Private Equity Experience

Private Equity in 2026: AI, Rates & Survival Strategies

• Emily Sander • Season 1 • Episode 27

Share episode

Dive into the future of private equity with hosts Rory Liebhart, Emily Sander, and Ed Barton! In this episode, they break down the top trends shaping 2026, from AI's impact on labor to soaring interest rates and deglobalization. Learn how PE firms are adapting to these challenges, what it means for founders and investors, and hear their bold sports predictions for the year!


🔔 Subscribe for expert insights and hit the bell to stay ahead in the PE world!


Key Topics Covered:
-Interest Rates & Private Equity Strategies: How rising rates affect leverage, deal-making, and refinancing.
-AI's Role in Labor and Operations: Will AI replace jobs or create new opportunities?
-Deglobalization's Impact: Tariffs, supply chain shifts, and reshoring trends in manufacturing and services.
-2026 Sports Predictions: Super Bowl, College Football, and more!

==============================

🎙 Podcast – Strategies, PE 101 & witty banter

📚 Book – On‑Ramp to Exit, full deal life cycle

🛠 Resources – Free templates, guides, tools

🔗 LinkedIn – Follow us for fresh PE insights

================================

Who Are We?

Three insiders. One mic. All things private equity — explained. Hi 👋 We’re Ed, Rory, and Emily — a CEO, a CFO, and a Chief of Staff — here to demystify the world of private equity. Between us, we’ve sat in the founder’s chair, run PE‑backed companies, and worked on the deal side, so we know the wins, the pitfalls, and the jargon (and we’ll explain it).

Through the Private Equity Experience Podcast, our book On‑Ramp to Exit, and a library of free tools and templates, we share real‑world stories, practical strategies, and insider insights to help you navigate every stage of the PE journey — whether you’re leading a portfolio company, joining a deal team, considering PE, or just PE‑curious.

🔗Connect with Ed

🔗Connect with Emily

🔗Connect with Rory

...
emily-sander_1_12-16-2025_150410:

The Pex boys are here.

rory-liebhart_1_12-16-2025_150409:

We are

emily-sander_1_12-16-2025_150410:

Sweet Eddie B and Big Red.

rory-liebhart_1_12-16-2025_150409:

Good to see you both again. It's been a, I guess a few weeks now since we've been

emily-sander_1_12-16-2025_150410:

It's been a minute.

rory-liebhart_1_12-16-2025_150409:

and

emily-sander_1_12-16-2025_150410:

It's been a minute.

rory-liebhart_1_12-16-2025_150409:

almost the end of the year. Can you believe it?

emily-sander_1_12-16-2025_150410:

It's crazy. It's crazy. Time goes faster as you get older. Is this just me?

rory-liebhart_1_12-16-2025_150409:

Not just you. It's a fact.

sweetness--xim-xis-_1_12-16-2025_150409:

I've got a lot of older on both of y'all and it don't slow down.

rory-liebhart_1_12-16-2025_150409:

have three, three decades of generations, I think, amongst us,

emily-sander_1_12-16-2025_150410:

Represented because I remember as like a little, little kid, someone said like, oh, it'll be a year. You might as well said it'll be forever. Like it'll just be forever and ever. And I was like, A year is like not, not that long. Um,

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

guys do New Year's resolutions? You're like, if I have a goal, I just make it happen any month I want.

rory-liebhart_1_12-16-2025_150409:

Yeah, the latter. I think, uh, stopped being a resolution or probably like 10 years ago and you know, now it's just pretty much, you know, year round try to try to not get complacent, I guess.

emily-sander_1_12-16-2025_150410:

Yeah. Do you like reflect on last year or just like

rory-liebhart_1_12-16-2025_150409:

yeah,

emily-sander_1_12-16-2025_150410:

whatever.

rory-liebhart_1_12-16-2025_150409:

Usually it's building on last year, you know, so if, if I've been, you know, kind of doing certain things, uh, up to this point I'm trying, I'm always trying to do more and, you know, kinda progress I guess. So, yeah, it's usually, it's, it's never usually like, let me pull back on shit to my detriment sometimes, but, you know, like that's generally how I go.

emily-sander_1_12-16-2025_150410:

Yeah, my new thing has been like process goals versus achievement goals because I used to be like, I want this, like, you know, revenue, I want this accomplishment in hand and.

rory-liebhart_1_12-16-2025_150409:

yeah.

emily-sander_1_12-16-2025_150410:

I found it's much more about like, get the process down and it like, like the rep is the goal, if you've done your rep like that is winning.

rory-liebhart_1_12-16-2025_150409:

it. Yeah, I agree with that completely. Um, but, you know, you keep stacking those reps, as you say, you'll, you

emily-sander_1_12-16-2025_150410:

Mm-hmm.

rory-liebhart_1_12-16-2025_150409:

those end goals, and then you have to reassess what the reps mean, you know?

emily-sander_1_12-16-2025_150410:

Yes. So we're going into 2026 and we wanted to lay some, some groundwork and just kind of get some different elements on the radar for people about what, what, um, the economy looks like, what the political landscape looks like, just different factors and different trends that might affect the private equity world. So why don't one of you kick us off? What's the first thing we should know?

rory-liebhart_1_12-16-2025_150409:

the, the thing that everybody likes to talk about all the time, regardless of cycle year, uh, what have you, seems to be interest rates. So, you know, as we've talked about ad nauseum, you know, so much of the private equity business model is based on, you know, leveraging acquisitions through debt. And so a whole heck of a lot of difference how those trends move. And so. You know, directionally, or specifically how interest rates fluctuate, um, you know, impacts how private equity operates in a lot of ways.

sweetness--xim-xis-_1_12-16-2025_150409:

Yeah, I think the, the challenge that we've got is historically we, we were at historically. Low levels of interest rates. And so

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

they ticked back up to kind of a more normal level,

rory-liebhart_1_12-16-2025_150409:

Right?

sweetness--xim-xis-_1_12-16-2025_150409:

now screaming is like way too high.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

And the, the challenge you have with, with interest rates. So I, I think there's political pressure certainly, uh, to bring interest rates down.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

think in advance of a midterm election in 26. There's gonna be continued pressure to bring interest

rory-liebhart_1_12-16-2025_150409:

Yeah, most definitely.

sweetness--xim-xis-_1_12-16-2025_150409:

Powell's time is limited and there'll be a new Fed governor that's gonna be appointed in part in, in part, or based on their willingness to reduce rates. Now the challenge is. And, and I, you know, I'm sure we'll touch on it more, but I'll touch on it now, is you also have, that creates an inflationary, inflationary specter because lower interest rates increases the availability of money. Plus you've got a, and I know and R you had kinda listed this as something to talk about, a deglobalization of the economy, which

rory-liebhart_1_12-16-2025_150409:

thought I'd hear that term in my lifetime, to be honest with you, but yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

which also is creating inflationary

rory-liebhart_1_12-16-2025_150409:

Yes. Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

as a result, what we may see is political pressure pushing interest rates down some in 2026, but that's gonna ratchet inflation unless the economy goes to

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

And that's not normally interest rates falling stimulates the economy, which is a inflationary cycle.

emily-sander_1_12-16-2025_150410:

And just as a quick.

rory-liebhart_1_12-16-2025_150409:

yeah.

emily-sander_1_12-16-2025_150410:

Like refresher for people, low interest rates, good for PE firms

rory-liebhart_1_12-16-2025_150409:

Generally, yeah. Oh

emily-sander_1_12-16-2025_150410:

generally, yes.

rory-liebhart_1_12-16-2025_150409:

again, back to the mortgage, mortgage analogy, we kind of thread throughout all this. You, you want your, want your cost of money to be as low as you can get it, and as Ed said, we all lived off of really low interest rates for a long time. You know, we're in the place where I think we certainly will continue to see, like small basis point drops in the coming quarters, in the, in 2026. Credit spreads remain wide. So you have a base rate and then you have a spread above that rate, and that creates the volatility because it's a floating rate, it's, it's not a fixed rate. So I think what we'll see is that interest rates will still be pretty high. so if you have a debt maturity coming up. You're gonna have to deal with refinance risk, meaning, you know, you're either gonna have to pay the piper and then probably end up taking out more debt to fuel your business or whatever, at a higher rate anyway. But you, it's, it's not gonna be as easy as, as it's historically been to refinance at a, at a good rate.

emily-sander_1_12-16-2025_150410:

Do PE firms build that in though Rory? Like wouldn't they say, Hey, we

rory-liebhart_1_12-16-2025_150409:

Yeah. Yeah. I, I don't know of too many, certainly in my, my experience. Maturity walls that have been hit in a real bad way. Um, it happens for sure, but, you know, these are very, very sophisticated capital markets professionals that know how to hedge their risk and stuff like that. But it, nevertheless, it's, it bears repeating that floating rate debt on the books limits your ability to operate if you have to pay more based on fluctuating interest rates and credit spreads. So

sweetness--xim-xis-_1_12-16-2025_150409:

ran, I mean, for years ran naked.

rory-liebhart_1_12-16-2025_150409:

yeah, we did.

emily-sander_1_12-16-2025_150410:

That'll be the clip for social media.

rory-liebhart_1_12-16-2025_150409:

that's gonna be the thumbnail. That's gonna be a short in and of itself on YouTube. I love this. Yes, we did Ed, we de definitely ran naked together a lot, you know?

sweetness--xim-xis-_1_12-16-2025_150409:

Yeah, I

rory-liebhart_1_12-16-2025_150409:

But yes, we hardly ever, ever working with you. I don't think we really ever hedged our, our risk

sweetness--xim-xis-_1_12-16-2025_150409:

yeah, we rarely hedged,

rory-liebhart_1_12-16-2025_150409:

in that timeframe. Yeah,

emily-sander_1_12-16-2025_150410:

Okay, so we've got, uh. We've got people running naked. Um, we have something called floating interest rates. So basically what was the floating spread? You said Ro Rory, like basically you can't predict it, is what you're saying.

sweetness--xim-xis-_1_12-16-2025_150409:

Well,

emily-sander_1_12-16-2025_150410:

can't.

sweetness--xim-xis-_1_12-16-2025_150409:

risk. You've got a risk premium

rory-liebhart_1_12-16-2025_150409:

That's exactly what it is. It is,

sweetness--xim-xis-_1_12-16-2025_150409:

a risk free rate, which is gonna be driven by kind of the. Interest rates that are set by the Fed largely sets the risk-free rate. It's theoretically supply and demand, but the Fed is providing supply at a certain,

rory-liebhart_1_12-16-2025_150409:

yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

at a certain rate. So that's your risk-free rate. And then you've got the risk premium over that, which is the amount that needs to be paid based upon the underlying credit risk of the, of

emily-sander_1_12-16-2025_150410:

Say the risk-free rate in, uh, what does that mean? Normal.

sweetness--xim-xis-_1_12-16-2025_150409:

so the risk, the risk-free rate is essentially the amount of money you need to. Make a loan with no risk at all, with no risk of non repayment. So the only thing that you're gonna have is risk, is inflationary risk. that will kinda inflation is about, is about the only piece that impacts the, risk free rate. And then you have the risk premium, which is the systemic risk associated with either that specific credit or with the market as a whole. And there's all sorts of.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

set that. But at the end of the day, that that risk premium fluctuates because if there's macro risks in the economy, folks go, even if I think inflation's gonna be relatively low and risk free rate's low, some of these. Some of these businesses, because they may have large amount of floating rate debt, they may have, you know, bullet maturities coming up. They may be

rory-liebhart_1_12-16-2025_150409:

Yeah,

sweetness--xim-xis-_1_12-16-2025_150409:

in the, in the hold period for private equity, the risk goes up and so the, the banks are likely to kind of put a bigger spread on the, on the loans.

rory-liebhart_1_12-16-2025_150409:

yeah. And to your question about how, you know, what, how does hedging come into that? So if you, if you are, if your business. Is damaged by volatility in those floating rates, then you can hedge your risk by paying a banker, an intermediary to a, to make it simple, fix the rate that you're looking for,

emily-sander_1_12-16-2025_150410:

Oh.

rory-liebhart_1_12-16-2025_150409:

a cost. Again, there's risk to the other side, so you pay for that risk. So hedging simply means. Reducing volatility, um, by, by, by paying. It is actually called a premium when you do that. When you, when you pay those, um, pay those amounts to banks and stuff, so yes. But depending on the, you know, complexity of your business or not, you don't need to hedge your hedge, your hedge your exposure. you know, and this is a good transition to the next trend that we'll talk about, which is, know, if you find yourself having to pay more. In interest to service the debt, cash out the door. And maybe you didn't plan for that. Well, what are the, some of the other trends that we're gonna see is, and one of those is labor. And you, you look at most companies, the biggest expense is, you know, often other than debt service is labor, right? And so. One of the trends to think about here is what's gonna happen with the labor market. We're still at super, super low unemployment rates overall, but, you know, um, is that going to remain the case? Is the labor market gonna be as tight? Are you looking at having to pay high wages against rising costs elsewhere, or high raises along, or ra wages along with other costs that you're seeing? you have the pricing power to offset that? And, and to make room to pay for other costs that are unanticipated that come up, you probably have to cut into your labor force.'cause that's where you're gonna see the most. Juice from your squeeze. So like, that's why you see big companies, um, you know, making layoffs and, and adjusting their workforce to be more AI centric or whatever is, you know, because labor is one of those levers you can pull in a cost side. And unless you think that the labor market's certainly gonna become looser, meaning higher unemployment, so you don't have to pay as much to retain and buy talent. That's something I have to consider. And if you're, from a private equity standpoint, again, you're managing to a p and l, you're managing to a bottom line. You have to be nimble and able to manage, um, you know, a workforce and labor in a way that allows you to continue to be profitable and, and, and grow profitability.

emily-sander_1_12-16-2025_150410:

Okay, let me see if I can do like a real life example.

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

let's say a few years ago. Uh, PE firm made an investment at pretty low interest rates. Like these were like record low interest rates for a while. Yes. And now the debt maturity has come up and they might have to refinance at a higher rate. So they're like, okay, boom. On our books, we have this, I don't know, 1, 2, 3, 4% more that we just have to pay. And then people want raises and they want colas and all these different things, and you're getting crunched from those two

rory-liebhart_1_12-16-2025_150409:

Yep.

emily-sander_1_12-16-2025_150410:

And you might go, we need to do around of layoffs Now, anticipating that a whole bunch of other people are gonna do this. So if we need to bring. High talent back into our company, we're gonna have a lot of supply. Is that kind of what I'm hearing?

rory-liebhart_1_12-16-2025_150409:

in, in our, in our current market, it means there's still a, lower supply. It's, it's hard to get talent now. I think every, and this is the trend, I guess this is the part we're talking about. I think everybody sort of sits on this fence with ai, and that'll be another trend on its own that we'll talk about is to

emily-sander_1_12-16-2025_150410:

Oh yeah.

rory-liebhart_1_12-16-2025_150409:

is the labor market gonna loosen up? Because you're gonna start to see, say there's somebody that leaves their job. I think every manager now is really thinking about, can I use AI to replace that role? I need to requisition new roles? So business plans and operating plans are, are, you know, basically being developed for the coming years based on much do I actually need to spend on human beings. With the advent of ai, now you get into other things involved with CapEx spend to develop AI for your company, but that's a whole nother ball game point is, the labor market and the dynamics in it are gonna be really interesting. In how you can manage a business, um, either, you know, in a market where labor's expensive or you know, perhaps there's going to be more supply, as you said, because of tools and technology and, and basically contraction.

emily-sander_1_12-16-2025_150410:

Okay. And I was thinking there'd be more supply.'cause if more, if a whole bunch of layoffs happen

rory-liebhart_1_12-16-2025_150409:

true. It could.

emily-sander_1_12-16-2025_150410:

collectively, there would be more. But you were saying that there'd be

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

so just to understand that.

rory-liebhart_1_12-16-2025_150409:

to very possible, but like. Again, I think maybe that's the next trend to, to talk about even is the AI component is like really, where is that gonna affect labor force? You know,

emily-sander_1_12-16-2025_150410:

Oh, I see what you're saying. Okay.

rory-liebhart_1_12-16-2025_150409:

I think white collar jobs, as they say, probably the most, I'd say mid-level, uh, functional work, um, even some level, mid, mid-level managerial work that's gonna be. More where companies are gonna at least experiment with, with using AI as opposed to humans. You're not gonna see people that are farmers using AI to drive tractors and plow fields right now. Like that's not where it's gonna come from maybe in the future. But right now it's gonna be, you know, law firms, accounting firms, uh, you know, you, you name it, service oriented tech firms that have people that do things that are repeatable

emily-sander_1_12-16-2025_150410:

Yeah.

rory-liebhart_1_12-16-2025_150409:

and, you know, can be sort of. 7 working, uh, through AI, bots and agents is gonna be, I mean, companies are just, you know, sort of being forced by the market to experiment with these things. If you're not doing these things, you're looked at as a laggard, you know, and there's maybe some actual merit to that. We shall see. It's so new. I think that's gonna be the topic everyone's talking about for the next year or two,

emily-sander_1_12-16-2025_150410:

Okay, so you're saying'cause AI is coming in there might be less. Okay.

rory-liebhart_1_12-16-2025_150409:

Uh,

emily-sander_1_12-16-2025_150410:

How.

rory-liebhart_1_12-16-2025_150409:

be, I, there will be. I

emily-sander_1_12-16-2025_150410:

Yes.

rory-liebhart_1_12-16-2025_150409:

matter of if, it's a matter of how much.

emily-sander_1_12-16-2025_150410:

And where and how and all those things.

rory-liebhart_1_12-16-2025_150409:

correct.

emily-sander_1_12-16-2025_150410:

do you like Ed? How do you use ai?'cause you have, you know, in your accounting practice,

sweetness--xim-xis-_1_12-16-2025_150409:

Yeah, we actually, we use it. For a couple things. The first one is when people call in and they ask weird, esoteric questions, and we kind of pop those weird, esoteric questions in there, and I don't,

emily-sander_1_12-16-2025_150410:

I.

sweetness--xim-xis-_1_12-16-2025_150409:

and I've told our folks, don't take the AI as gospel,

rory-liebhart_1_12-16-2025_150409:

Right.

sweetness--xim-xis-_1_12-16-2025_150409:

it, it's at least an epistle. It's sending you the right direction and then you can kind of figure the stuff out as you go. So, so we, we use it there. We also use it to summarize. So if I've got a, a large document, so for instance we're, we've got a contract

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

we be, that we're asked to review, I'll drop a PDF of that contract into AI and go, you know, summarize this or basically abstract this, abstract this contract for me. Now again, that's always gonna leave stuff out. By nature of it being an abstract, but it does kind of cut it down to the, to the critical issues. And then the systems themselves are becoming more AI

rory-liebhart_1_12-16-2025_150409:

Mm-hmm.

sweetness--xim-xis-_1_12-16-2025_150409:

So when you look at like a QuickBooks online,

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

there's already, you know, kind of a set these business rules. So that stuff will automatically post. It now is going, okay, we're matching, you know, automatically matching various bank, bank statement

rory-liebhart_1_12-16-2025_150409:

Yep.

sweetness--xim-xis-_1_12-16-2025_150409:

to bank.

rory-liebhart_1_12-16-2025_150409:

Mm-hmm.

sweetness--xim-xis-_1_12-16-2025_150409:

those automatically. And so all you have to do is validate. So what used to take us two or three days to close a client may now take us a couple hours. And so that's, and that's being driven. You know, AI is a broad term and

rory-liebhart_1_12-16-2025_150409:

It is, yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

it differently, but as simple as machine learning, you know, the kind of the old school, a AI that's been around for 20 years is infused in all of these, in all of these programs now, and it's continuing to broaden.

emily-sander_1_12-16-2025_150410:

Yeah.

rory-liebhart_1_12-16-2025_150409:

Yeah, it's interesting, like where does PE figure into all this? Certainly from the Opco, meaning operational company, op operating company, level of their investments. I think there's gonna be a big push from the PE funds to. enable and sort of pressure management teams to adopt this level of technology because, you know, it does have such power to harness. Now again, the cost to implement it can vary by, by industry, by by kind of company, of course, but you know, I, I see it equally where PE will use the technology as a tool to enhance the business they own. But also perhaps, you know. Investing in AI becomes much more of a pe, play than just pure venture play. So early stage investment. So you, you know, I can see a point, I can see a situation where. PE funds, kind of set up a, an AI strategy, raise a bunch of capital for that alone, and then aggregate up companies that, you know, I think could go two different ways. Growth stage, right? We talk about growth, straight stage, private equity investment. That could be very, very much a fruitful channel. The other one, and I, know, hate to be Dr. Doom here, they're gonna be a lot of blowups no matter what. It's gonna always happen. This is where PE comes in and, and sort of acts as that sort of distressed investor buying up companies that are distressed, and maybe turning them around or bolting them onto existing portfolio companies that they have to give'em a second, second shake at life if they've actually got some sort of product that actually matters.

emily-sander_1_12-16-2025_150410:

Oh, if, if a PE firm wanted to be totally contrarian on ai, how would they, is that the closest way they would do that?

rory-liebhart_1_12-16-2025_150409:

be contrarian on ai? You basically, um, strip all your computers outta your company and do everything by hand. No, I'm kidding. Um,

emily-sander_1_12-16-2025_150410:

No, no more internet.

rory-liebhart_1_12-16-2025_150409:

be contrarian. Um, God, that's a good, good question. I don't know. I, I don't know how to answer that'cause I just feel like it's gonna be so much of a, it's almost gonna be. Like a commodity. It, it's gonna be incredibly ubiquitous. There's no way around it, you know?

sweetness--xim-xis-_1_12-16-2025_150409:

Yeah, I was almost, I was almost thinking more there's the. Contrarian, know, if you want to go, okay, what's, what does contrarian mean? And I, I tend to view it as, are there folks that are, and I go back to the internet, boom.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

again, I, you, you guys are probably

rory-liebhart_1_12-16-2025_150409:

I was around for it. Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

Okay.

rory-liebhart_1_12-16-2025_150409:

Oh yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

but you know, the, the, I look at it and go the folks that did fairly well, you had a few kind of. Big movers like the Amazons and such that that survived and thrived most blew up. And I think we'll see the same thing here and where I think private equity has the opportunity as opposed to venture where, you know, venture's gonna make a lot of these bets and hope that some of these payoff and the consolidation happens and they get. Cashed out one way or the other. I think on a private equity side, we are gonna see, you know, investments in later stage companies. Um, but on the contrarian piece, I think it's gonna be the picks and shovels folks. So, you know, AI's gonna be here. It's, there's a huge power consumer. So, you know, if I don't want to invest directly in AI,'cause I don't wanna bet on the winner, um, but I wanna bet on the, the. moving forward and having additional consumption of electricity. You know, where can I, where can I invest as a private equity firm to take advantage

rory-liebhart_1_12-16-2025_150409:

Construction.

sweetness--xim-xis-_1_12-16-2025_150409:

and

rory-liebhart_1_12-16-2025_150409:

I mean,

sweetness--xim-xis-_1_12-16-2025_150409:

What,

rory-liebhart_1_12-16-2025_150409:

yeah,

sweetness--xim-xis-_1_12-16-2025_150409:

I do to, what can I do to, to play in that space? Knowing that certain elements of it are gonna blow up, but that it's likely, uh, it's not likely. It is here to stay and it's gonna continue to move forward. So I don't think you're gonna get contrarian, and I think you're gonna get more peripheral

rory-liebhart_1_12-16-2025_150409:

agree. Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

I'm not, I'm not trying to pick the winner.'cause I don't know if I can do that. As a private equity investor, I'm gonna have a lower risk risk tolerance, I will look at the sector itself and go, what? Tangential sectors, what peripheral sectors support this new phenomenon and how can I kind of those coattails up?

rory-liebhart_1_12-16-2025_150409:

Yeah, one. One other element that I could see being interesting is like. P and it kind of figures into the growth stage, but it also figures into just like a lot of times PE will come in and, and a business is stalled out. They, they've taken their business to a certain point and, you know, ran outta capital before they could. You know, um, bring it to the next level. I, I see a lot of companies that are kind of moving very quickly to invest in CapEx capital expenditures towards AI adoption, things like that. But if there's any sort of shift on the top line for these companies that doesn't support their internal growth, they're gonna have, spend all this money and they're gonna reach a standstill. And so it's gonna require more capital. To move it forward, at which point, that's when it's not quite a distressed company, perhaps. I guess if it's close to running outta cash. It is, but it's, it's maybe like not the same thing as a growth company. It's more like a contractor come in to, um, build you a new kitchen and. Um, that contractor itself ran outta steam to be able to do it. So you bring in another contractor to pick it up and bring it to the, to the end of the project. I see a lot of scenarios possibly going that way where companies made big bets and say, okay, I'm gonna a ton of my operating budget this year into AI implementation. Not just adoption, but implementation And they're left with, what do I do next? So, you know, probably that owner is gonna be like, okay, I need to sell part of my company to get an infusion of capital to take this thing or finish the job, so to speak. I can see that happening a lot.

emily-sander_1_12-16-2025_150410:

When do you think that like, so there's this wave of AI companies that's, that are coming up, almost a tidal wave of them and you're saying, Hey, there's gonna come a point where they run outta cash or they have done all they could, or some of them flounder,

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

there's gonna be that moment.

rory-liebhart_1_12-16-2025_150409:

teams, uh, you know, no, no bounds. I mean, like you can have all the business, um, you know, ideas and, and sort of like business plan, but if it's a bad management team, it's gonna fail. And we know that about humans is there's bad managers and there's bad management teams. So no matter what sector you're in, it's gonna happen. And it's gonna happen in this one too. For

emily-sander_1_12-16-2025_150410:

So a savvy PE managing director would know, Hey, in about 12, 18 months, whatever you think it's gonna be, this, this is gonna be a frothy market in terms of these,

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

what?

rory-liebhart_1_12-16-2025_150409:

18 months to 24 months. Yeah. That's kind of the timeline because whatever companies had raised, you know, up in their neck, their earlier round are gonna have burned through that runway by two years. And so that's gonna be, yeah. So I, and I do think that as we're talking about 2026 specifically, you're running up on that timeline from when this all this fervor started. We're kind of like two years into where. It went from like, you know, being talked about a little bit to, you can't get outside of a single, kind of, uh, earnings call without heavy reference to ai. So everybody's in it. Everybody's put a ton of energy and effort into it, now it's gonna be a time for reckoning, I think after that initial flood of capital's gone through it.

emily-sander_1_12-16-2025_150410:

How does deglobalization.

rory-liebhart_1_12-16-2025_150409:

I don't know if deglobalization is a thing, if we didn't have the current administration, the United States of America, but we do. And I think that, um, there's more, much more of a nationalist, protectionist sort of, uh, vibe and the tariffs, you know, kind of, uh, support that. So what does that even mean? It means that. You have to rethink your entire business in supply chain. A lot of times, depending on the kind of business you are, um, whether you're a manufacturing business or you're, you're a goods importer, you're a reseller, whatever the heck it may be, you're, um, rely, rely on, um, labor. Who knows? Like, rethink things.

emily-sander_1_12-16-2025_150410:

yeah. I mean, Rory, you and I have a had a. Mutual connection in Canada,

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

the manufacturer space, and when tariffs hit that was, you know, 30, 50% more expensive.

rory-liebhart_1_12-16-2025_150409:

Major, major impact for a lot of these companies. And Canada's our just to the north. We're not even talking, you know, overseas. Overseas, exactly. Yeah. does that mean? It kind of comes back to a lot of the things we've talked about is that has to be offset. So the higher cost associated with deglobalization. Have to be offset by at the front end in some ways. What, how much pricing power do you have over your customers? and what, what levers can you offset internally? So get, do more with less Sure. Seems to be the, you know, that philosophy seems to know. No, no bounds on economic cycle. It's always that. But you know, like, um, it just, there's so much, I guess the whole point is. A whole other level of discipline is required to maintain profitability in these businesses.'cause we're fighting against things that we haven't dealt with really. Um,

sweetness--xim-xis-_1_12-16-2025_150409:

Well, the, the other piece on the deglobalization side is a lot of that has been focused on manufacturing because as you noted, the current administration's view is, you know.

rory-liebhart_1_12-16-2025_150409:

yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

Can't we just go back to 1951 again and have smoke stacks and steel mills and other things? And you know, there's some, there's some

rory-liebhart_1_12-16-2025_150409:

Right.

sweetness--xim-xis-_1_12-16-2025_150409:

defense reasons why we may want to preserve some of those industries, but,

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

The where it hasn't been impacted and where I'm still seeing, you know, significant opportunity is the use of offshore labor, in the services

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

so again, you where, where deglobalization is hitting hard in agriculture and manufacturing and services, I think it's globalization continues to be a thing I'm just kind of hoping,'cause again, our model, you know, we utilize a, a global workforce, um, in, in my company.

rory-liebhart_1_12-16-2025_150409:

Yep.

sweetness--xim-xis-_1_12-16-2025_150409:

And so I, you know, I, what I'm hoping is that the administration doesn't think about that. Um, and that no one from the administration watches our podcast and decides to just leave, you know, global labor alone. Um, now the, this is not just a, a Trump administration thing. The Biden administration had some protectionist policies as well. Um,

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

I, I think it's been a, it's been an evolving, it's interesting because, you know, the. Globalist or, or protectionist trade, um, has tended to be more of a, you know, driver driven by labor unions and, and,

rory-liebhart_1_12-16-2025_150409:

Right.

sweetness--xim-xis-_1_12-16-2025_150409:

typical, uh, traditional democratic, um, strength areas. And now you've got a populist government that has essentially said, Hey, we're, we're buying into this too. I don't think it's gonna make a difference. In three years, who gets elected president? I think you're gonna continue to see this deglobalization trend

rory-liebhart_1_12-16-2025_150409:

Hmm.

sweetness--xim-xis-_1_12-16-2025_150409:

at least another seven years or so until hopefully some folks, some folks kind of moderate the, moderate the tone and temperature. Um, but it's a, it's a red meat. It's a red meat electoral issue, and folks like to be able to have their jobs and, you know, the steel mills and the smoke stacks and

rory-liebhart_1_12-16-2025_150409:

Yeah. Yeah.

emily-sander_1_12-16-2025_150410:

Why does that make pricing power non-negotiable?

rory-liebhart_1_12-16-2025_150409:

Well, I'd say it is just pricing power. It's non-negotiable. You, you, to be successful, you gotta have pricing power. So you need to be able to pass those costs onto your customer. And you know, like you, the, the example you brought up Emily, like where, you know, a Canadian company that you know, manufacturers in Canada but sells in the us. Like, uh, you have to be able to. Pass the inflated cost to the, to the, to the customer to be able to survive even potentially at, at, at, at best. It's eating into your margins. worst, you just can't be viable, you know, because it's, you're just gonna, you're

emily-sander_1_12-16-2025_150410:

Is, is that, yeah.

rory-liebhart_1_12-16-2025_150409:

flow

emily-sander_1_12-16-2025_150410:

Is that the only way to do it is just you pass on the cost to the customer?

rory-liebhart_1_12-16-2025_150409:

or

emily-sander_1_12-16-2025_150410:

mean, some, some companies I know are like,

rory-liebhart_1_12-16-2025_150409:

from your own business.

emily-sander_1_12-16-2025_150410:

yeah.

rory-liebhart_1_12-16-2025_150409:

this is assuming you want to, you know, continue to maintain or expand your margins. If you're okay with contracting margins, you're betting on the long game, then that's a different story. But you have to be able to, you know, it's a zero sum game at the end of the day. You have to be able to, you know, offset your costs with additional business or, you know, take, take, take out costs if your business is reduced. Yeah.

emily-sander_1_12-16-2025_150410:

Well, I'm assuming that. In some scenarios, that's the smart savvy thing to do is like, let's ride this out. We'll take a lower margin

rory-liebhart_1_12-16-2025_150409:

Mm-hmm.

emily-sander_1_12-16-2025_150410:

on the fact that, hey, we'll survive this. We won't,

rory-liebhart_1_12-16-2025_150409:

And

emily-sander_1_12-16-2025_150410:

our customer

rory-liebhart_1_12-16-2025_150409:

doing

emily-sander_1_12-16-2025_150410:

have churn

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

be able to bring things back

rory-liebhart_1_12-16-2025_150409:

Yeah. Exactly.

emily-sander_1_12-16-2025_150410:

that's risky though. That's like going through a

rory-liebhart_1_12-16-2025_150409:

Yeah.

emily-sander_1_12-16-2025_150410:

Yeah. Tunnel. Hold your breath type of thing.

rory-liebhart_1_12-16-2025_150409:

Yep.

emily-sander_1_12-16-2025_150410:

Okay.

rory-liebhart_1_12-16-2025_150409:

Yeah, but what choice do you have as a business owner? Really? You know,

emily-sander_1_12-16-2025_150410:

In, in times like these.

rory-liebhart_1_12-16-2025_150409:

of backed into a corner that way. Yeah.

emily-sander_1_12-16-2025_150410:

What else do people need to know for 2026 private equity?

rory-liebhart_1_12-16-2025_150409:

I, I think overall it's, it's, it's, it's not gonna be a year of, um, huge expansion. I think it's gonna be a lot of sort of eking out profitability on the margins lit. Literally meaning like. You're not gonna, you're not gonna necessarily, um, expand your, your returns on investment or your margins based on use of leverage and financial engineering. Maybe that's the way to say it. Financial engineering is not gonna be the way you get your returns, the way you're gonna get returns. It's fun, smart, fundamental business management really. And so it's kind of boring to talk about, but, I think that's certainly the, the direction it's gonna go for 26. Which is really just a continuation of 25 is another way of saying it kind of.

sweetness--xim-xis-_1_12-16-2025_150409:

fewer home runs a lot more singles and doubles.

rory-liebhart_1_12-16-2025_150409:

Right, right.

sweetness--xim-xis-_1_12-16-2025_150409:

and singles and doubles are gonna be successful because I think, again, when you look at the environment under which a lot of these portfolios were built, you know, back from 20. 18 through 2023. gonna be difficult to be able to not strike out on a number of

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

So, you know, it, it is gonna be, uh, I agree with Rory. It's gonna be a lot of scrapping to just try and get some reasonable returns the macro environment is not gonna make that any easier.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

putting challenges and roadblocks in a way of every one of these, um, private equity managers and really the most talented ones. the ones who bought right. Will be the ones that are able to get the returns.

rory-liebhart_1_12-16-2025_150409:

Right.

sweetness--xim-xis-_1_12-16-2025_150409:

you make the money on the buy?

rory-liebhart_1_12-16-2025_150409:

Correct. I think, so, you know, this, that's a key point to speak about. Uh, don't get me wrong, my perspective is not that there's not opportunity to be an investor and as a, you know, a private equity investor, I think that's actually going to be the place where you can make some, Hey, hey is on the buys. There's gonna be a lot of opportunity to buy. There's a, there, there's still a ton of capital on the sidelines. Um, you just have to. Look for deals that are gonna be, um, you know, undervalued if you will. And then sort of, even if you perform normally, you'll make your return on the buy as had said. Yeah,

emily-sander_1_12-16-2025_150410:

Let's do a little prediction round. So if we're sitting here December, 2026, we've kind of talked about what might happen in the PE world so we can make PE predictions or other predictions. So like in real time now,

rory-liebhart_1_12-16-2025_150409:

Hmm.

emily-sander_1_12-16-2025_150410:

we could do like, who's gonna win the Super Bowl

rory-liebhart_1_12-16-2025_150409:

Woo.

emily-sander_1_12-16-2025_150410:

Football? Not the chiefs. They just got eliminated.

rory-liebhart_1_12-16-2025_150409:

cheese. Definitely not the cheese. That's a good question. Um, see ox look good. I'll just say that. So does LA Rams though, so yeah.

emily-sander_1_12-16-2025_150410:

Yeah. Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

I'm, I'm leaning. I am leaning Patriots.

emily-sander_1_12-16-2025_150410:

Ooh, Drake May,

sweetness--xim-xis-_1_12-16-2025_150409:

I think it's gonna be the Patriots. I think they've got an easier walk the, to the Super Bowl than anybody in the NFCN. C's a A just gonna be a A dog fight. then comes out of the A FC is probably, I think the Patriots are gonna cruised. Through the playoffs, and then they're gonna be in really good position with a lot of confidence going into the Super Bowl.

rory-liebhart_1_12-16-2025_150409:

Against the Eagles.

sweetness--xim-xis-_1_12-16-2025_150409:

team's gonna have gotten beat up.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

think it's gonna be the Eagles. I I, I think the NFC is going to, I think it's gonna come down to either Seattle or uh, LA but I think whichever one goes forward is gonna lose.

rory-liebhart_1_12-16-2025_150409:

Yeah,

emily-sander_1_12-16-2025_150410:

Wow.

rory-liebhart_1_12-16-2025_150409:

wins games. My, yeah. Ed,

emily-sander_1_12-16-2025_150410:

Yeah.

rory-liebhart_1_12-16-2025_150409:

were you about Notre Dame being left out of the dance for college football?

sweetness--xim-xis-_1_12-16-2025_150409:

It was a little bit ridiculous. Um, you know, the fact that Alabama jumped Notre Dame and was selected as in an at large with more losses and not having the same

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

a, a against, you know, top 25 teams, I think was, uh, was a travesty.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

Now, I think the SEC probably has a significant influence upon the, upon the selection committee.

rory-liebhart_1_12-16-2025_150409:

Yeah.

sweetness--xim-xis-_1_12-16-2025_150409:

And I think Notre Dame's. Now, the flip side of that is Notre Dame decided that they were gonna give a, a, you know, one gun salute to,

rory-liebhart_1_12-16-2025_150409:

Yes.

sweetness--xim-xis-_1_12-16-2025_150409:

ESPN on the bowl games and basically say, well, you're not gonna get any money outta us by showing up at a second tier

rory-liebhart_1_12-16-2025_150409:

Right.

sweetness--xim-xis-_1_12-16-2025_150409:

um, because you played us. You know, so, again, I'm, I'm. I am hoping that the team made that decision. The players, not the, not the coaches administration solely because that's, this is their college ex football

rory-liebhart_1_12-16-2025_150409:

Mm-hmm.

sweetness--xim-xis-_1_12-16-2025_150409:

but I can't say that I'm saddened that Notre Dame gave them one gun salute.

rory-liebhart_1_12-16-2025_150409:

Yeah. Yeah. I hear you. Yeah. I

emily-sander_1_12-16-2025_150410:

All right.

rory-liebhart_1_12-16-2025_150409:

other, uh, team from Indiana that gets it done. Although it'll be a rematching against Ohio State. I think so, yeah.

emily-sander_1_12-16-2025_150410:

Who wins the championship? It's always, it is like Georgia seems to be in the thing every year.

rory-liebhart_1_12-16-2025_150409:

They are. They are. I think they'll be formidable. I think it's gonna be a Big 10 team this year, either Indiana or

emily-sander_1_12-16-2025_150410:

Hmm.

rory-liebhart_1_12-16-2025_150409:

State. Yeah,

emily-sander_1_12-16-2025_150410:

Ohio State.

rory-liebhart_1_12-16-2025_150409:

Sure as hell can't be Oregon. That would be a real problem.

emily-sander_1_12-16-2025_150410:

All right. We've got some 2026 predictions for our listeners in the sports world and private equity.

rory-liebhart_1_12-16-2025_150409:

Yes.

emily-sander_1_12-16-2025_150410:

anything else for the good of the

rory-liebhart_1_12-16-2025_150409:

By low and sell high is all I gotta say.

emily-sander_1_12-16-2025_150410:

All right, thanks, ed.

sweetness--xim-xis-_1_12-16-2025_150409:

Thanks.

emily-sander_1_12-16-2025_150410:

Thanks, big red.

rory-liebhart_1_12-16-2025_150409:

Thanks.