've managed to manage to, uh, sit in those, sit in those seats. Um, I've worked with four, uh, different private equity firms, uh, over that period of time, um, both working at the kind of at the PE level, uh, as a kind of a. CFO in residence with some of their portfolio companies, as well as being picked up and dropped into companies that usually needed a little bit of help and guidance and direction, have spent You know, the, the bulk of my career in, in, uh, financial services or financial services related companies. Although I had a stint in restaurants, I had a stint, uh, in, uh, again, with Emily and digital marketing. So, you know, the, the private equity world, uh, can be pretty varied and, uh, they invest in pretty much anything that has a chance to make money and, uh, kind of, you know, History, uh, history lesson. I, I was, uh, involved in a, in a situation where we were getting, uh, deposed. So there was a, there was a lawsuit, um, uh, amongst, uh, a number of folks in the, uh, in the investment. Um, so it was a pretty sticky situation. And you might've been involved. And, uh, I actually, my deposition was used as a training film for, uh, for a major, a major law firm, um, on how to answer the questions consistently and not get rattled under pressure. So I, I'm kind of proud of that. I subsequently, um, kind of fun fact related to that, um, because of the, that, that lawsuit and the kind of the. period I was in, in my career, I actually went back to law school, um, in my thirties. Um, and that subsequently has passed, have passed the bar exam, have now admitted to practice. Um, and I spend most of my current time working as a chief financial officer or doing consulting and tax consulting work and tax attorney work, um, for folks in the Pacific Northwest. And just for the record, What do all the letters behind your name stand for? Um, I spent way too much time studying for tests. That's what they stand for. Okay. Uh, Rory. Yes. Uh, Rory Liebhardt. Uh, I'm a Pisces. No, I'm kidding. Um, I like long walks on the beach. Yeah, exactly. Uh, boy, yeah, I've been in financial services for 20 years, both as an asset manager, as well as an executive operator and kind of many points in between. If I were to typecast myself, I'd probably be, um, identified as a CFO for small to medium sized private equity backed companies like Ed. I've, I've worked for four different, uh, private equity, um, sponsors through their operating company. Um, you know, cumulatively been involved with about a dozen or, you know, transactions, about a billion dollars in transactions. And fun fact, I suppose you could call it, maybe at the time it wasn't as fun for me, but, um, you know, I've sold the same business three times. And actually that was the point maybe about almost 20 months ago now, where I decided to kind of pull the plug on, um, for the moment anyway, you know, being an executive in operating business and started doing a lot of, um, consulting for businesses and, you know, And I'm working as more of a fractional CFO. So I've had a lot of cool exposure to early stage businesses, family offices, manufacturing companies, and, you know, a lot of different points in between. So, you know, I, I met Ed and Emily, um, met you guys. Speaking of first, third person, whatever, um, you know, long time ago, I known Ed for 20 years now, Ed's been a mentor, friend, confidant, all of the things in between in my career. And, you know, thanks to Emily, we've kind of come together again as a, as a unit and said, Hey, let's put something out to the world, uh, about private equity and our experience cumulatively in it, and just, um, You know, really excited to be sharing that with the world. Beautiful. All right. So now the listener knows who, who they're talking to here. PE 101, like lay of the land. Part of my brain was like, what, what was there before private equity? So in other words, what gap was it filling? What role does it play in the economy or in the market? Yeah, I mean, I'll speak real high level. Um, it's kind of in the name, right? It's, you know, for sources of funding for any business you look to outside Capital a lot of times. So, you know, whether it's a bank to lend you money or it's issuing stock for the public, like you, me, and millions of others to buy little slices of the company. You know, those are the two that most people think about, but private equity, uh, sits in a spot that is what the name implies. These are private companies taking private, uh, positions in your company, um, and partnering with you to help you grow your business. In large part. Yeah. A lot of historically, a lot of, you know, if you go back a hundred years or so, um, which is really private equity has been around a long time. Yeah. Um, but if you go back a hundred years or so, so right around the, the great depression and the stock market crash, um, you, you built a business one of two ways you either, you know, went friends and family and had, you know, family money and you raised money at the local rotary and, and, The Masonic temple and all that other stuff and kind of pulled in and did the kind of did the bootstrap where you went public and there was really nothing in the middle. Um, you, you basically were a public company or you were a closely held family business. Um, once we kind of transitioned past the second world war into, um, Kind of into a, a much more, uh, a much more diverse economy, there was a need, as Rory said, for the, for the, to raise this capital. Um, and it was too big, um, for, you know, the, the friends and family thing and going public has become, you know, over time has become incredibly expensive, incredibly difficult to maintain compliance. Um, so a lot of times lawyers involved, man, too many damn, it's, it's definitely that plus too much. Yeah. Too many, uh, too many regulators too. Um, but you, you go back, you go back into the eighties. And really that was when private equity really started taking off. So prior to the, prior to the eighties whole LBO thing that people think of. Right. You could, you could, A lot of you had a lot of small public companies. Yeah. I mean there was a ton of small public companies in the American Stock Exchange was popular and stuff like that in the, in the eighties. All of a sudden you saw, you started seeing these, these big aggregators like KKR pull in. Uh, which is Colbert, Kravitz, Roberts. They started pulling in a lot of institutional money and going, we can get a better return because these public companies aren't really well, aren't really well run. And so we're going to take them private. We're going to buy all the stock. We're going to take them private. We're going to put debt on, we're going to try and optimize their, their, um, Their operations. And that started at like these big companies, like, like RJR and Abisko. And, and that same model over time really started working its way down into the, into the mid market, especially as, you know, you start looking at like the, the stock market. Uh, issues around, you know, 2000 or so, and you had Sarbanes Oxley come in, which really made being a public company very expensive. And private equity has, has become the primary way to raise capital, um, for small, mid sized business. So let's, let's pause there. So private equity is for a business who wants or needs outside funding. Traditionally, it was from family and friends, or you went public. Private equity offers. Another option. Okay. And this has been around like first private equity firm was when. I think the first, like, I think the one that people think of as the first private equity deal was way back in like 1946 with J. H. Whitney and Company and, and that was, that was kind of the impetus and, you know, the, the run up started in the 70s. Okay. And so that became much more of a bigger part of our global economy. Now there's 4,000, 5,000 private equity firms globally,$5 trillion of assets under management, which we'll talk about later about assets under management. But if you wanna think about that in terms of like comparables, that's the GDP of Japan and a lot of other countries in this world. So it is foundational now, really. So, you know, hence the reason why. More information needs to be shared with the world about this environment because it's, it's here to stay. And, and it's, it's a really, um, I would say, you know, macroeconomically it's not cyclical. It's there all the time, as opposed to, you know, stock markets ebb and flow. Private equity is always there. And I think the likelihood that a company goes with private equity versus going public is much higher. So if you're listening to this and you're a founder or you're on a leadership team, the chances that you will be involved in with private equity in some way is much greater than you going public with an IPO. Yeah, I would totally agree with that. Far greater. Yeah. That was about saying you're, you're likely to, even if you do go public with an IPO, you're likely to stage through private equity or venture capital to get there. Yeah. Okay. Okay. And then you mentioned it, Roy. So, um, assets under management, which is an acronym, AUM, we'll use over and over again, uh, means what briefly, and then what is the number that the, the private equity kind of footprint represents today? So private, I'll start with a second question first. It's so big. I mean, five to 10 trillion of assets under management, depending on how you measure it, but assets under management simply means The dollars that these private equity funds have to invest in businesses and other So assets being businesses primarily, but there's also portfolios of loans and things like that, that could be considered investments for private equity funds. Okay. So like the money under their management, under their control, like running through the private equity ecosystem is four to 5 trillion with a T dollars today. Think about it. Like if you're, you know, back when I was young, I got like a 5 allowance probably till I was like 14, actually. So I was. Not a very savvy negotiator with my parents, but if I'm walking around on Saturday with five bucks in my pocket, that's my assets under management. I don't own any other stuff. But that cash that I have to spend on comic books or baseball cards or whatever it may have been, that's my assets under management. And how I invest that, you know, I hope to get a return on it. I was not a very good investor, so I bought that kind of crap and it was pretty much depreciated to zero at the beginning. So, but yeah, I've learned a lot since then. I am a professional now, but you know, Okay, beautiful, beautiful explanation. Uh, Another acronym got thrown out, LBO. Is that important to cover now? Why not? Ed, you want to take that one? Yeah, sure. So LBO is leveraged buyout. And so that's what happens when a private equity firm takes a look at a company and says, we're going to buy the company. Um, and The sellers of the company generally will get cash. Um, however, the buyer of the company, instead of writing a check for let's say a hundred million dollars, writes a check for 25 million and borrows 75 million from either other institutional investors, banks, um, or issues bonds, and then they utilize the cashflow from the business to pay off that debt to service that debt. And so as a result, they get, they get to control a hundred million dollar asset with a link. 25 million of equity and the rest of it is leveraged and they bought it out, therefore leverage buyout. Yeah. Okay. Yeah. All right. Leverage equals debt in terms of use of capital. And I think that one of the things that is associated with leverage slash debt is just risk, right? If you put all of your own money into something, you can kind of control the payback timeframe and kind of how much and things like that. But if you take on debt from a bank or another. Private credit fund or however you want to do that. You know, you're on their terms. You have to agree to their timelines and their required returns. In most cases that works out well, if you put, if you're, if you're the private equity group and you put down a small sliver, as Ed said, you get the benefit of the whole asset, well, once you pay off these, Clown banks and private credit funds, then everything's there for you. So that would have been a sweet deal. However, if things don't go as planned and you have these obligations to your bank or your other credit provider, your debt provider, that's where things can get pretty hairy. So therefore, you know, when you think about LBOs, that's how people associate it, they think about that as like, Ooh. Private equity, super risky, all this, that, and the other thing, that's what they're associating that with. Okay. All right. So we've got PE firms are a way to get money into a business. They've been around since the forties. They really took off in the seventies. They now represent what technically term is like a crap ton of money in the market. Uh, and there's this thing called, uh, LBO, which is kind of representative of just how you structure debt and how you structure I'm going to be talking about how to get into different deals and how you can infuse capital in there, which we'll get into in other episodes. But that's one example of that. Uh, as you mentioned, like KKR, who are some big players in this space? Like when you say, okay, in the PE world, here's like your big boys or here's, you know, the different types of PE firms you can have. I mean, I would tend to, there's like Rory said, there's, there's. Thousands of PE firms now. Um, but KKR, uh, is probably the, they're like the cutting edge foundational, um, Kind of prototypical firm. Um, but you've got, I mean, I'm just thinking there's, I, I've got so many kind of running through my head. and the challenge is you used to have a very, you know, obvious split between like, this is a private equity, you know, Firm. This is an investment bank. This is a, but now like the investment banks have their own private equity firms or funds, and so it's all starting to get kind of mishmashed together. Um, but you know, the Blackstones, the KKRs, uh, you know, Rory and I both worked with Lone Star funds. Who's a huge, um, huge, uh, private equity firm, uh, three headed dog. I remember at night, I used to joke about that one, but yeah, Apollo Cerberus, uh, you know, Ares, man. I mean, there's, there's a lot of them out there. And when we're talking about the biggest ones, we're talking about, you know, uh, four or 500 billion under management. And so, you know, maybe the next question is, well, where the hell do they get all that capital? Right. So When you think about private equity funds, they're just like other businesses that require capital to go do the things they do. It just so happens that private equity funds are existing to make investments. So the folks that, that's, that they serve to make those investments tend to be called limited partners, LPs. You'll hear that a lot. You'll see that a lot. What is an LP? Well, an LP is, is a typically an institutional investor. What's an institutional investor? It's usually a, a very large fund, um, of could be, um, retirement funds from a pension. Could be sovereign wealth funds, could be university endowments, insurance, uh, conglomerates really what it is is it's these massive amounts of capital out there that we as consumers or individuals usually pay into, we're paying into a retire or we're like accumulating in a retirement plan, social security, whatever kind of stuff like, so that all that money all needs to get invested somehow. Otherwise, as you. Is time passes the value of that dollar that's sitting there goes down with inflation, right? So they need to keep making a return on that money. So where do you put it? Well, they put most of their money just like most people into public public equities Some very safe bonds and other other things like that, but they have allocated To alternative investments, private equity, as well as other things sit in this world of alternative investments, typically. So these, these large endowments and university pension funds and, and sovereign wealth funds, they allocate money to private equity. And so that's where private equity gets their capital. They invest that capital on behalf of those LPs. And they return profits to those LPs, which then in turn, theoretically funds the retirement of teachers and pensioners and, you know, um, government officials and sovereign wealth funds and wherever else it's going out of the sovereign wealth funds too. We don't know. Um, but that's kind of, that's kind of how it works. It's, it's basically just follow the money around. It's it's money is going through various points. To come back with a little extra, but that extra is being made off of somebody else and redistributed basically. Yeah. So we have a chart on this in our book on ramp to exit, but there's like the middle level, which is kind of the PE firm level. And then above that would be the LP. So limited partners that Rory just mentioned. And like to think about that in a real example, it might be, you mentioned pension funds. So a pension fund will make, you know, a dozen investments for, you know, A series of decades, right? Cause they're talking about decades and decades and decades. You're, you're looking at decades long obligations to your pensioners. You know, a relatively small percentage of their investments will be to private equity, uh, funds because that's riskier. And so they're like, we're not going to put our whole thing and less liquid. Exactly. That's key right there. What Ed said. Well, we want some kind of alternative, maybe some more aggressive. We want higher returns. Yeah. portfolio that it does. So maybe like sub 10%, like sub 5 percent even will be allocated to private equity investment. So they will fund the private equity firms, which in turn, so that's, so LPs on the top layer, PE firms in the middle, and then below that are these portfolio companies or what most people would think of as like companies or businesses. Yeah. Yeah. That are saying, yes, I want to take that private equity funding because I need external or I want external funding. And that's kind of like the circle of life, Simba, for the PE world. So in terms of how a PE firm makes money, I think that that's important to understand. So we have the LPs on the top, the middle level or layer is PE firms. And then we have, um, like these, they're called funds. So what normal people think of as companies or businesses, a PE firm will group them in like groups of like 10 to 15 companies and call that fund one, and then they'll have, you know, like fund two with 10 companies and fund three, and we'll talk about how that, that works. But basically those companies grouped in those funds are on that third bottom. layer. And so how a PE firm makes money is they get some on both ends, right? So maybe someone, Ed, can you talk through like they get a management fee for the LPs and all that stuff? Yeah. So, so the LP essentially is utilizing the private equity The private equity management team as a efficiency to make these investments. So private equity managers are experts in finding undervalued assets, negotiating these deals, unlocking value, structuring balance sheets. And so, and it's difficult. They're sifting through. If you're sitting in a private equity firm, you're sifting through potentially dozens of deals a day to try and find ones that fit your investment thesis. So the. The folks at the, the upper end, the, uh, uh, institutional investors go, look, I'll pay you generally around 2 percent of the money I'm investing with you every year for you to do that for you to kind of sift through all this stuff, find these investments, manage these investments for me, just like you would pay, um, if you were getting a managed kind of managed fund to Edward Jones or something. So that's the, the, the. These guys up here at the institutional level are really happy. It's a good deal for them to pay that 2 percent or so management fee on the assets every year to have those private equity experts go through a very inefficient market in a private space and find the best deals and sift through those deals. Now, the other side of that is, and I'm not going to talk about, you know, kind of the, the management fees coming into, um, The private equity firm right now, I'll just start with the private equity firm, then goes and invests in these, these companies and the companies are managed. By the private equity firm. And in a number of ways, there's operational efficiencies that they look to unlock and there's financial efficiencies that they look to unlock. That strategy goes, they go in with a strategy. I know we'll talk about this a lot more, but they go in with a strategy that when they're buying into that business, they know how they're going to, they've got a plan on how they're going to get back out of it and how they're going to unlock value. Always, every time that value that they unlock, Okay. So let's say they, they unlock a hundred million dollars of additional value. They send that the initial investment back to that institutional investor and go, thank you for your a hundred million dollars. We've now made you 200 million. We're going to send you back 180 million. And we're going to keep 20 percent for ourselves of the, of the ops. So we're going to keep 20 million. So now they've made 2 percent for just kind of managing that investment over time. And then they get 20%. And again, this is roughly some are higher, some are lower. It depends on the, the, the fund, the 20 percent of the profit. So now on that a hundred, a hundred million dollars that was invested by the, by the, uh, The institutional investor, they might've gotten 2 percent per year. So they got, you know, 10 million, um, on that, um, for a five year hold. And then they got another 20 million on the investment and the original investor got 180 million. Everybody's happy, not a bad gig. No. So institutional investor equals limited partner. Yes. Yep. Okay. So on that top layer, institutional investor or LP, and in between like that top layer and the PE firm, there's like a little cycle of money that's happening, which is 2 percent and then in between the surrounding air, you know, nothing big, just a couple million here, a couple million dollars on a Apollo size phone. And then in between the middle layer, which is the PE firm and the Lower bottom level, which is the companies in those funds. There's a little money loop happening there, which is the go ahead, Ed, which is, yeah, so, so, Some private equity firms, I've worked for private equity firms that both do this and some that do not. Um, but there's private equity firms that will also charge the, the operating company a management fee too. So they, they get a little bit of money coming in from the operating company to manage it. They get a little bit of money coming in from the, from the, uh, the LPs to manage the money. So they're getting it on both ends. And then when they sell. They get generally 20 percent of the profit, so they get, so they get, you know, but that's transactional. So that's only going to happen generally once during the course of the, the investment. Okay. So that's high level how a PE firm makes money. Yep. Okay. Um, so then Rory, what are some reasons why a founder Or original founders would even consider private equity. you know, a lot of times it comes down to it's reached a point in its life cycle, the founders probably bootstrapped the business up to a certain point. And, you know, the business itself at that very moment, isn't generating enough. Free cash to make bigger investments, to grow, grow more. Maybe they don't have access to traditional debt markets, et cetera. Um, so they need outside investment. So that's, that's place and go also another reason why a founder might take on a partner. Maybe they want to, uh, they, they want to monetize some of what they've built rightfully. So, you know, if you spent 15 years of your life grinding away, um, to build your business. You want to reap the benefits of that in some way. Um, so you could either sell your entire company altogether to maybe a strategic buyer and, you know, be done with it and move on, or you can sell a majority of your business to a private equity fund at a value you think, and they agree on or vice versa, uh, is fair. And so you can take some money off the table and start building that big house or buying that Maserati or whatever. Um, but it's a way to, it's a way to realize some of that investment without going through the rigmarole of. Um, taking a company public because that could, you could, you could be dead on arrival if you do that wrong and time that wrong, you know, so. oftentimes it is a great deal, uh, for. Relatively little friction to go get more capital, right? Even if you have a very fundamentally sound business, taking your company public is a massive endeavor. It's extremely costly. And it, you know, it is not always a given private equity in my experience. Uh, the ones that I've worked for are oftentimes very flexible in how they get a deal done. Um, so there's, I would say if I were to wrap it up, it's potentially the easiest, um, avenue of those three. To get deal done basically. And so again, why would you want to get a deal done? One, you just need more money to grow your business. You have a new product or a new strategy or new geography you're trying to get your solution into. It takes a lot of dough to hire the people, to build the technology stack, to manage through the compliance and all that kind of stuff. Um, you need money to do that. And so if you don't otherwise have the means to do that through your current business, you need outside money to, again, like I said, you know, some, some founders want to take money off the table by that. I mean, you know, get, get paid for what they've built and doing that through selling to a private group. Is probably again, the path of least resistance to doing it. Now, again, we'll talk more about what that means. Once you do lock arms with your partners, but, um, but, you know, getting to the point I I've been through a lot of private equity deals and, and sometimes they can be pretty straightforward, believe it or not, so, you know, Okay. Those are some reasons why you would engage with a PE firm. Ed, any, anything else to add? Well, I think the, the other, the other piece is you do run into a situation where it's, you know, could be a family owned business or closely held business and partners are no longer getting along. So you need to be able to, uh, make a transition, make a transition, um, of one or more of the partners that founders of the business, um, been in that situation before. And also, um, you've got situations where I forgot. It's not all rainbows and unicorns. You know, it's, so there's a distress, there's a distress side of this too. And there's private equity firms that specialize in distress where they, you've got situations like that. Um, you got situations where founder founder may, uh, need to get liquid because they've got a family situation or they're a divorce or, or, um, an illness or death. Um, and so private equity firms, as Rory said, it's a very low friction, uh, comparatively and. Quick to close comparatively. And so they could come in and kind of provide that liquidity to founders, founders, families, um, could save the business in some cases, if there's a need for additional equity, but the business has, you know, a future ahead of it. And so there's the distress side of private equity as well. And that's a pretty lucrative piece of that business. Actually, that's a great point. Um, it's worth talking about that. Not all private equities are the same, right? Like you have private equity groups that focus purely on technology and, um, let's call it, you know, services businesses. And you have others that only deal in industrial and manufacturing type businesses, and furthermore, Like Lone Star Funds, I'll go out and say it, you know, who we've worked with, they, they look for a lot of times, um, financial services, but undervalued or, or sort of distressed scenarios, you know, so they build their business in what they do best. And again, these private equity firms are made of human beings. You know, every human being has their own core competency and the things that they are good at and they're knowledgeable for. So, they build these businesses around people and then double down on the emphasis of where they put their money based on that. So Okay. Okay, my second to last question is If Who would not be a good fit for private equity? So if someone's listening and it's like, look, if you want to maintain a lifestyle business, if you want to maintain control, like who is just this You're you're hit, you just did on two of the big ones. So if you're, if you're going into a PE back deal, um, A couple, a couple of companies that should not be not be looking at it is if you're too small, um, and you know, by too small, I'm saying, you know, equity value under 10 million. Um, you're probably going to be too small for private equity. Uh, you know, there's, you're going to have to go, you know, to hit the Elks Lodge and pass a hat around a church, um, to, to raise additional capital. That's still friends and family. Um, If you, if you want to run your business as a lifestyle business and you've gotten used to making, you know, a million, million and a half a year, working 35 hours a week, it ain't going to be that way anymore. And if that's what you're looking for, you'd best exit. Um, if you're going to go private equity and you know, the other, the other piece where it isn't good is. And we'll talk, I know we'll talk about this more is if you've got a problem and you're trying to sell out from in front of that problem. And you don't think the private equity guys are going to find that problem. Um, they're going to find that problem during diligence. They've generally seen it all. And if they don't find it during diligence, they're going to find it after diligence. And so if you're, if you're trying to get out and you're not being transparent about what the business's opportunities and challenges are, that's going to be a bad fit ultimately for that private equity partner in you. Yeah, well said, you know, first and foremost, if you're a fan of total control of your business. And you're not willing to see that private equity ain't for you. All right. What is private equity not? So Ed, you mentioned, you alluded to this just a second ago with VC, but just what are the things that private equity gets confused with? We want to clarify. Yeah. So, so venture capital, um, and I'll, and I'll use the example. Um, venture capitalists look for, you know, 20X, 30X returns and they expect 10 percent of their stuff to hit. Private equity looks for 20 percent returns and expects 90 percent of it to hit. So you're, you've got a different risk profile that those, that those two types of investors are, are looking for. And so if you're a high risk kind of early stage business, that's rocket ship to the moon, you're probably not a private equity. You're probably a venture capital as a candidate. Um, The other thing that private equity is not is generally a passive investor. Um, private equity is, is looking for ways to either operationally or financially enhance the value of that business through efficiencies. And that's where they're, that's where they're going to bring their expertise in. And, you know, so if you're expecting someone who's just going to hand you a big check and walk away and, you know, come back five years later, that ain't going to happen. They're not that they're, they're an active partner in the business. That's the angel investment seed round action. That's not right. Yeah. Yeah. Yeah. Yeah. Well said. I mean, um, yeah, it's, it's, it just, it comes down to really what you're used to and how much you control and ultimately, you know, how, how much honestly, from what I've observed and experienced. How much you're willing to kind of put your ego aside and move your business forward with a partner. Because again, oftentimes the private equity groups see things beyond what the founder sees in your business. And they want to work with that founder and the management team to even potentially pivot the business in a way that everyone thinks can make a lot of money, but sometimes if it's. Not the right chemistry or dynamic off the, off the jump that that's going to be a problematic road. Um, and I think that the founder, uh, generally controls that destiny on how they respond to change and the input of others, if you will. Yeah, I think that's a good note to leave on because the whole premise of this is it can be, when it's set up well, it can be a win, win, win scenario. Oh yeah. Everyone can hit home runs. Life changing. It can be lucrative. Uh, you can win. The PE firm can win. Your customers can win. So when it's done right, um, it, it can be, um, a great move to make. And part of why we're doing this podcast is just to arm you with that knowledge. So, you know. What's going on, eyes wide open, what, what you're getting into. So, um, we'll call that a wrap for our first episode, but, um, there's, that was literally just the tip of the iceberg, the very tippy top of the pyramid type of thing. So we're going to expand on, um, all of these topics and more, and just make sure that you have everything you need. To, to make an informed decision. And right now we're planning on every other week podcast. So it'll drop every other week. But if you, um, like what you heard here or want to hear more and learn more about this, then hit subscribe. So you don't miss an episode and we will catch you next time on the private equity experience podcast. If you enjoyed today's episode, please like, share, and subscribe wherever you get your podcasts.