Hey Steve Its GREAT that you made this video. Everyone talks about PE & LBOs but rarely does someone talk about Value Creation On the other hand; It will be great if you link up every idea with an example so that we will be able to understand the strategies better You can make ONE VIDEO per strategy too so that you can rake up the ad revenue for your efforts Till then Great Job
Hi Divyansh, thanks so much for your comment. I appreciate your kind words. We'll be posting videos every Tuesday. We hope they are helpful! Thanks again!
Thanks Timothy! Good luck with the CFA exams. As you will see when reviewing your materials, I wrote the Alternative Investments section for the CFA Institute. These videos will hopefully help you :-)
I cant say how much i am thank full to you - you are like after god to me - I was struggling with broken peices and you helped me connect the dots .. thank you sir with so much respect
Hi Varun, thank you very much for your comment. I see you emailed us and are communicating with my colleague about a call with me. Looking forward to chatting!
This was fascinating. We are looking at how the talent side of private equity contributes positively or negatively to value creation, and looking at talent strategies more consistently boost value creation post acquisition. We think the old “rip and replace” method PE is notorious for depletes value.
Your presentation demeanor is excellent. Clear, and to-the-point. It's fantastic to watch a very brief video and get so much information out of it. Thank you!
Unlocking value via digital transformation is a game changer for PE firms. Consider how Rolls Royce used the cloud and AI to transform into an Engine-as-a-Platform business. Overnight it changed the value of the enterprise as well as created a new market.
This is a great video with some very key concepts that were well explained. Thanks Steve! One suggestion is to continue having more examples, it always helps to have something to relate to. Now when I think of Operational Improvement I will always think of Dollarama! Best from Swtizerland
Thank you very much for your comment, Fredo. I appreciate the suggestion. I'll see if I can add in more examples to the videos. Thanks again for letting me know your thoughts!
Great point Rishiraj. In the framework, we would refer to outsourcing (using external variable costs instead of fixed costs) or building from scratch as "Organic" (or in other words, "company specific"). Thanks for your sharing this!
What caused the change in importance of deal structure? Why is multiple expansion and operational important improvement more important now? What were the key catalysts?
Hi Elizabeth, have you seen our playlist titled "Alternative Credit (including Private Debt). Here is the link: bit.ly/3w5jwS3 Does this answer your questions? If not, please let me know what questions you have.
Thanks for your message, Slow Motion. I'm doing my best to put new content out. Next week, we should have a new video ready on "The Issues with Committed Capital". Thanks again for your message!
With leverage levels in PE deal structures approaching pre-crisis percentages, and the amount of dry powder, especially of an older vintage, placing increased pressure on GPs to produce returns, is there sufficient reason to expect the buy and build strategy to experience a squeeze in the wake of 2020 market conditions?
Hi Matthew, thanks for your message. That's a great question. I think it all depends on the industry. There are still quite a few industries that are fairly fragmented where a buy and build strategy may make sense. I think the abundance of dry powder has created more competition for deals that has brought multiples up in general over the last few years. With that said, it will be interesting to see what will happen to multiples in 2021 considering what is going on around the world.
Private equities track record is abysmal. They follow a tried and true recipe: Slash costs. Slash costs. Lower wages. Sell off 'non performing' assets like real estate. They raid pensions. Raid healthcare. Take on MASSIVE debt. Pay themselves special dividends. Pay themselves management fees. Buildings fall apart. They have a track record of bankrupting companies 5 years out 10x the average. We are to believe that a simple fresh pair of eyes adds value, and that in of itself, is more compelling than experience in that industry. PE has laid waste to whole industries. They own as much as 15% of whole industries and eat them like moths. PE are plunderers. For every successful PE story, there are 10 bankruptcies. Leverage them up. Extract cash at an alarming rate. Strip them naked. flip in 24-30 months.
Hi Sarah, thanks for your question. Finding a company with "low cyclicality" is more difficult than it seems. Private equity has become a lot more efficient over the years. 20 - 30 years ago quite a lot of value was created through debt and deal structuring. Today, many private equity firms have many employees with operational expertise so that they can help their portfolio companies improve from an operational perspective. Does that help answer your question?
Hi Dhanusha, Great to hear from you. Your presentation last week was excellent. Good luck in the finals this week! Thanks for your question. It would depend on the size of the companies that are purchased and the market share of the combined company. Usually, you will see the buy and build strategy in fragmented industries, where larger companies buy smaller companies. With that said, if it involved two dominant players, this could be an issue. Great point, Dhanusha.
Buffett & Munger on EBITDA: "It's a dishonest number. I'll listen to you when you can show me you're paying all your expenses." Munger: "When you hear EBITDA, think "bullshit earnings."" EBITDA is euphemism for cash flow for a guy who is the equivalent mentality of a house flipper. Just throw a coat of paint on it.
Thanks for your comment, Javier. My students told me the same thing about my head, so I tried to fix it in my recent videos :-) Thanks for your feedback.
Very cool of Steve to credit original thinkers. He is a very good and ethical academic.
Hey Steve
Its GREAT that you made this video. Everyone talks about PE & LBOs but rarely does someone talk about Value Creation
On the other hand;
It will be great if you link up every idea with an example so that we will be able to understand the strategies better
You can make ONE VIDEO per strategy too so that you can rake up the ad revenue for your efforts
Till then
Great Job
Hi Paul, thanks so much for the suggestion. Let me see what I can do.
Lllllll di dalam rumah lllllll lllllll yang akan kita oo9o yang akan
O
L lol XDdandiwara
Suffice to say I’m addicted to all of Steve’s videos and he’s become one of my favorite online educators in finance. Thanks a ton Steve!
Hi Divyansh, thanks so much for your comment. I appreciate your kind words. We'll be posting videos every Tuesday. We hope they are helpful! Thanks again!
This is hands down the best and most concise learning video I ever watched, I'm going for my CFA and I see that you are a charterholder!
Thanks Timothy! Good luck with the CFA exams. As you will see when reviewing your materials, I wrote the Alternative Investments section for the CFA Institute. These videos will hopefully help you :-)
Thank you so much Steve, you're amazing ! I appreciate it @@SteveBalaban
I cant say how much i am thank full to you - you are like after god to me - I was struggling with broken peices and you helped me connect the dots .. thank you sir with so much respect
Hi Varun, thank you very much for your comment. I see you emailed us and are communicating with my colleague about a call with me. Looking forward to chatting!
This was fascinating. We are looking at how the talent side of private equity contributes positively or negatively to value creation, and looking at talent strategies more consistently boost value creation post acquisition. We think the old “rip and replace” method PE is notorious for depletes value.
Your presentation demeanor is excellent. Clear, and to-the-point. It's fantastic to watch a very brief video and get so much information out of it. Thank you!
Unlocking value via digital transformation is a game changer for PE firms. Consider how Rolls Royce used the cloud and AI to transform into an Engine-as-a-Platform business. Overnight it changed the value of the enterprise as well as created a new market.
prepping for an interview with a PE rn and this has helped me so much thannks
Hi Yuke, I happy to hear this was helpful. I hope your interview went well!
You are just the GUY man. All the way from London
Thanks John! I appreciate the message!
Thanks so much for your videos, Steve. Concise and precise. Very well delivered.
Thank you for your comment, Eddy. I appreciate it!
This is a great video with some very key concepts that were well explained. Thanks Steve! One suggestion is to continue having more examples, it always helps to have something to relate to. Now when I think of Operational Improvement I will always think of Dollarama! Best from Swtizerland
Thank you very much for your comment, Fredo. I appreciate the suggestion. I'll see if I can add in more examples to the videos. Thanks again for letting me know your thoughts!
Thank you so much for making content like this!
Thanks Michael!
I just love your business acumen. I hope to be in your shoes one day
Hi Andres, thank you for your comment. I appreciate it!
clear, concise and very informative video. Please keep it up
Thanks Pedriny! I appreciate your feedback!
Hi Steve, thank you so much indeed for posting this video, informative & precise!!
Thank you Pradeep!
Clear and concise. Thanks for sharing your thoughts.
Thanks Raghu!
Great video ! Very clear. Thank you that Steve. Is there a book you would recommend to grasp more on value creation in private equity ?
Thank you Steve!! Very very useful and nice video!!!!
Hi Simona, great to see you on here. Thanks for your message!
my firm is pretty medium now but your videos are informative love from kenya
Thanks for writing, Adam. I visited Kenya in 2018. Loved it!
@@SteveBalaban cool next team check us out centum investments
@@adamnyambala5607 what multiples are you paying for your lbos e.g longhorn
Appreciated, very informative👍. Respect from India.
Thanks Nitin! Glad to hear these videos are reaching India!
Quick thought, Ebitda margin can be increased through partnerships such as JV, outsourcing or building by scratch in addition to acquisition.
Great point Rishiraj. In the framework, we would refer to outsourcing (using external variable costs instead of fixed costs) or building from scratch as "Organic" (or in other words, "company specific"). Thanks for your sharing this!
Thanks for a great video!
Thanks Eric!
Great video. Thank you for sharing.
Thanks Levar. I appreciate your message.
What caused the change in importance of deal structure? Why is multiple expansion and operational important improvement more important now? What were the key catalysts?
Hey Steve, thanks for these videos! Can you do a similar series on how credit works in private markets?
Hi Elizabeth, have you seen our playlist titled "Alternative Credit (including Private Debt). Here is the link: bit.ly/3w5jwS3
Does this answer your questions? If not, please let me know what questions you have.
i love you thank you
Thanks for your comment!
What about value creation through digital transformation, specifically reducing technical debt and growth through technology
Helpful, thank you
Thank you for your comment, Reed!
Great video
Thanks Vasu!
Please could how practically show how to cash reconcialiation and evaluate a NAV
Nice
Thanks Farhan!
Please make more videos!
Thanks for your message, Slow Motion. I'm doing my best to put new content out. Next week, we should have a new video ready on "The Issues with Committed Capital".
Thanks again for your message!
With leverage levels in PE deal structures approaching pre-crisis percentages, and the amount of dry powder, especially of an older vintage, placing increased pressure on GPs to produce returns, is there sufficient reason to expect the buy and build strategy to experience a squeeze in the wake of 2020 market conditions?
Hi Matthew, thanks for your message. That's a great question. I think it all depends on the industry. There are still quite a few industries that are fairly fragmented where a buy and build strategy may make sense.
I think the abundance of dry powder has created more competition for deals that has brought multiples up in general over the last few years. With that said, it will be interesting to see what will happen to multiples in 2021 considering what is going on around the world.
Private equities track record is abysmal. They follow a tried and true recipe: Slash costs. Slash costs. Lower wages. Sell off 'non performing' assets like real estate. They raid pensions. Raid healthcare. Take on MASSIVE debt. Pay themselves special dividends. Pay themselves management fees. Buildings fall apart. They have a track record of bankrupting companies 5 years out 10x the average. We are to believe that a simple fresh pair of eyes adds value, and that in of itself, is more compelling than experience in that industry. PE has laid waste to whole industries. They own as much as 15% of whole industries and eat them like moths. PE are plunderers. For every successful PE story, there are 10 bankruptcies. Leverage them up. Extract cash at an alarming rate. Strip them naked. flip in 24-30 months.
Why would a PE firm want to engage in operational improvement? Wouldn’t a company with low cyclicality be a better deal? (Less work)
Hi Sarah, thanks for your question. Finding a company with "low cyclicality" is more difficult than it seems. Private equity has become a lot more efficient over the years. 20 - 30 years ago quite a lot of value was created through debt and deal structuring. Today, many private equity firms have many employees with operational expertise so that they can help their portfolio companies improve from an operational perspective. Does that help answer your question?
@@SteveBalaban Thank you for your reply. Why do companies need to have portfolio companies?
Do you have any books about this topic?
Would the buy and build strategy violate antitrust regulations?
Hi Dhanusha, Great to hear from you. Your presentation last week was excellent. Good luck in the finals this week!
Thanks for your question. It would depend on the size of the companies that are purchased and the market share of the combined company. Usually, you will see the buy and build strategy in fragmented industries, where larger companies buy smaller companies. With that said, if it involved two dominant players, this could be an issue. Great point, Dhanusha.
@@SteveBalaban Thank you for the reply, Professor! Great RUclips page btw, very informative!
really good info… but don’t yell at me 😂
Buffett & Munger on EBITDA: "It's a dishonest number. I'll listen to you when you can show me you're paying all your expenses." Munger: "When you hear EBITDA, think "bullshit earnings."" EBITDA is euphemism for cash flow for a guy who is the equivalent mentality of a house flipper. Just throw a coat of paint on it.
I just wanna know why this man's head remains at a 45 degree angle
How to write to you ?
jemmy, thanks for your message. Feel free to contact me through my website: www.minkcapital.ca/
Why your head tilted?
Good video though
Thanks for your comment, Javier. My students told me the same thing about my head, so I tried to fix it in my recent videos :-) Thanks for your feedback.
@@SteveBalaban no worries, it just feels odd. But the content itself is really good🙌
private equity never makes anything better, they make everything go to shit.