Have been quiet on here for the past few months after some live deal sprints and a busy recruiting season. Am transitioning from my MM PE seat to a MF Special Situations role and would love to connect with folks over the next month before I start - DMs open.

“9-5 banking job”

Sign this guy up for Democratic Party text updates

I’d be willing to bet big that this guy went to Indiana State and owns and operates a $12m EBITDA freight brokerage business

“Yeah, I have it pretty good here, been told I’m on a career track. Bet Director promote comes next year.” In reality:

Shots like this remind me that these protesters are deeply unserious. It is not passion driving their activism, but rather the value that they hold for protest itself. It is coming of age theater for children who want to feel impactful in as low stakes an environment as possible.

Maybe he is my mayor

“There tend to be two types of people who seek out jobs on Wall Street. The first are those with wealthy parents who were sent to the right prep schools and Ivy League colleges and who, from their first day on the trading floor, seem destined to be there. They move through life with a sense of ease about themselves, knowing that they will soon have their own apartments on Park Avenue and summer houses in the Hamptons, a mindset that comes from posh schooling and childhood tennis lessons and an understanding of when it is appropriate for a man to wear seersucker and when it isn’t. The second type call to mind terms like street smart and scrappy. They might have watched their fathers struggle to support the family, toiling in sales or insurance or running a small business, working hard for relatively little, which would have had a profound effect on them. They might have been picked on as children or rejected by girls in high school. They make it because they have a burning resentment and something to prove, or because they have the ambition to be filthy rich, or both. They have little to fall back on but their determination and their willingness to do whatever it takes, including outhustling the complacent rich kids. Sometimes the drive these people have is so intense, it’s almost like rage. Steven Cohen came from the second group.”

If your commercial banker doesn’t look like this, your rates too high

Alleged Lazard MD desk, need this sketch for the home office…

Low bonus this year? Consider pulling the O’Hare hedge, big payday or mountain hut in Bolivia.

Been working on shitco industrial deals too long, developed a taste for the Houlihan mints

*waking up violently hungover at 1PM* “Oh no, I slept through the run club”

Was there a reason why representation of whites and Europeans was explicitly blocked and the ethnicity of white historical figures rewritten? Was this the inability of your program to perform basic tasks, or, the result of deliberate censorship decisions?

I tried thinking of a response, but I’ll take the loss GG

I don’t boss!

Classic soyjack facial expressions - goes to show you can be a good looking, wealthy guy and still be a complete loser at your core.

Gold from Kravis, but begs the question, does youth hold the same value to someone whose goals have gone unmet? To someone whose purpose still sits on the other side of tomorrow?

“I want to join private equity to help partner with best in class management teams to grow industry defining businesses” VPs: Hey, can you toggle in the upside case where product margins expand because we are successfully able to pull the dill / garlic reduction lever by year 2? Should juice MOIC by .05x, thx.

“Finance” twitter accounts not understanding the difference between capex and opex is too funny

Did anything happen today? I was too busy closing on our Sri Lankan textile platform to watch the news.

Same Syd

Having interviewed 100+ associate / senior associate candidates for several well-regarded private equity funds, I would much rather blind hire a non-target over an Ivy League grad (ex. Wharton). Those individuals tend to be far less technically oriented and have serious problems with work ethic.

Henkel recruiter and her top prospect

Currently over indexed to cash, certainly because I saw this coming and not because I was too lazy to allocate my last bonus - you could say me and Buffett are cut from the same cloth.

This is completely divorced from reality. PE performance has remained stable over the past five years and has continued to deliver returns that compensate investors for longer duration and illiquidity that occasionally arises during periods of dislocation. You can't compare the two asset classes on the basis on DPI intracycle when one of the primary features of private credit is interim cash yields - PE delivers most of its value through capital appreciation and exit-driven realizations that can be cyclical. If you are to compare the two, it should be done of the basis of TVPI over 1+ cycles and you will see that the current environment (slower exit markets, fewer IPOs, etc.) does not imply a permanent impairment to PE's ability to deliver more attractive risk-adjusted returns that credit...

The only thing this indicates is that Shortcut is getting increasingly closer to behaving like a real IB Analyst - great work team!

Popped up on my memories today, almost forgot how miserable banking was, bet this pitch was definitely worth it!

Now this is a real salt of the Earth, meat and potatoes American, you couldn't make someone who looks more like a DA Davidson Industrials banker in a lab

Me surveying the efficiency of my recently privatized textile mill after LBOing Haiti with Sixth Street, Apollo, and Barbecue.

Really interesting as you consider where the puck is moving with regard to capital allocation, LMM likely presents the most white space and is the most palatable corner of the market for institutional LP dollars. Search fund model (staking searchers) is generally higher return / higher beta with a long tail distribution that sets it up quite nicely for a highly diversified model, but also for potential shared infrastructure that allows for a degree of operating leverage as the portfolio scales. Would love to explore setting up a fund here…

It’s impossible not to hate a 25 year old without industry expertise who becomes your boss by virtue of managing capital, even if subconscious, impossible

Must have been hard for Chalamet to keep his composure around central Indianas 2016 Entrepreneur of the Year

Nothing kills the motivation of A players at a fund like having to give economics to, or work with, C players

Knew an associate who had another job lined up, was asked to take something through to IC before leaving and was left in charge of the model, v-upped several times over the course of two weeks (up to v38). Finally after a few days of asking to see a draft, VP goes into the model and sees that it’s completely empty - then they go radio silent. Had to respect it.

Wouldn’t dream of it, I’m showing up in my Zegna Centoventimila wool suit, a bespoke Turnbull & Asser shirt, Hermès tie, Gucci 1953 loafers, and a 5711 Nautilus.

And what will you be remembered for?

Driving shareholder value here >

“Babe, Kirkland just emailed you. Who’s Clearlake and what does LME stand for?”

“We find that mutual fund managers from poor families outperform managers from rich families. We argue that managers born poor face higher entry barriers into asset management. Consistent with this view, managers born poor are promoted only if they outperform, while those born rich are more likely to be promoted for reasons unrelated to performance. Overall, we establish a first link between fund managers’ family descent and their ability to create value.” academic.oup.com/rfs/article……

Those are expensive seats

As an Associate who often had work stolen from me and passed off by VPs to MDs as their own, I learned to initialize the end of every file name. Either your work is acknowledged, or you force the issue of renaming the document, essentially admitting to the wrongdoing, by the VP.

My fatal flaw is thinking that I could quit PE tomorrow to start a business and trip on the way out of the office into a term sheet from a16z.

I dream of running my own analyst farm one day, a vast monoculture of economic output, stretching as far as the eye can see.

Agree, Josh has crafted Thrive in an incredibly sensible manner that closely models the type of fund that I would like to begin one day: (i) small partnership, with human capital decisions largely indexed to intellect and drive > experience for junior employees, (ii) generalist model, cross border, stage, and industry, (iii) thematic with flexibility to incubate companies internally, and (iv) thinks of themselves as a product to founders, fostering innovation in areas that have a tendency to stagnate in traditional asset managers (diligence process, operational toolkit, etc.).

I know 5+ people this could be

We’ve hit a new tier of status theater where people feel comfortable posting DMs from five years ago once someone makes it. Hard to overstate how cringe this is.

For an industry that prides itself on meritocracy this was a big surprise. So much of getting “the seat” is also getting the seat before it and kicking off that flywheel early

Recommend giving this one a listen; over the past 14 years, 3G has 28x’d its $1 billion investment in the take private of Burger King with current annual dividends equivalent to 70% of its invested capital. The deal is one of the highest earning buyouts ever. podcasts.apple.com/us/podcas…

Super excited to see what Shore is going to do here, high returning corner of the market with a lot of white space for LP allocation: "Shore Capital Partners, a private equity firm focused on lower-middle market investments, today announced the closing of its inaugural… Shore Search Partners Fund. "With Shore’s established playbooks and recognized brand in sourcing, negotiating and executing microcap transactions, the Search team will focus on supporting executives pursuing acquisition opportunities in the traditional Search investment range. Search executives will have access to Shore’s extensive network and resources to help them find, execute and operate microcap companies. Breakout companies will have the potential to become Shore microcap fund investments."

The folks over at HIG will be the first to admit that they are not the smartest people in the room and do not have an angle in business picking, their focus is i) downside limitation and structure and ii) finding broken auctions where the business has 1-2 major issues (customer concentration, key man risk, commodity volatility, etc.), and seeing if they can devise a means of relieving or muting those issues pre-close.

A lesson I had to learn early on in my career; whoever creates the first draft of a deliverable will have a disproportionate impact on the final document. If you want influence, take control.

“What’s your number?” Give me $20m and I’m starting an independent sponsor and splitting my year between NYC, Nantucket, and Whitefish.

Michael Gatto’s (Silver Point) process for evaluating credit, useful framework

The 3G talent model is extremely interesting / meritocratic to an extent verging on excess; Daniel Schwartz promoted to Parter at 27, CFO Burger King at 29, and CEO at 32 and David Knopf to CFO of Kraft Heinz at 29.

Becoming increasingly interested in developing a thesis around roll-ups within electrical component distribution for two primary reasons, i) there is unprecedented demand for picks and shovels to support infrastructure and electrical distribution demand and ii) technological advancements make it such that this should be an industry where there are <10 players, not thousands of subscale, unsophisticated participants. Advancement of AI should prove a large value creation lever for distribution businesses over the next decade enabling ease of cross sell, dynamic pricing by customer group and purchasing occasion, and improved inventory management. I view this as consequential for a few reasons, i) use of data provides more leverage in distribution than other fragmented industrial markets, ii) these are low margin businesses where turning the screws slightly can have large impacts on the margin profile and enterprise values of businesses, and iii) market / wallet share will continue to inure to scaled players that are able to invest behind technology / have a flywheel currently running. Finally, these are 6.0x to 8.0x businesses with relatively robust earnings profiles with price inelasticity, highly retentive customer relationships, and high capital efficiency.

Got this gem the other day

You can find these for less than 15k

“Ew why is that midget taking a picture of me, what a freak”

I never knew what he looked like, this makes so much sense

See below for a brief post summarizing my perspective on the current state of the MM distribution market (comments, thoughts, RTs much appreciated). I plan on touching on I) Underwriting in Today’s Environment and II) State of the M&A Market for These Assets. I endeavored to keep this brief (+ limited time on a flight) though if there is interest, would consider elaborating in a Substack post. (I) Underwriting in Today's Environment: Sustainability of earnings is top of mind as many U.S. distribution assets appreciated considerably during the supply demand dislocation following COVID through several vectors, including i) price and ii) volume / captured wallet share. (i) Price: Input costs (raw materials, freight, and labor) inflated significantly in 2021/2022 and distributors were largely able to pass though price increases to end customers. Depending on the business, these increases were either necessary to stabilize margins, or, in some cases, opportunistic to expand margins (exploiting customers / capitalizing on the temporary lag between selling prices that kept up with inflation and average inventory costs that lagged inflation). I will touch on the former as implications of the later are quite clear. While the former may appear benign as the gross margin profile of the business may have remained unchanged, gross profit dollars increased; as did EBITDA through operating leverage as input prices increased more rapidly than operating expenses – this is OK in a vacuum, but challenging when viewed through the lens of mean reversion in today’s environment. The variable cost structures of these businesses are tied to inputs with both robust and transiently priced inputs. Transiently priced inputs, like materials and freight have begun to decline over the past year, while stickier inputs, such as labor, have remained stable. Depending on the composition of the business’s inputs, this has caused the landed costs for certain distributor’s inventory to compress and margins to expand. To be clear, this is a benefit of investing in distribution businesses, they often have the flexibility to insulate themselves from negative movements in inputs by passing along inflation to customers and benefit from positive movements by holding price as inputs compress, especially in markets with low ASPs or where products are low %’s of the total end product / project cost. Because of this dynamic, investors must be vigilant in determining steady-state margin profiles (through analyzing landed costs / input composition) and evaluating where businesses sit in this cycle. We are currently in an expansionary margin environment, and while beneficial in the short term, means that there is less future pricing power and implies that the business will be forced to absorb upstream price inflation in the future as means revert, compressing margins from underwriting. (ii) Volume / Wallet Share: As we know, Covid was a black swan event that brought about an initial trough in demand, followed by a peak that not only allowed distributors to benefit by riding temporary macro tailwinds, but also allowed domestic suppliers to temporarily displace incumbents that have more international supply chains with inflexible purchasing depts. On the first point, in addition to increasing end customer purchasing (driven by cheap money, delayed purchases, and government stimulus), we also saw a desire for industry participants to overstock on supply in the midst of an opaque S/D environment. Now that the bullwhip effect is beginning to ease, we are seeing excess inventory being burned through at end customers, in addition to a softer macro market. Important to be mindful of this phenomenon as submitting off LTM numbers is likely aggressive as a true trough may not occur until H2 2024. The second point is more difficult to evaluate, however, channel checks and market work should be scrutinized to determine where targets stand in a competitive environment where participants have jockeyed for position and competed on the basis of abnormal purchasing requirements. (II) State of the M&A Market for These Assets: Distribution valuations remain very strong for premium assets, driven by scarcity value for platforms (robust multiples compared to subscale players) and appetite from private equity to deploy capital into an industry that has i) strong cash flow characteristics, ii) above-market performance through economic cycles, and iii) palpable value drivers, including secular tailwinds through reshoring initiatives, strong opportunity for tech enablement, and robust consolidation opportunities. Over the last 18-months, valuations have contracted 1-2 turns, primarily driven by the rate and financing environment for LBOs, though inventory of high-quality assets has remained barren. The cohort of firms feeling pressure to deploy appears to be increasing, coupled with growing pressure from LPs for DPI, may create conditions for a potential rebound in activity if macro outlook strengthens in 2024 driven by increased election and rate clarity.

They are bound with glue made from the ground up bones of third year analysts who didn’t get a buyside offer

Looking for some input - Good MM fund, early VP promotion, young, non target UG and banking program, goal is to move upmarket and focus on starting a fund one day. For this person is HBS or GSB worth it?

When I first entered private equity, I came across a white paper on complexity investing by @NZSCapital that I find myself coming back to quite often and that tends to align with the lens through which I approach new opportunities. The concepts are intuitive and I do not fully prescribe to some of them (particularly related to operational optimization), but I found it helpful to explicitly lay out in a very brief synopsis: i) Traditionally, investors and economists tend to think about the future in terms of the likelihood of identifiable risks occurring, but not on the long tail on unlikely, but highly consequential potential influences. However, businesses operate in complex systems that are driven by power laws; millions of diminutive events affect a company every day, increasing the odds of one unforecastable stimuli having an outsized affect on the business over some period of your hold. ii) This is part of the reason why modeling and forecasting is helpful from a tactical perspective (sanity checking cases on returns, negotiating the CA grid, pitching IC, etc.), but strategically, is often a fool’s errand. NZS suggests that rather than underwriting narrow predictions, one should emphasize establishing a framework for evaluating the following variables as a proxy for whether companies can thrive in a complex environment and have tools at their disposal to create resilience and optionality: Adaptability, Innovation, Network effects, and Duration of growth. These should be considered to evaluate the long tail of unidentifiable risks, you should, of course, do your best to analyze idiosyncratic risks and mitigants central to your thesis thoroughly and independently. iii) Ideal businesses that fit this construct are companies with a core business model that fosters a high degree of revenue retention in acyclical, low-growth, antifragile markets; but, with multiple levers for growth that can be pulled / invested in over the life of one’s hold (forays into higher-growth segments of the industry, product expansion, strong de novo strategy, operational improvements, compelling M&A thesis, etc.). iv) Do not be afraid to pay a premium multiple for these opportunities and endeavor to squeeze out processes that will not fit a barbell distribution; deals that rank moderately on both resilience and optionality, here you are suited to overpay. There are some great graphical representatives in the long-form article which I may summarize in a follow-up if there’s interest. Full Whitepaper here: nzscapital.com/news/complexi…

Biggest financial mistake of my life was being a poor analyst during COVID

MM private equity firms are certainly calling upon underwater VC backed software businesses - helps provide an exit to the founder, resets the MIP and helps a lot of these executives actually get a path to material $, and allows partial realizations to VCs who haven’t seen DPI. There are a lot of zombies out there, after realizing that the TAM is smaller and growth rates are lower than expected, these companies make better PE plays from the perspective of slashing sales and R&D and maximizing profitability with relative annuity like revenue streams.

Something that successful families fundamentally understand, and that those from less fortunate backgrounds often miss, is how circular success is in life. So many thresholds for traditional measures of success (academics, careers) are simply based on one’s current station rather than any truly meritocratic measures. The bar is infinitely higher for outsiders, and this flywheel starts far earlier in life than one might imagine, making it very challenging to break its velocity in adulthood.

This is so sad dude

These are the sirens they warn you about

Got this message after my flight this morning, is this the move?

Do you fundamentally understand how private equity works? This is a nonsense chart, no shit there’s limited distributions from newer funds

Going to have to fade this. Fervently chase prestige early in your career. Put yourself in the room with the “smartest” and largest allocators and then consider specializing. It’s a unidirectional path with far more option value.

I am not a particularly pious man but these people need to find a god, something to place value in that focuses on the beauty of life rather than guilting them into artificially experiencing the suffering of a far off group

One of the most interesting applications here is the ability to connect AI to a native data lake for analysis. One of private equity firms greatest assets that is generally underutilized is historical data. Imagine being able to ask an AI assistant to chart all IOIs submitted in an industry with corresponding success rates? Screen 10k+ CIMs and run a comparative margin analysis against those in a certain end market. There are very interesting possibilities.

Only a matter of time before we learn that the medallion fund is printing off of Indian soybean arb.

Not at a rate of 12 to 1 though

What a ridiculous question, it’s math: $15m company that sells for 7.0x = $105m EV OR 15x $1m company that sell for 3.5, each = $52.5m total EV Scale and professionalization trump diversification every day of the week

Very few people appreciate that the vast majority of private equity gains over the past two decades have been driven by the number of PE-owned companies 20x-ing. This has led to multiple expansion and value appreciation, however, has a multiplicative effect in down cycles such that you are faced with both multiple compression and lower levered yields.

Wondering about LP’s thoughts on the implications for PE here. Multiples have barely compressed, record levels of dry powder sitting on the sidelines, and delayed rate abatement. Looks like this is going to be a challenging set of vintages for undifferentiated managers without an RX or operational angle - a hollowing out of vanilla MM allocators.

Sounds like a lot of work, I wouldn’t worry about it.

A few years ago I came across a white paper on complexity investing by NZS Capital that I find myself coming back to quite often and that tends to align with the lens through which I approach new opportunities. The concepts are intuitive and I do not fully prescribe to some of them (particularly related to operational optimization), but I found it helpful to explicitly lay out in a very brief synopsis: i) Traditionally, investors and economists tend to think about the future in terms of the likelihood of identifiable risks occurring, but not on the long tail of unlikely, but highly consequential potential influences. However, businesses operate in complex systems that are driven by power laws; millions of diminutive events affect a company every day, increasing the odds of one unforecastable stimuli having an outsized affect on the business over some period of your hold. ii) This is part of the reason why modeling and forecasting is helpful from a tactical perspective (sanity checking cases on returns, negotiating the CA, pitching IC, etc.), but strategically, is often a fool’s errand. NZS suggests that rather than underwriting narrow predictions, one should emphasize establishing a framework for evaluating the following variables as a proxy for whether companies can thrive in a complex environment and have tools at their disposal to create resilience and optionality: Adaptability, Innovation, Network effects, and Duration of growth. These should be considered to evaluate the long tail of unidentifiable risks, you should, of course, do your best to analyze idiosyncratic risks and mitigants central to your thesis thoroughly and independently. iii) Ideal businesses that fit this construct are companies with a core business model that fosters a high degree of revenue retention in acyclical, low-growth, antifragile markets; but, with multiple levers for growth that can be pulled / invested in over the life of one’s hold (forays into higher-growth segments of the industry, product expansion, strong de novo strategy, operational improvements, compelling M&A thesis, etc.). iv) Do not be afraid to pay a premium multiple for these opportunities and endeavor to squeeze out processes that will not fit a barbell distribution; deals that rank moderately on both resilience and optionality, here you are suited to overpay. There are some great graphical representatives in the long-form article which I may summarize in a follow-up if there’s interest. Full Whitepaper here: nzscapital.com/news/complexi…

Me speaking to coverage bankers all day, why in gods name did I schedule these.

This was the worst season of television I have seen in a very long time.

The is is the standard

A lot of remote PE corp dev jobs out there

When I was an analyst I wore brand new leather soled loafers to tour a machine shop for an MP, learned i) how to pry metal shavings out of my shoes and ii) never to do that again

Is this how the Rothschilds felt sending their sons to London, Paris, and Vienna?

Very rarely do I structure add-on IOIs where the implied multiple increases throughout the earnout period. This introduces risk asymmetry, you are allowing founders to take chips off the table today, while retaining most of the upside, without trading off any downside.

Frog and the scorpion man, can’t be mad at a grifter for grifting, for it’s in their nature.

We are likely within one to two years of AI being able to complete most rote associate tasks - VDR reviews, data cuts, NDAs, etc. Investing is, and will continue to be, an apprenticeship model, however, it will be interesting to see how developments change the nature of junior work.

I agree with the spirit of this, however, there’s a price where you would do any deal. Even if a business is going into BK, so long as there is positive cash flow or enterprise value, there’s a price that you would pay in order to earn an attractive risk adjusted return. Return at the underwrite and buying cheaply is how a lot of successful funds have made their money.

And then my hard work was acknowledged and the entire bullpen clapped for me

Hallowing out of the middle class will trigger deep structural shifts - millions of individuals with idle time who feel disenfranchised by a system that generated vast wealth, but left them behind. UBI will need to be implemented as a social pressure valve to prevent mass discord. Welfare becomes the pacifier, the state becomes the parent, and political power shifts to the left under a system of increasing wealth disparity. My takeaway is that i) it has never been more necessary to accrue assets than it is right now, else be left behind, ii) expect rising support for welfare policy by the right, and iii) barbell your consumer exposure (buy section 8 and Hamptons, sell the suburbs)

The most successful people I know all have one trait in common, belief in themselves to the point of delusion, our ambitions are often within reach.

Is Sam Altman Paul Atreides?

Good read, a few takeaways: i) End of destocking has not resulted in expected rebound. In 2023, expensive inventories swelled, prompted by supply chain fears and elevated commodity prices. Consensus expectations called for continued destocking through H1 to deplete the expensive inventory, preceding a return to growth around the midpoint of the year. Despite these expectations, broader industrial weakness has prevented this recovery from materializing. ii) In response to macro weakness, distributors are looking to vertical integration, service and capability extensions. iii) PE-backed distributors are expanding into Europe. Consolidation across several specialty distribution end markets has limited the number of viable acquisition targets for distributors in the US. As a result, many PE-backed consolidators have turned their attention to Europe to find accretive acquisitions that will enhance revenue quality, increase total addressable markets, and unlock new, fragmented distribution markets.