Lecture on Private Equity by Gerald O'Dwyer with Mike Lorelli

Jul 2, 2024

Lecture on Private Equity by Gerald O'Dwyer with Mike Lorelli

Introduction

  • Broadcast on private equity interviewing PE firms’ executives.
  • Gerald O'Dwyer introduces himself and Mike Lorelli.
  • Encourages the audience to prepare questions for Mike.
  • Slides and handouts available via email and chat box.
  • Sponsored by Blackmore Partners Inc (founded in 2005).
  • Blackmore helps executives monetize their background into deals.
  • Executives can earn $250K-$1M, with potential bonuses and equity.
  • Concerns about long-term inflation and job security.

Blackmore Partners Inc

  • Helps executives become part of private equity deals.
  • Talent Group (started in 2007) conducts hundreds of searches for private equity roles.
  • Roles include CEOs, COOs, General Managers, and more, all with salaries over $150K.
  • Blackmore Connects: an educational and networking organization.
  • Offers deep dives into the private equity mindset: hiring, buying, surviving, etc.
  • Events and conferences offer valuable networking opportunities.
  • Emphasis on understanding the private equity mindset and reducing failure rates for executives transitioning into private equity.

Introduction of Mike Lorelli

  • CEO of five portfolio companies and experienced board director.
  • Insight into private equity workings.
  • Extensive board experience (7 private equity and 3 public boards).
  • Long-term relationship building with the private equity community.
  • Accredited at the American College of Corporate Directors and NACD.

Private Equity Landscape

  • Public vs. private company landscape shifting significantly.
  • From 7,000 to 3,600 public companies in four decades.
  • 16,800+ private equity portfolio companies currently.
  • Private equity offers significant career opportunities.

Key Private Equity Concepts

  • Private equity professionals prioritize time over other metrics.
  • History: Private equity began in 1977; rebranded from “leveraged buyout groups.”
  • Key players: General Partners (GPs), Limited Partners (LPs).
  • LPs include public pension funds, company pension funds, endowments, etc.

Private Equity Dynamics

  • Sector specialties and asset management sizes differentiate private equity firms.
  • Misconception: Private equity firms work in all sectors.
  • Importance of being sector-agnostic and focusing on skill sets and adaptability.
  • Emphasis on betting on the jockey (executive) rather than the horse (sector).
  • Performance measured through significant profit potential over conventional asset classes.

Private Equity Model & Measures

  • LBO model explained with step-by-step financial metrics.
  • Importance of EBITDA and multiple expansions.
  • Importance of the invest and harvest periods in private equity cycle.
  • Performance measures in private equity (e.g., 3x cash on cash return).

Compensation in Private Equity

  • CEOs in private equity might earn less in salary/bonus but gain significant equity.
  • Importance of negotiation and understanding equity stakes.

Board Involvement

  • Private equity boards are smaller but as significant as public boards.
  • Good governance often necessitates having outside directors.
  • Creating a “Skills Map” to identify gaps in board competencies for targeted applications.

Tools & Strategies

  • LinkedIn: Importance of a strong LinkedIn profile with optimized headline and rich 'About' section.
  • Cover letters: Crafting compelling subject lines to capture attention.
  • Networking strategies for finding and engaging with private equity firms.

Q&A Summary

  • Approach to finding companies for sale: Importance of having a target-driven strategy.
  • Board certification discussion: NACD and other certifications beneficial but not mandatory.
  • Importance of having a versatile portfolio of deal theses.
  • Differentiating oneself as a deal source and strategist, not just a job seeker.
  • Discussion on the unfunded sponsors and relevance in private equity deals.
  • Energy sector: Challenges with current policy environment but high profitability for daring investors.

Conclusion

  • Encourage participants to apply for Blackmore Connects conferences to deepen their knowledge and connections.
  • Thanks to the audience and participants for their engagement.