Disgruntled PE Associate

@holistic_pm @Will_Schryver Higher than I would’ve thought. GP resets their economics while LPs get their face ripped off. Guess that’s why it’s called a GP-led!

@plsfix4life @Will_Schryver The average opt out rate is 90%, most initially LPs take liquidity and do not roll into the CV

Private Equity secondary market volume hit a record $226 billion ~50% of the market is GP-led volume Average MOIC ~4.3x prior to CV with an average ~93% GP carry roll The supply of opportunities exceeds capital chasing these deals Creating a buyer’s market filled with high quality deals Data suggests GP-led deals are not filled with inherently bad companies and GPs attempting to kick the can down the road Source: Hamilton Lane

@dealflow_guy Why do you say high capex is ok/good and how does this play into valuation? Let’s use excavation as an example.

If I was a new Independent Sponsor or ETA guy with limited experience: 1) build quick website 2) buy knowledge (NOT Codie/Ben) 3) hire buyside rep 4) connect with others in space 5) build and iterate on a thesis 6) get solid debt/equity on tap All of this with 24 month time horizon. All of this expecting to inject min $100K-$500K into first deal. Would not buy: - HVAC Resi or Commercial Would buy: - other home services (select) - industrials - B2B services - GovCon - tech enabled services - selective construction (high CapEx is ok, good even - but need capital partner for balance sheet) Strategy: - rollup, pay up for platform - keep operator (can promote from within), be there for 9 months regularly - patient capital with opportunistic out - start and keep proprietary sourcing - look at brokered deals, don’t rely on them - get in person with sellers ASAP - get to LOI ASAP - avoid complex structure - hang around the hoop

@YourQoEGuy I view RR as top line driven and what you’re describing as PF adj EBITDA. Saw an eyecare biz (big platform) that engaged McKinsey and ripped $40M of opex out in late Dec ‘25. Sure enough their Dec PF adj EBITDA had an add back of $40M. I’d bet they rehire > half those roles.

Every deal right now seems to have “run rate EBITDA.” Here’s what I look for: • Was the cost actually removed? • Is it contractual? • Is it structural? • Or is it just expected? There is a big difference between: “We plan to eliminate this” and “It is already eliminated.” If your investment thesis depends on execution risk, price it that way. What’s the most aggressive add back you’ve seen this year?

@YourQoEGuy Obviously price increase is the easier to implement, but which would you say is more sustainable? Or is it a well balanced combo?

Every CIM says: “Significant opportunity for margin expansion.” The real question: Why hasn’t the current owner done it? Common answers: • Capability gap • Capital constraint • Cultural resistance • Or it simply is not realistic Before underwriting expansion, isolate which category you’re in. Margin improvement from price increases is very different from margin improvement from operational redesign. One is market dependent. The other is management dependent.

@cgtwts Someone still has to tell Claude what to do and it sure as hell ain’t gonna be my MD

Investment banking analysts and financial analysts right now:

@Will_Schryver 4x for the resi deal and 3x for commercial. Potentially more for the resi depending on DD findings — location, customer churn, systems and employee turnover - to name a few key focus areas.

What EV/EBITDA multiple would you pay for these companies? Residential HVAC $3M Revenue / $750K EBITDA (25% margin) Commercial HVAC $12M Revenue / $3M EBITDA (25% margin) Residential - 0% Construction - $0 Backlog / visibility in earnings - 100% Service & Replacement - 0% Project based Commercial - 100% Construction - $12M Backlog - 0% Service - 100% Project based

@SMB_Attorney My VP thinks he’s one - does that count?

Who are the best younger generation (Millennial, Gen X) life and/or business coaches and speakers?

@PrivatEquityGuy 2x EBITDA and the sellers stay employed? Sign me up (I will turn the NDA and pass the deal along to my VP)

Had a small business owner call me today. Said they run a very small but profitable swimming pool maintanance and supply shop. They’re both in their 50s; the company has zero debt, keeps ca $1m in the account, and $300-400k in inventory. For the past 8-10 years, they’ve paid themselves ca $400-500k per year in dividends. They called because they’d like to sell the company. It turns out they have fewer than 10 employees, and to this day they work 40-50 hours per week, managing almost everything. They’ve built awesome lives for themselves over the years - nice homes, cars, no debt, kids at great universities, apartments, etc. Although, a company like this isn’t worth much once they leave... Do they understand this? Yes and no... when asked how much they would want for a company like this, they said 2x EBITDA? Maybe 3x? At the same time, they don’t want to leave and are willing to work next to the new owner, educate and teach them, so this person could take over the company.

@realEstateTrent My VP thinks I only know 7th grade math. I better keep studying…

Big or small, real estate deals should require no more than 8th grade math. Anything more is just flex and fluff.

@ConnorAbene Why not both?

You don’t feel stressed because things are bad. You feel stressed because you don’t know how bad they could get.