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
Trapped Capital: The $348 Billion "Zombie Fund" Crisis in Private Equity
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
What happens when a private equity fund reaches the end of its 10-year lifespan and can't sell its assets? Welcome to the era of Zombie Funds.
In Episode 40 of the Private Equity Experience Podcast, hosts Emily Sander, Ed Barton, and Rory Liebhart break down the alarming $348 billion backlog of net asset value trapped in aging PE funds past their standard 10-year expiration date.
The team examines why private equity firms are holding assets longer than ever, how frozen M&A markets affect Limited Partners (LPs) and General Partners (GPs), and what creative financial instruments (like continuation vehicles and net-asset-value loans) are emerging to solve this liquidity bottleneck. Plus, they explore how institutional capital is expanding into unexpected markets like NFL franchise ownership!
What is a "Zombie Fund"? Standard private equity funds operate on a 10-year life cycle (5 years to invest, 5 years to exit). Zombie funds are those past their decade mark still holding significant portfolio assets because market conditions prevent an profitable exit.
The Valuation Gap: Sellers want to maintain valuations based on peak post-COVID multiples, while buyers are adjusting for higher interest rates, creating a bid-ask spread that freezes M&A volume.
LP Pressure: Institutional investors (pension funds, endowments) are starving for cash distributions to reinvest in new funds, leading to a fundraising crunch across the industry.
Alternative Liquidity: Continuation vehicles and secondary market sales are moving from "last-resort options" to core strategic tools for GPs trying to return capital to LPs.
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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.
Podcast Kickoff
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 Leaphart, and Emily Sander.
emily-sander_1_07-30-2026_134731All right.
Zombie Funds Explained
emily-sander_1_07-30-2026_134731For this pod, Rory, you have found another article for us to dive into
rory-liebhart_1_07-30-2026_134730Clickbait strikes again. They got me. They got my algorithm in, in holding it hostage. So I saw this, um, this article with the title, "Private Equity Assets Stuck in Zombie Funds are at Record High." so I had to click through read about it and, uh, you know, it put some numbers behind some actual trends that we've talked about on this show, um, about how, you know, more recent funds are, uh, having longer duration for so many different reasons. But it's something like $348 billion of, uh, worth of under management, so how much these funds manage in terms of portfolio company value. 348 billion in net asset value is in funds that are greater than 10 years old, which is a lot. You know, it's, it's, that's significant. Um, and I found it real interesting. Some of the things they talked about kind of aligned to some of the trends we've been speaking about as well from the economy standpoint. um, yeah, just this term zombie funds just made me chuckle a little bit 'cause
emily-sander_1_07-30-2026_134731So is
rory-liebhart_1_07-30-2026_134730not zombie funds because zombie implies dead. No, these
emily-sander_1_07-30-2026_134731They're like The Walking Dead Yeah
rory-liebhart_1_07-30-2026_134730active well I guess they-- zombie implies reanimated, so I don't know if that's even happening. But, um, but it, it made me think about a few things and like, you know, not only just what we're, what I was just mentioning around like the reasons why it's taking funds longer to liquidate portfolio companies, but also the fact that like I've been in operating companies, so has Ed, that are in the tail end of a, a single fund how that ends up going, right? Like, so you think about it in some ways, like, you know, if there's a new shiny toy, you know, people move on from one to the other. You have to manage the old toy or, you know, maintain it or whatever, but there's this new toy to go do lots of cool shit with. So, um, it's been... It's interesting to be part of a company that's like kind of at the tail end of a fund, so to speak. And so that got me thinking about that.
emily-sander_1_07-30-2026_134731Yeah, like I think of zombie as like The Walking Dead, which like one, you had to die first, and two, you kind of got Frankensteined back into s- some medium life space.
rory-liebhart_1_07-30-2026_134730Yeah.
Why Exits Are Stalling
rory-liebhart_1_07-30-2026_134730Yeah, it's, it's an interesting dynamic, and I think, you know, the other stat was like, uh, 74% of the private equity value is currently locked up, meaning it hasn't been
emily-sander_1_07-30-2026_134731Wow
rory-liebhart_1_07-30-2026_134730sold. And that's like, you know, I guess almost $4 trillion based on the numbers that we had calculated before of like roughly $5 trillion, uh, something like that, of PE value. So a lot of this stuff is just like, it is truly illiquid until you find a buyer. And there's a lot of reasons why companies aren't selling as fast. We've talked about, you know, interest rates rising. So being able to command a premium on what you paid back in 2020 and 2021 with higher interest rates, which means higher cost of borrowing, it's gonna be a tall order. So, like, you're then faced with, do I sell at a loss or what, right? Or do I restructure this balance sheet? Who knows? There's all myriad of reasons, but it's not, it's not the easiest market to just, like, flip companies these days to a buyer for profit
emily-sander_1_07-30-2026_134731Is
rory-liebhart_1_07-30-2026_134730a meaningful profit.
emily-sander_1_07-30-2026_134731is there a scenario though where you go, "Look, I have to cut my losses on this one to go get another one that could then make up for them hopefully?"
rory-liebhart_1_07-30-2026_134730Yeah, definitely.
Cross Fund Deals Risks
rory-liebhart_1_07-30-2026_134730And that's where you start to see things like inter-fund dynamics too. Like, so, you know, again, funds are not, I, I don't know, it, it's regulatory and just otherwise fiduciary where funds are not supposed to be co-mingled, which means you're not supposed to necessarily have, um, you know, assets going from one fund to the other, self-dealing. we've been through that kind of stuff and we, we had to structure like workarounds where it'd be like a not an actual, you know, ownership stake in this company by an, the same affiliate fund be, but rather an SPV owned by that new fund that invested in the old. It's, there's a lot of ways to work around that, but, you know, um,
sunshine-and-rainbows_1_07-30-2026_134730and it does
rory-liebhart_1_07-30-2026_134730you're really not
sunshine-and-rainbows_1_07-30-2026_134730opens
rory-liebhart_1_07-30-2026_134730supposed to do that.
sunshine-and-rainbows_1_07-30-2026_134730the private equity firm up to, if the limited partners aren't the same in the fund, so it opens them up to, to lawsuit because the valuation is such that, you know, these guys may go, "You're trying to subsidize this
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730partnership group,"
rory-liebhart_1_07-30-2026_134730Yes
sunshine-and-rainbows_1_07-30-2026_134730to cover your, your mistakes with our capital." and, you know,
emily-sander_1_07-30-2026_134731Oh
sunshine-and-rainbows_1_07-30-2026_134730those folks have to pay for the mistakes, not this, not this fund, that other fund
emily-sander_1_07-30-2026_134731Wait, so run me through a scenario. So like, a company, uh, ABC gets bought and then they're under PE investment for like pushing eight, nine years instead of five to seven, let's say.
rory-liebhart_1_07-30-2026_134730Yeah
emily-sander_1_07-30-2026_134731And so what's the option? They can then go
sunshine-and-rainbows_1_07-30-2026_134730Well, so, so what some firms have done is they go, "Well, we're gonna sell, we're gonna sell the business," and they have another one of their funds buy the business. Or
emily-sander_1_07-30-2026_134731Oh.
sunshine-and-rainbows_1_07-30-2026_134730a bigger issue is you've got a, you've got an acquisition loan comes due, the fund's in runoff, and so they have, you know, a pri- like a, a, the private equity firm may have a private debt fund that then decides to loan to the, to essentially refinance out the original bank financing
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730know, from the private, from the private debt fund. And as a result, you've got, or, or private credit, and as a result, you've now got a kind of a related party transaction where it's not arm's length. And
emily-sander_1_07-30-2026_134731So the, so the same PE firm, like, buys it from itself?
sunshine-and-rainbows_1_07-30-2026_134730Yeah. Like
emily-sander_1_07-30-2026_134731Oh
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730it, buys, buys it from fund four
emily-sander_1_07-30-2026_134731I didn't know you could do that. Okay
sunshine-and-rainbows_1_07-30-2026_134730Well, it's, it's not-- It's a pretty risky move the folks in Fund IV, are they getting, are they getting screwed or are they getting
emily-sander_1_07-30-2026_134731a deal.
sunshine-and-rainbows_1_07-30-2026_134730or are they, y- you know,
emily-sander_1_07-30-2026_134731Or are they getting like leftovers that like didn't work in fund four?
sunshine-and-rainbows_1_07-30-2026_134730Right. And so the, you know, and again, the article Rory, Rory identified did show that, you know, one of the challenges are having problems, private equity funds are having problems raising additional capital because they
rory-liebhart_1_07-30-2026_134730That's right.
sunshine-and-rainbows_1_07-30-2026_134730capital out and, and these institutional investors have a allocation percentage that they put toward alternative investments. And so as a result, you know, as we've talked about numerous times on the pod and in the book, the private equity firms make their money by cycling. You know, they have to, they have to, or they, they liquidate the investments or they sell the investments. That's where they get the kind of the, the ops. So you get your base management fee, you get your real payment if you're a private equity person on the 20% or so on the carry. Well,
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730getting carry, two things are happening. One, your income's low, and two, the money that folks have said, "Well, I'm gonna put 10% of my money in private equity," that 10% of the money's still in private equity. So you go to try and raise another fund and you can't
emily-sander_1_07-30-2026_134731So just, okay, so just so I have it, I think I have it. So let's just say, uh, Emily's private equity firm has fund four, and in fund four we invested in company ABC. That did not create as much value as we wanted, as quickly as we wanted, and so it's just kind of lingering there. And so to close fund four, I'm gonna have fund six of still Emily's private equity firm buy ABC company, and now it's in fund six.
rory-liebhart_1_07-30-2026_134730Well, that happens and can happen, but it's not a good thing because how do you tell the investors in Emily Fund 4, maybe you're the sole investor in Emily Fund 4, how do you tell Emily Fund 4 that you got a fair price for, for that
emily-sander_1_07-30-2026_134731Oh, yeah,
rory-liebhart_1_07-30-2026_134730who's, you know, basically affiliated with you in the same way?
emily-sander_1_07-30-2026_134731And did
rory-liebhart_1_07-30-2026_134730how do you have a market trade it's the same group of funds that are buying the next company? Like, how, how do you, how do you not suspect there's collusion there?
emily-sander_1_07-30-2026_134731And so what you're saying, Rory, just there, and what I think you were saying, Ed, in a different way is, like the LPs for fund four c- first of all could be different than the LPs for fund six.
rory-liebhart_1_07-30-2026_134730likely the same.
emily-sander_1_07-30-2026_134731More likely the same, maybe a little bit different mix, but more than likely the same. But, but they're going like, "Wait, so when you told me all this good stuff about this company back in fund four, and we did our calculations based on what you estimated, y- you were either lying or were grossly negligent somehow, and so now we're doubling down."
rory-liebhart_1_07-30-2026_134730it's, yeah, it's like more like there's a cacophony of factors that could have happened. Like maybe your projections on the business are spot on, but the capital markets environment to be able to raise new debt cheaply or to sell a company in an M&A transaction, just not what, what, what would make it a profitable deal if you sold it. you haven't been able to liquidate the asset for those reasons. So it may not be operational. It may very well be capital markets or just general
emily-sander_1_07-30-2026_134731Okay.
rory-liebhart_1_07-30-2026_134730driven
emily-sander_1_07-30-2026_134731What, what happens if in fund six it sits there and does the exact same thing?
rory-liebhart_1_07-30-2026_134730It, wha- say that again? Wait, what?
emily-sander_1_07-30-2026_134731So if the company goes from fund four to fund six and it performs the exact same way, it's like a dud in fund six
rory-liebhart_1_07-30-2026_134730Well then Fund VI is gonna probably find itself in a similar position of, you know, trying to get value through selling it at a purchase price that's
emily-sander_1_07-30-2026_134731Yikes
rory-liebhart_1_07-30-2026_134730or very, you know, very minimally above what they paid for the company, which is even if you got a, like a, let's say a two, you know, I don't know, 2X on your investment, that's still gonna be considered a failure probably in the private equity
emily-sander_1_07-30-2026_134731Okay. So because we're seeing this trend across the board, do you think this option will become more and more likely to be used?
rory-liebhart_1_07-30-2026_134730What I see happening now and more is funds are just having to deal with longer duration. They're having to manage that with their LPs, which is difficult because a lot of these LPs are like insurance companies and endowments and like that, that actually have pension-- and like pension funds that have obligation to pensioners and to, you know, um, pay out, uh, insurance claims and shit like that. Like, so you have to manage your assets and liabilities, you know, from top to bottom. So that's just one thing is just like resetting expectations and hoping that your LPs stick with
Secondaries And Liquidity
rory-liebhart_1_07-30-2026_134730you. The other thing is, um, one of the other things, of course, is secondaries in, in that fund. So like let's say I, I'm Emily Fund IV is long in the tooth, 10 years, and its LPs want to get liquid, meaning get their money, money out. So maybe that means Emily Fund IV through an investment banker literally the ownership stakes that Fund IV has in your operating companies new investors, so they step into your shoes, which then basically allows you to pay your investors back without selling the operating companies.
emily-sander_1_07-30-2026_134731So it goes to the bank?
rory-liebhart_1_07-30-2026_134730Not necessarily, no. I mean, it would just basically like imagine, like, um, I don't know, you own a ATM machine and you value that ATM machine based on its future cash flows as, you know, a million dollars. Well, maybe I like that business and you wanna get out, and I'm willing to pay you a million dollars to step in there, you might take that. And so you no longer have to wait for cash, nor do the people that invested in your fund. You can, you can liquidate them out, and now I'm happy because I like that business and I got a fair price for it, right? I paid a fair price for it
emily-sander_1_07-30-2026_134731Okay. How, but is that different from like the normal course of
rory-liebhart_1_07-30-2026_134730Yeah,
emily-sander_1_07-30-2026_134731PE action? Okay
rory-liebhart_1_07-30-2026_134730is that the operating companies themselves are sold, like the
emily-sander_1_07-30-2026_134731Ah,
rory-liebhart_1_07-30-2026_134730was sold.
emily-sander_1_07-30-2026_134731okay
rory-liebhart_1_07-30-2026_134730me your stake in the ATM machine
emily-sander_1_07-30-2026_134731I gotcha. Okay
rory-liebhart_1_07-30-2026_134730or the car wash or whatever. Yeah.
sunshine-and-rainbows_1_07-30-2026_134730I, and the other, the other piece that Rory hit on, and this is, I think, a longer term issue is... And I'll, I'll give an example. I, I sit on the board of $120 million, um, endowment, and so I, I'm part of their investment committee, and so we work through some of these, some of these items, and this was actually one that we were discussing in our last meeting a week or so ago,
rory-liebhart_1_07-30-2026_134730Mm-hmm.
sunshine-and-rainbows_1_07-30-2026_134730which is you've got certain liquidity needs. So for instance, for the next, for the next quarter, we need $4 million available. And so as a result, you're going, "Okay, I've
rory-liebhart_1_07-30-2026_134730To pay athletes. No, I'm just kidding.
sunshine-and-rainbows_1_07-30-2026_134730Yeah, well, uh, so I've got to have that, I've got to have that available in cash or short-term, short-term securities.
rory-liebhart_1_07-30-2026_134730Yep
sunshine-and-rainbows_1_07-30-2026_134730when you have alternative investments and they... And so not only are they managing for overall return, they also have to manage for liquidity and calls, especially when you're looking at, you know, college endowments and, um, insurance companies where you can basically predict what your cashflow needs are gonna be. And as we go forward and, and, you know, private equity has done extremely well, and so as a result, folks of overweighted into those alternative assets. And I think if this continues where you've got kind of a clog in the system where you're not gonna be able to get your, your money back out, folks are gonna go, "Yeah, I can't overweight. I'm gonna have to, you know, balance or underweight because I can't rely on when times are tough. When I need cash, I can't get the cash out." And you
emily-sander_1_07-30-2026_134731Yeah.
sunshine-and-rainbows_1_07-30-2026_134730about that until
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730becomes a problem. And it was actually a topic of conversation we had, you know, as recently as a week and a half ago
emily-sander_1_07-30-2026_134731So do you think that'll make the LPs, so the limited partners who are funding the PE firms, do you think that'll make them go instead of a, uh, 10% of our, of our portfolios in PE, like maybe 5% now 'cause it's so illiquid and it's not guaranteed like it once was?
rory-liebhart_1_07-30-2026_134730Certainly possible, but I think that within, let's say an LP strategy, there's like a few basic buckets. You have fixed income strategies, you have, you know, public equity strategies, you have alternative investment strategies. Like, PE will always be part of the, the, um, alternative investment strategy, and that's maybe gonna have a smaller allocation, whether it's five, maybe, may- maybe it's 10, maybe that does fluctuate because of like longer duration. But my guess would be that long as private equity returns are still strong, somewhat uncorrelated to the public equities you know, pro- produce the kind of attributes of an investment that they see, you know, today or five years ago, I don't, I don't think it'll materially change. I think they're just gonna r- like, better way to put it is I think they'll just stay in it and roll with the punches.
emily-sander_1_07-30-2026_134731And how would you define alternative asset?
rory-liebhart_1_07-30-2026_134730Uh, something that's not a fixed income instrument or public, public equity's,
emily-sander_1_07-30-2026_134731So anything else,
rory-liebhart_1_07-30-2026_134730I
emily-sander_1_07-30-2026_134731all the others
rory-liebhart_1_07-30-2026_134730it could be a lot of different things. I mean, honestly, it's like
emily-sander_1_07-30-2026_134731嗯。
rory-liebhart_1_07-30-2026_134730would be a really long conversation. Kind of a fun one maybe actually to do that, but like, you know, fine art, wine,
emily-sander_1_07-30-2026_134731Oh
rory-liebhart_1_07-30-2026_134730uh, private equity, private credit, uh, real estate could be considered. I actually put real estate in its own category, but certain types would maybe be that. But, you know, stuff that's just, you know, uh, a little less mainstream, I guess. You know, um, aircraft leasing, you know, uh, stuff like that, you know, um,
emily-sander_1_07-30-2026_134731Okay. Okay
rory-liebhart_1_07-30-2026_134730income alternative asset. So yeah, the, the fixed income and equity alternative assets are two different things too. So it's like,
emily-sander_1_07-30-2026_134731Interesting. I've never, I never would
rory-liebhart_1_07-30-2026_134730pod actually to really break that down. I'd enjoy that,
emily-sander_1_07-30-2026_134731Yeah, we should do it. Put a...
rory-liebhart_1_07-30-2026_134730wouldn't or, but you know, I don't know,
emily-sander_1_07-30-2026_134731No, put a pin in that. I d- I didn't put like PE and like fine art together. I didn't know they could interact, but apparently in certain circumstances I guess they can
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730as we're
rory-liebhart_1_07-30-2026_134730Commodities is another one. Yeah
sunshine-and-rainbows_1_07-30-2026_134730here locally, PE and professional sports franchise, up to 10% of the Seahawks may be acquired by
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730equity
rory-liebhart_1_07-30-2026_134730Yep
emily-sander_1_07-30-2026_134731Wait, what? We just got a new owner
sunshine-and-rainbows_1_07-30-2026_134730Yep. The, and a new owner is required under NFL rules to own, I think 35, 30, 30, 35% of the business. They could have up to 20 partners, and up to 10% of the ownership can be held by private equity
emily-sander_1_07-30-2026_134731So the owner could give up a 10% to PE
sunshine-and-rainbows_1_07-30-2026_134730Well, would sell it, but yes. And that's become, in a lot of the transactions that have occurred, that's become a very common structure.
rory-liebhart_1_07-30-2026_134730Mm-hmm. Yeah, and that's-- NFL is just a little bit behind on that too. I mean, F1, Formula 1, there's a lot of private equity money there. I think, I'm pretty sure, you know, kind of European soccer leagues have private equity, certainly have sovereign wealth funds. so the NFL is maybe just getting
emily-sander_1_07-30-2026_134731How many NFL teams have PE?
rory-liebhart_1_07-30-2026_134730ooh, I don't know. I'm not sure that's a good question.
sunshine-and-rainbows_1_07-30-2026_134730guess that probably any that have transacted in the last five years
emily-sander_1_07-30-2026_134731Really?
sunshine-and-rainbows_1_07-30-2026_134730to.
rory-liebhart_1_07-30-2026_134730Yeah
emily-sander_1_07-30-2026_134731Okay. Wow
rory-liebhart_1_07-30-2026_134730And I mean, what is a private equity fund anyway? Like, like, uh, you know, a family office these days acts like a private equity fund, and just some rich person that's got a multifamily office strategy could very well be considered a private equity fund, you know?
emily-sander_1_07-30-2026_134731Yeah. Okay, so what are other characteristics are there of these zombie, these, of these zombies?
rory-liebhart_1_07-30-2026_134730like I was saying early on, earlier on, it's like some of you-- some of it is not as much like what you see on the outside as far as like, okay, the sale environment, the capital market environment, but it's also like what it is on the inside. So, know, managing a fund or working for a portfolio company that is in a long-dated fund that's, you know, trying to liquidate. Well, uh, ultimately emphasis then is about how do I extract as much cash out of the business that I can wind down this fund as possible. So like what I've experienced, um, in a small way is, you know, like if you're a CFO, for example, or even a CEO, much of your time and energy is less about sort of and optimizing the, the business from a growth and top-line standpoint, but rather financial engineering, and cash, and ultimately, again, a sale. And so let, let's, let's play this, play this out a little bit. Some of what you might see in an operating company that let's say is doing real well, free cash flow, all that stuff. maybe the, the goal, you know, a couple years prior wasn't to constrain the balance sheet with debt, but maybe now, ownership is about making money, not about creating a, like a, a loving business or legacy with your community. No, it's about engineering returns. So if you can't sell the business a big multiple, maybe you have an opportunity to, uh, re-engineer the balance sheet with a lot more debt and other weird securities to be able to pull cash out and let it die. And I'm,
emily-sander_1_07-30-2026_134731Mm-hmm.
rory-liebhart_1_07-30-2026_134730I'm saying that a straight face, like the death of a company isn't always a bad thing from an investor standpoint if you got as much value as you can get out of it
emily-sander_1_07-30-2026_134731Wow
rory-liebhart_1_07-30-2026_134730wound it down. I've seen that happen a lot of time.
sunshine-and-rainbows_1_07-30-2026_134730I was about to say I could point to Lone Star Steakhouse.
rory-liebhart_1_07-30-2026_134730Ed's literally done it. Like, Ed's been the last guy standing. I've been the second to the last guy standing in some of these businesses
emily-sander_1_07-30-2026_134731So they like, they like just like intentionally kamikaze themselves
sunshine-and-rainbows_1_07-30-2026_134730Well, they extract it, but you know, it's not intentional.
emily-sander_1_07-30-2026_134731Okay.
rory-liebhart_1_07-30-2026_134730quite that way. They, they think about it as I'm, I'm bringing this thing to a logical conclusion. I've extracted all the value I can get out of it.
emily-sander_1_07-30-2026_134731We're just winding it down. We're just gonna wind it
rory-liebhart_1_07-30-2026_134730Yeah.
emily-sander_1_07-30-2026_134731down to
rory-liebhart_1_07-30-2026_134730And
emily-sander_1_07-30-2026_134731it off the books.
rory-liebhart_1_07-30-2026_134730vultures then maybe,
emily-sander_1_07-30-2026_134731Wow
rory-liebhart_1_07-30-2026_134730by doing that, it actually creates an opportunity to sell the company. 'Cause like the company's value is only worth the expected future cash flow of the business on a present value basis, uh, you know, with a risk premium applied to it. And so
emily-sander_1_07-30-2026_134731So many words.
rory-liebhart_1_07-30-2026_134730bless. So my point is like, you know, the value of a business is attractive to a certain type of buyer, but if you've gutted it and it's in pieces now, and maybe it becomes a- attracted to a different kind of buyer. Maybe, maybe
emily-sander_1_07-30-2026_134731what is it like to gut it? Is that like offshoring stuff, like automating stuff, like
rory-liebhart_1_07-30-2026_134730very simple terms, it's like basically cutting off all the expenses you have
Cash Extraction Playbook
emily-sander_1_07-30-2026_134731Man
rory-liebhart_1_07-30-2026_134730running it into ground and extracting as much cash you can get out of it, I think
sunshine-and-rainbows_1_07-30-2026_134730in the process if you could get away with it, and again, if I take a look at like some of the, some of the companies that I worked with, it's sale-leaseback on, on
rory-liebhart_1_07-30-2026_134730Yes.
sunshine-and-rainbows_1_07-30-2026_134730It's,
rory-liebhart_1_07-30-2026_134730yeah.
sunshine-and-rainbows_1_07-30-2026_134730of, sale of
rory-liebhart_1_07-30-2026_134730Exactly
sunshine-and-rainbows_1_07-30-2026_134730assets. It's, you know, raise as much cash as you can, dividend that cash out. Um, and then you're running really tight and lean and everybody's got the pucker factor, and if something happens, it happens. But they got their cash out plus,
rory-liebhart_1_07-30-2026_134730Yeah.
emily-sander_1_07-30-2026_134731Huh, okay.
sunshine-and-rainbows_1_07-30-2026_134730that's
rory-liebhart_1_07-30-2026_134730a return on that
sunshine-and-rainbows_1_07-30-2026_134730Yeah, that's fine
emily-sander_1_07-30-2026_134731you might flip into, inadvertently or intentionally, you might flip into, "Oh, like we go after distressed companies, or we go after ones that are s- situated like this," and then you're our perfect, perfect target now
rory-liebhart_1_07-30-2026_134730Yeah. We don't like this business when it was a functional free
emily-sander_1_07-30-2026_134731Yes
rory-liebhart_1_07-30-2026_134730business it was too rich for us, and that's not what we do. What we do is we buy component parts, repurpose them, and then stick them to other businesses. Well then, then this business that you've gutted or wound down effectively is now maybe, maybe actually has a few buyers that would pay a certain price for it. So it's a really interesting world, you know?
From Growth to Wind Down
rory-liebhart_1_07-30-2026_134730And again, it's like you tend to see oftentimes, again, just drawing on my own experiences and from what I've heard anecdotally is like companies in this situation driven by the PE shareholders who always have the majority stake for the most part. If they take a controlling financial inter- interest, they're gonna have a majority voting interest as well. You know, they're basically like, okay, this is a different business now. A lot of times you see management change out. And if you have a growth-oriented CEO and executive team, probably not a fit for a wind down scenario, and maybe
emily-sander_1_07-30-2026_134731Right
rory-liebhart_1_07-30-2026_134730for that. So you bring in somebody that's like, you know, basically a tactical wrap it up type of person, you know, to, to see it through to that next phase, which may be the final phase.
emily-sander_1_07-30-2026_134731new and different leg of the race.
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730Yes
emily-sander_1_07-30-2026_134731who- who
rory-liebhart_1_07-30-2026_134730a growth-oriented CEO is not really gonna be that interested in sticking around in
emily-sander_1_07-30-2026_134731No, no.
sunshine-and-rainbows_1_07-30-2026_134730want that
emily-sander_1_07-30-2026_134731We're like a maintenance, we're a maintenance CEO. That's a different story.
rory-liebhart_1_07-30-2026_134730Yeah.
emily-sander_1_07-30-2026_134731leg of the race, like a relay race. Know your leg of the race.
rory-liebhart_1_07-30-2026_134730Yeah
Who Benefits From Zombies
emily-sander_1_07-30-2026_134731with this whole, uh, zombie situation, who in the ecosystem benefits? Are there like, I don't know, like do VC firms benefit? Do,
sunshine-and-rainbows_1_07-30-2026_134730The employees of a company are probably benefiting to some extent because they're still employed, um,
emily-sander_1_07-30-2026_134731If they are not being wound down though. Okay
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730Yeah, the, the, the-- in the zombie situation really there's, there's limited benefit to anybody.
emily-sander_1_07-30-2026_134731Oh
sunshine-and-rainbows_1_07-30-2026_134730You know,
rory-liebhart_1_07-30-2026_134730I'd agree with that
sunshine-and-rainbows_1_07-30-2026_134730the customers, the employees, kind of the stakeholders that are non-financial are, are to some extent, you know, they're not, not investor financial. They, they tend to be benefiting to some extent because the company's still there. It hasn't been sold, it hasn't been merged, it hasn't been... But really there's no win. You know, the bank may be because they're continuing to get, have
rory-liebhart_1_07-30-2026_134730Yeah, I was just gonna say that. Yeah
sunshine-and-rainbows_1_07-30-2026_134730get some interest. They're getting, you know, a loan is staying outstanding, some of those elements, but that's about it
emily-sander_1_07-30-2026_134731I, I think, I think last, a couple pods ago we compared it to being constipated, where it's just, it's just uncomfortable and it's just like waiting for this to happen. Okay.
rory-liebhart_1_07-30-2026_134730Yeah
emily-sander_1_07-30-2026_134731are VC firms in, in a similar boat, like to a smaller or lesser extent, or not really, they have different, different-
rory-liebhart_1_07-30-2026_134730know what? Maybe the algorithm just hasn't kicked that over my way, but I haven't seen a lot of news like that. I've seen a lot of news run along these lines. We've been talking about it specifically with PE for some time now, I haven't seen the same thing with VC firms, but maybe it is
sunshine-and-rainbows_1_07-30-2026_134730at VC, VC, the companies are normally in a little different, little different phase,
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730so at that point, the
rory-liebhart_1_07-30-2026_134730they don't survive
sunshine-and-rainbows_1_07-30-2026_134730they
rory-liebhart_1_07-30-2026_134730to... Yeah.
sunshine-and-rainbows_1_07-30-2026_134730or they get bought.
rory-liebhart_1_07-30-2026_134730Yeah, that's true. That's it. That's probably the reason
sunshine-and-rainbows_1_07-30-2026_134730they've got really promising something and, you know, so they're gonna, they're gonna get bought or, know, it's a, it's a wind down. I have, I have same thing. I have not seen or heard anything on the VC
rory-liebhart_1_07-30-2026_134730So that makes sense as to why
sunshine-and-rainbows_1_07-30-2026_134730you know, again, as we've talked, the, the VC environment and the PE environment, that, that line is pretty blurry now.
emily-sander_1_07-30-2026_134731Mm-hmm.
sunshine-and-rainbows_1_07-30-2026_134730you know, it's, it's, there may be, I'm sure there's some in there, but that's not, you know, it's a, it's kind of a different, it's a different way that they monetize. So on the VC side, it's really, know, it's we're shooting for a 10% success margin and a 30X return.
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730and on the, the PE side, it's we're looking for a 80% success margin or 90% success margin at a 25% to 30% annualized return. And that's the, know, and that's the, the, the difference. And so as a result, you have a really different investment profile that, you know, is, is gonna, some are gonna be able to transact or shut down faster because of their size or the, the nature of the business versus a relatively mature
Secondaries and Vulture Funds
sunshine-and-rainbows_1_07-30-2026_134730business
emily-sander_1_07-30-2026_134731So, so let's say this current state of play lasts for, I don't know, two, three, four, five more years. What would be smart to do in that time period that you g- you can't do once these, once these things hopefully kind of go back to normal?
rory-liebhart_1_07-30-2026_134730In the current environment? Well, mean, I'd be looking for deals on secondaries market. Like, I'd be looking for solid businesses where somebody really needs a liquidity event. Maybe that rest of that fund's actually done pretty well. Like, so, you know, the private equity fund itself has made money for investors and itself, and you might be able to talk that private equity fund into selling you a business below its intrinsic value just so they can wrap it up and they're already kind of of the mind, "Hey, I've done already pretty well here. We just wanna get this thing sold. Take it off my hands for, you know,
emily-sander_1_07-30-2026_134731Mm-hmm.
rory-liebhart_1_07-30-2026_134730So I- that's where I'd be playing if I had hundreds of millions of dollars of my own equity capital, and I could leverage that up with a buttload of debt. Yeah.
sunshine-and-rainbows_1_07-30-2026_134730Yeah, I, I would, I would be saying the same thing. I think this is actually a good time to start
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730equity
rory-liebhart_1_07-30-2026_134730It is, yeah
sunshine-and-rainbows_1_07-30-2026_134730have a fresh, a fresh fund of where it's a contrarian fund or where it's a, you know, kind of more of a vulture fund, and you're, and you do. You go hoover up secondaries. You kind of take advantage of the fact that there's constipation to provide liquidity.
rory-liebhart_1_07-30-2026_134730Provide them, provide the Metamucil.
sunshine-and-rainbows_1_07-30-2026_134730yep, and, and you're gonna get... And if you've got the ability and your investors kinda understand that that's what it looks like, you've got the ability to kind of ride this out for four or five years, it should, it should turn to the point where you've got-- you're able to get liquidity again
rory-liebhart_1_07-30-2026_134730Yeah,
emily-sander_1_07-30-2026_134731Hmm.
rory-liebhart_1_07-30-2026_134730exactly
emily-sander_1_07-30-2026_134731Who's, who-- So who are secondary market buyers? Are there PE firms, banks?
rory-liebhart_1_07-30-2026_134730Yeah,
sunshine-and-rainbows_1_07-30-2026_134730I
rory-liebhart_1_07-30-2026_134730definitely. I would not say banks, definitely not.
emily-sander_1_07-30-2026_134731okay.
rory-liebhart_1_07-30-2026_134730um
emily-sander_1_07-30-2026_134731Individual
rory-liebhart_1_07-30-2026_134730Family
emily-sander_1_07-30-2026_134731high net worth individuals. Okay
rory-liebhart_1_07-30-2026_134730Yeah. net worth individuals, like ultra high net worth. Yeah, for sure.
emily-sander_1_07-30-2026_134731Wow, okay. How, like, this might, a silly question, but like how, how do you advertise on the secondary market? Do you, is, is it just who you know or is there like a
rory-liebhart_1_07-30-2026_134730Um, you know, yeah, yeah
sunshine-and-rainbows_1_07-30-2026_134730I-- investment bankers and then the PE folks generally know each other fairly well. I
rory-liebhart_1_07-30-2026_134730Mm-hmm.
sunshine-and-rainbows_1_07-30-2026_134730it's a, it is a relatively small community.
rory-liebhart_1_07-30-2026_134730Correct
sunshine-and-rainbows_1_07-30-2026_134730able to have, you know, pick up conversations. People tend to know who they're, who they, who they competed with when they bought the thing.
emily-sander_1_07-30-2026_134731Oh, yeah.
rory-liebhart_1_07-30-2026_134730Yeah,
emily-sander_1_07-30-2026_134731Okay
sunshine-and-rainbows_1_07-30-2026_134730that, you know, you go back and go, "Okay, well, we've gotta dump this," or, "We're gonna be selling this now. Are you interested?"
emily-sander_1_07-30-2026_134731嗯
sunshine-and-rainbows_1_07-30-2026_134730And, you know, there's,
rory-liebhart_1_07-30-2026_134730Yeah.
sunshine-and-rainbows_1_07-30-2026_134730those kind of opportunities
emily-sander_1_07-30-2026_134731Interesting.
rory-liebhart_1_07-30-2026_134730Yeah.
emily-sander_1_07-30-2026_134731How,
Rates Outlook and Seller Moves
rory-liebhart_1_07-30-2026_134730would be
emily-sander_1_07-30-2026_134731does your, does your zombie article say anything about how long this should last? Are they predicted to last?
rory-liebhart_1_07-30-2026_134730No, but I suspect it'll last until interest rates come down meaningfully, 'cause I think people can behind on an intrinsic level, but I don't think they can justify purchasing at these levels without cheaper debt. So, you know
emily-sander_1_07-30-2026_134731W- when it changes, do you think there'll be like a watershed of like PE firms going, "Ugh," like let, get, get all of these ones off, and then there'll be like a flurry of sells and new deals, and it'll go crazy 'cause they've been stuck for so long? Or is it
rory-liebhart_1_07-30-2026_134730think it would be that drastic. I think what's my, my thought is funds and fund managers that are already in this situation have kind of managed their LP expectations the best they can. And so they're all smart people, so they like figure out workarounds and stuff. So thing they're not gonna do is irrationally sell stuff just to sell it when the market starts to turn, because they understand the laws of supply and demand and how to make money and not lose money. So just think it'll, I think it'll just gradually change because this has been a gradual process to get to this point. Hasn't been an overnight thing either. So it's like five to six, seven-year cycles. stuff just fluctuates, you know?
emily-sander_1_07-30-2026_134731So it's more like-
rory-liebhart_1_07-30-2026_134730be the new normal too. I don't know. It could be. Because I don't see interest rates going back down to where they were in 2020 and 2021, maybe ever in my lifetime, frankly. So
emily-sander_1_07-30-2026_134731So if, so like if you were in the small adjustment category and you were a PE firm, maybe you say, "Hey, we're gonna open ourselves a little bit more to the secondary market than we normally do because of the situation," and take a little bit, little bit more there.
rory-liebhart_1_07-30-2026_134730Mm-hmm.
emily-sander_1_07-30-2026_134731Okay. Okay, cool. What else? Anything else that people
rory-liebhart_1_07-30-2026_134730Hmm.
emily-sander_1_07-30-2026_134731know or would be interesting to like, just, just keep this in mind, put this in feather in your cap, just kinda keep that in mind for what's going on right now
sunshine-and-rainbows_1_07-30-2026_134730Well, I think if you're, if you're a seller, so if you're in a, if you're a... Again, if you're a founder or you're a management team that's looking to sell, that right now the liquidity in the market is low. And is this something you need to be doing today?
emily-sander_1_07-30-2026_134731Hmm
sunshine-and-rainbows_1_07-30-2026_134730it, is it something that you should be strategizing? Now, again, there's, there's always gonna be money out there, and you only need two irrational buyers to turn into an irrational purchase price.
rory-liebhart_1_07-30-2026_134730Exactly right. Yeah
sunshine-and-rainbows_1_07-30-2026_134730the, is not as robust as it was four or five years ago, and a lot of the big players are struggling with this. Now, the other piece of that is you as a management team may be a legitimate buyer. Where, you know,
rory-liebhart_1_07-30-2026_134730That's a great point
sunshine-and-rainbows_1_07-30-2026_134730"Hey, I, you know, I'm, I'm in the sell mode," there may be opportunities for the classic tuck-in acquisition or strategic acquisitions of
rory-liebhart_1_07-30-2026_134730Yep
sunshine-and-rainbows_1_07-30-2026_134730portfolio companies or segments of portfolio companies. So, you know, uh, uh, and I'll give an example. The last company Emily and I worked for, we had a division that did home improvement. We did a division that did automotive,
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730and sell off the home improvement side to somebody else. You get liquidity, which you then dividend out and kind of relieve some of that pressure from the, from the LPs. And, you know, if you're the buyer, you probably picked up a good asset at a reasonable price. So there's opportunity out there, but it- the management teams are the ones right now that I think need to be looking at when
rory-liebhart_1_07-30-2026_134730That's a great point.
sunshine-and-rainbows_1_07-30-2026_134730benefits,
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730the benefit is. And I think management teams need to be thinking about, "Okay, how do I benefit from this situation? Do we have the ability to do some of those type of acquisitions, and can we, can we really improve our position now so that when the market turns, we're in a, we're in a better place?"
emily-sander_1_07-30-2026_134731Yeah, and I think we've also seen cases where the original founder who partnered with PE then buys back their own company
sunshine-and-rainbows_1_07-30-2026_134730Yeah. I've, I've, I've seen that in multiple cases and rarely has it gone well. But
emily-sander_1_07-30-2026_134731Hmm. But it is an option
rory-liebhart_1_07-30-2026_134730mentioning it, I agree with you. Like, I don't know that I've heard a lot of success stories on that front
sunshine-and-rainbows_1_07-30-2026_134730yeah, but i- it's entirely possible, and if you're well, i- if you're well-advised and you're not emotional about it, it can be a great opportunity
emily-sander_1_07-30-2026_134731Ooh, a founder that's not emotional about their business. That's, that's tricky order. Yeah. I'm, I'm sure there are, but oof, I have, I have not met a lot of them.
sunshine-and-rainbows_1_07-30-2026_134730No
rory-liebhart_1_07-30-2026_134730True that
emily-sander_1_07-30-2026_134731Gotcha. Anything else our listeners need to know about The Walking Dead?
rory-liebhart_1_07-30-2026_134730I think that covers it. We'll, uh, we'll keep folks posted on, uh, new developments in this space
emily-sander_1_07-30-2026_134731There we go.
Seahawks Ownership Talk
emily-sander_1_07-30-2026_134731Yeah. Okay, and obviously keep, uh, keep folks posted on the state of the Seattle Seahawks, 'cause that's the most important thing
rory-liebhart_1_07-30-2026_134730Oh, yeah. Yeah, yeah
emily-sander_1_07-30-2026_134731that's talked about on this podcast. Oh my gosh. Uh, that'll be crazy if that happens. Jody Allen was such a good owner, I feel like. Oh,
sunshine-and-rainbows_1_07-30-2026_134730great
rory-liebhart_1_07-30-2026_134730Truly.
emily-sander_1_07-30-2026_134731man.
sunshine-and-rainbows_1_07-30-2026_134730asset,
emily-sander_1_07-30-2026_134731Yeah
sunshine-and-rainbows_1_07-30-2026_134730we need to cross our fingers that the Koshlas are gonna be the same. And I, you know, every, every indication is that they're passionate about the sport, especially the son, passionate about the sport, really wanna build a winner. The only challenge I think might be, and you know, the-- my antenna goes up a little bit, is you might have a, of Jerry Jones syndrome in
emily-sander_1_07-30-2026_134731Oh, God
sunshine-and-rainbows_1_07-30-2026_134730has been an, has been an intern at multiple NFL franchises, kind of is this is a passion of his, and he's, know, the 30-some-year-old that's gonna inherit the team, and he may wanna turn into the, you know, the, the, the Bidwells, the Browns, the Joneses, and a heavier influence on a typical
rory-liebhart_1_07-30-2026_134730Yeah
sunshine-and-rainbows_1_07-30-2026_134730owner. And that tends to not, again,
emily-sander_1_07-30-2026_134731Oh, man
sunshine-and-rainbows_1_07-30-2026_134730necessarily go extraordinarily well with the, the
emily-sander_1_07-30-2026_134731I don't like a lot of the words you just said. Like he was an intern, he probably thinks he knows more than he does. He's in his 30s, so he's rah, rah, rah, and he just bought a team he's gonna get rid of
sunshine-and-rainbows_1_07-30-2026_134730though, he's a great guy and really smart.
emily-sander_1_07-30-2026_134731Okay
sunshine-and-rainbows_1_07-30-2026_134730you, you kinda hope all that goes together and it's like, yep, this could be a real asset as opposed to, you it's, it's the Joneses
emily-sander_1_07-30-2026_134731on the flip side, like he knows more than a lot of owners do about the actual hands-on, day-to-day inner workings of the football team. So I guess that's could be a positive
sunshine-and-rainbows_1_07-30-2026_134730Which, which may or may not be a good idea.
emily-sander_1_07-30-2026_134731We'll see
sunshine-and-rainbows_1_07-30-2026_134730hopefully he knows enough to know that the teams that tend to do extremely well are the ones that don't have the owners meddling every day in
emily-sander_1_07-30-2026_134731We'll see. And if they take on PE
rory-liebhart_1_07-30-2026_134730suspect John Schneider's a guy to like hang around where he's
emily-sander_1_07-30-2026_134731No, no
rory-liebhart_1_07-30-2026_134730he wants to get done
sunshine-and-rainbows_1_07-30-2026_134730I agree with that
emily-sander_1_07-30-2026_134731And he's good at what he does. He proved that in the last draft class especially. Oh my gosh.
sunshine-and-rainbows_1_07-30-2026_134730last two
rory-liebhart_1_07-30-2026_134730good.
sunshine-and-rainbows_1_07-30-2026_134730Yep
emily-sander_1_07-30-2026_134731All right. We'll keep an eye on that 'cause, uh, if the Hawks go to PE, that's, oof, that'll be a recurring topic on this pod 'cause I'll wanna get your guys' take on all of
Wrap Up and Subscribe
emily-sander_1_07-30-2026_134731that stuff. But, uh, with that, we'll wrap this one up, and, uh, we'll talk to everyone next time on Private Equity Experience podcast.
rory-liebhart_1_07-30-2026_134730Yeah.
emily-sander_1_07-30-2026_134731Rory. Thanks, Ed
rory-liebhart_1_07-30-2026_134730Thanks, Sam
sunshine-and-rainbows_1_07-30-2026_134730Thanks, Sam
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