The Private Equity Process

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Since 2013 Quiet Light’s average transaction size has grown up to ten times. Back in those days, there were no private equity firms poking around the e-commerce space for these listings. Today it is a completely different story and more often than not we’re seeing private equity firms come into the buyer spectrum. In fact, once a business reaches a certain size, it is more likely than not that a seller’s potential buyer is going to be in the private equity space of the buyer pool. Today we are going to dissect the PE process a bit further. We’ll delve into the process, the advantages and disadvantages, and give a general education on the subject for those who are curious about it how it works.

Today’s guest, Brian Rassel, is Vice President of Private Equity with Huron Capital. He’s responsible for sourcing, evaluating, and analyzing investments made by his firm. Brian delves into ways he finds that e-commerce has entered into almost sector of investment that his group is involved in these days. Prior to joining Huron Capital, Brian was an Associate at Prophet, a global growth strategy consulting firm. Prior to Prophet, Brian was a consultant with New England Consulting Group where he led project management in their private equity practice for buy-side clients. Brian is sharing his wealth of private equity experience and how PE is entering more and more into the e-commerce space.

Episode Highlights:

  • How Brian defines private equity.
  • How PE funds traditionally start up and get solidified.
  • The difference between small, medium and large equity funds.
  • The holding periods that private equity funds usually need to secure capital.
  • Is PE all about acquiring to grow and sell or is there a category for buy and hold? Do evergreen funds exist?
  • The difference between platform and bolt-on investments.
  • Three things funds do to generate deal flow and types of business spaces they favor.
  • The behind-the-scenes processes of putting a deal together.
  • How many people are involved in the deal on the PE side.
  • The backend investors committee and if that hinders the deal for the seller. Why time commitment is actually a good thing.
  • How many deals Brian’s PE firm evaluates per year.
  • The defined process that gets them through the numbers.
  • The growth potential for e-commerce – multiple appreciations and the role of private equity.
  • Brian frames an ideal acquisition structure based on the general private equity model.
  • Why the buyer/seller fit really matters.
  • How private equity can work for sellers who want to get their business to the next stage.

Transcription:

Joe: Back in 2013 Mark I closed 23 transactions. It was a busy year for me. Do you have any idea what the average transaction size was?

Mark: I … what do I guess? Well, it’s you so I’m going to say like seven million dollars.

Joe: I love putting you on the spot because you do it to me all the time. The average transaction size—

Mark: You got to be like 250.

Joe: It was 125.

Mark: Holy cow.

Joe: 125; very small.

Mark: Okay.

Joe: And at that time there were no Private Equity Firms poking around the e-commerce space for these smaller listings. Today it’s a completely different story and my average transaction size was 10 times that last year. And a lot of buyers or a lot of sellers, the question I get asked all the time are who are your buyers? And it’s a mix of everyone but more often than not now we’re seeing Private Equity Firms come into this space. And I understand you had an expert in that area on the podcast.

Mark: Yeah p

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