Anybody have any experience working on the operator side of a PE-backed portfolio company?

There is an interesting opportunity in front of me to make the jump from Corporate America to working on the mgmt team for a PE portco. Interested to hear others experiences.

Less Evil Hank Scorpio said:

---

I left a corporate career after only 4 years to join a PE backed company. We sold 2 iterations under the PE backing. Very positive experience. Now, almost 10 years later, I am a partner in the successor company that is Family Office backed but in many ways operates similarly to PE backing. Only real difference is a longer investment horizon/less pressure to be ready to sell in 5 years.

I'm in O&G, can't speak as much to other industries. Do you have any specific questions?

---

Is it cool if I DM you?

Dale Earnhardts Stache said:

---

Less Evil Hank Scorpio said:

---

I left a corporate career after only 4 years to join a PE backed company. We sold 2 iterations under the PE backing. Very positive experience. Now, almost 10 years later, I am a partner in the successor company that is Family Office backed but in many ways operates similarly to PE backing. Only real difference is a longer investment horizon/less pressure to be ready to sell in 5 years.

I'm in O&G, can't speak as much to other industries. Do you have any specific questions?

---

Is it cool if I DM you?

---

Go for it

My email is in my profile. Feel free to reach out.

Lots of mergers and acquisitions and layoffs. That's my wife's experience at a PE owned company and in a field that has a lot of mergers and acquisitions (digital media and advertising).

Left Corporate world for O&G PE Portco in 2012, have never looked back. Feel free to DM me as well

I haven't gotten one yet but since you don't have a star he can't DM you here.

Thanks for all the responses. I'll reach out this weekend.

Another successful TexAgs hookup!

Well said. I have been a cfo for a couple of "run the best play" guys for 7 years in real estate. Our investors on individual deals are all real estate private equity, but the owners of my firm are the first example.

Your post made me laugh how accurate it is.

I will say that working for the guys who aren't hyper focused on the financial statements has downsides too. For instance, the first year or two it was a real struggle to get them to attend a weekly cash flow meeting, when we were consistently struggling to have stable cash. Now my focus is delaying distributions to pay off unproductive debt first.

These seem like silly problems in comparison to PE backed companies, but I spend a ton of time focusing on them. Ultimately, like you said, you can call the right play today for a long time, but eventually you need to get in the endzone.

Thanks for the laugh this morning.

I love my job by the way and I have been offered other rolls in "fast growing, high upside, PE backed". And I look at the comp and the mold of the guys I would work with, and I pass.

At least the guys I know right now, for all of their good and bad, I know they truly care about me and have my back. If I left and worked for someone else with less emotion, as soon as we don't hit quarterly numbers, I could be out.

Consulted for PE companies for a decade. Then joined a small PE fund on the buy side.

Then joined a bigger one as an in-house operating partner to support portcos.

Now serve as the CFO of one of their larger portcos.

I can go on for hours about PE, VC, large fund, search fund, good ones, bad ones. Family offices. Industrials, healthcare, software, O&G. Owner operated getting the 2nd bite. Pure management team swap. Hands off PE deal team. Hands on deal team.

jh0400 said:

---

It depends on your industry. I'm in software and am working for a PE-backed co after spending part of my career in a public co. Running the business is similar, but the expectations of the investors are wildly different. The vintage of the deal also matters. A majority of the 2021-23 take-privates in software are in a really bad spot. Growth has slowed significantly across the board, and the companies are fighting debt loads that made sense when interest rates were 300 bps lower.

If you happen to be in software, shoot me a PM. I can give you more insight.

---

Hah, ditto. PE software is not a great place to be right now.

How often does the owner operated with the owner getting a second bite work out? We get hit up multiple times a week by PE companies and I've always wondered if it makes more sense to stay on and try to hit the big payday or get out while the getting is good.

KALALL said:

---

How often does the owner operated with the owner getting a second bite work out? We get hit up multiple times a week by PE companies and I've always wondered if it makes more sense to stay on and try to hit the big payday or get out while the getting is good.

---

totally depends. Here's the thing... when that money rolls into the "2nd bite" scenario, it's cash rollover. So the only way you're not getting it back (not the only way, but keeping it simple) is if the business doesn't sell, essentially, for what it was originally bought.

lots of things can change that, but all part of the negotiation (preference on who gets paid first, how much leverage is getting used, etc.). As well as how much dilution that rollover is subject to.

Here's an example...

you sell for $30mm and roll over $6mm. You should now own, effectively 20% of the business going forward. It will be diluted by management incentive plans, etc. But that's what you should own.

Say the buyers put in... $10mm equity and $14mm of debt... They still own 80% but the debt comes in front of everyone.

Fast forward down the road... yall sell together for 75mm but have taken on some more debt to grow, do some acquisitions, etc. Let's say there's now $25mm of debt.

$25mm debt gets paid off. $50mm left, you get 20% of the $50mm... so another 10. You turned the $6mm investment into 10.


many many variables to consider but unless it tanks post-close, you'll at least get your money back at the next transaction... hopefully with a decent return. It's mostly used for them to 1) not have to put as much cash in to buy the company in the first place (since you roll) and 2) keeps you onboard and incentivized to grow it.

I think it depends on the business.

Let's say that you have a $10MM company, profiting 10% for easy math.

PE wants to buy 80% of it and flip it, promising that $8MM plus 20% of the next sale is way better than you trying to grow it on your own.

If you can double the value in five years with hard work and aggressive reinvestment (without the partner), that's probably another $5MM+ in profit over that time plus you get to sell a $20MM company. So in five years you're +$25MM.

To come out ahead in the "second bite" situation, that PE company is probably going to need to raise the sale price to $90MM. That means turning your company into something that attracts a different kind of buyer or almost 10Xing the company for it to be a better deal. Does that version of your company even exist?


If you've got a company that trades on revenue and you can raise prices and buy more customers, the second bite works well.

Or if you've got a company that trades on EBITDA and you can eliminate a ton of overhead by being part of a portfolio and grow revenue a decent amount, I think that works, too.

But some businesses are built to be cash cows, not moonshots.


A lot of it also comes down to what you want. Some people find being the owner the worst part of the job, have no idea what they'd do if they weren't doing what they do now, and selling most of it to someone else is a fantastic deal even without the huge financial upside. Some of the best exits I've seen have been someone who gets enough money to pay off their house, lock up their retirement, buy a few toys, and continue to work their current job with a lot more vacation time.

Personally, the idea of working for someone else doesn't interest me. It would take a really big payday for me to be willing to do it, and for my business the "second bite" economics just aren't there. If I were to sell it to someone, the deal would probably be some version of "write me a check and you'll never see me again."

Huge factor in my scenario also is how much people are willing to pay for a company. There are times where it's a seller's market, and selling a decent company in that environment might pay a lot more for selling a great company in a buyer's market.

I think biggest factor in timing the sale and what type of sale to do depends on what you want. Most of us are talking about sums of money that don't make enough of a difference to outweigh your preferences.

Agreed. My last conversation with one of these people highlighted that what I needed to grow my business was to reinvest more aggressively: hire a few people, and buy some new equipment.

Basically I don't need a capital partner to stop being a little b. Beating the next boss it might be a different story.

easier to spend other people's money

Ain't that the truth...

ChoppinDs40 said:

---

Consulted for PE companies for a decade. Then joined a small PE fund on the buy side.

Then joined a bigger one as an in-house operating partner to support portcos.

Now serve as the CFO of one of their larger portcos.

I can go on for hours about PE, VC, large fund, search fund, good ones, bad ones. Family offices. Industrials, healthcare, software, O&G. Owner operated getting the 2nd bite. Pure management team swap. Hands off PE deal team. Hands on deal team.

---

The deal team involvement should be a major factor, and it differs quite a bit between the equity providers in oil and gas. There are pluses and minuses to both sides of that involvement, but a highly engaged deal team can be a massive time commitment until you've established reputation (previous successful exits accelerate that, but they are not enough).

topher06 said:

---

ChoppinDs40 said:

---

Consulted for PE companies for a decade. Then joined a small PE fund on the buy side.

Then joined a bigger one as an in-house operating partner to support portcos.

Now serve as the CFO of one of their larger portcos.

I can go on for hours about PE, VC, large fund, search fund, good ones, bad ones. Family offices. Industrials, healthcare, software, O&G. Owner operated getting the 2nd bite. Pure management team swap. Hands off PE deal team. Hands on deal team.

---

The deal team involvement should be a major factor, and it differs quite a bit between the equity providers in oil and gas. There are pluses and minuses to both sides of that involvement, but a highly engaged deal team can be a massive time commitment until you've established reputation (previous successful exits accelerate that, but they are not enough).

---

Agreed. It can be good or bad. Also depends on what type of investment it is.. lots of acquisitions? roll-ups?

Often times they can provide lots of horsepower. For those who haven't done an institutional deal, there's a TON of work. Legal, modeling, funds flow, contract assignments, etc. So much paper pushing to do and if you're doing 2-5 of these a year, having a deal team can be hundreds of thousands of savings in output.

I'm currently working as the CFO for a medium-size privately held company with experience in both buy side and sell side M&A. Do you have any recommendations on how to get in with PE companies for PortCo CFO roles? Any attempts to apply through recruiters and my IB contacts have not generated any successful leads so far.

Most funds that I'm aware of engage one of a few third party recruiters for exec search. The ones I'm familiar with due to having worked with them in the past:

JM
Bespoke
True Search
ON Partners

jh0400 said:

---

Most funds that I'm aware of engage one of a few third party recruiters for exec search. The ones I'm familiar with due to having worked with them in the past:

JM
Bespoke
True Search
ON Partners

---

Thank you. I'll reach out to them and see if we're a good fit.

jh0400 said:

---

Most funds that I'm aware of engage one of a few third party recruiters for exec search. The ones I'm familiar with due to having worked with them in the past:

JM
Bespoke
True Search
ON Partners

---

We use JM.

What sort of experience with buy and sell side M&A? QOE work?

GTBullitt68 said:

---

jh0400 said:

---

Most funds that I'm aware of engage one of a few third party recruiters for exec search. The ones I'm familiar with due to having worked with them in the past:

JM
Bespoke
True Search
ON Partners

---

Thank you. I'll reach out to them and see if we're a good fit.

---

I can connect you with someone at ON Partners if interested. That's who I recently chatted with.

Also, thanks for all of the responses and apologies for never reaching out directly to those that offered. Things have been crazy and I ended up passing on the PE opp. I'm still intrigued by this world so plan to keep my eyes and ears open.

That would be great! My email is username at gmail dot com. I appreciate the recommendation

GTBullitt68 said:

---

That would be great! My email is username at gmail dot com. I appreciate the recommendation

---

Email sent