Case Study: Navigating the Private Equity Waters with BlackmoreConnects and ACG – Remember it is all about the exit

Case Study: Navigating the Private Equity Waters with BlackmoreConnects and ACG - Remember it is all about the exit

Written By: Gerald O’Dwyer III 

The PE Guru — Blackmore Partners, Inc | July 18, 2024

Introduction

John Smith, an accomplished executive with over two decades of experience in the manufacturing sector, recently decided to venture into the world of Private Equity (PE). Having successfully managed several high-growth projects and facilitated two minor PE deals in his previous roles, John felt ready to take on a more significant challenge. His goal: to find the right PE deal within the next 12-24 months that would lead to a life-altering exit.

The Starting Point

Despite his experience, John knew that the PE landscape was complex and highly competitive. To navigate this terrain effectively, he sought the expertise and network of BlackmoreConnects and joined the Association for Corporate Growth (ACG). These steps were crucial in equipping John with the tools and connections necessary for success in PE.

Leveraging BlackmoreConnects

BlackmoreConnects provided John with a structured approach to his PE journey. The platform’s measurable, repeatable process helped him in several key areas:

  1. Networking: Through BlackmoreConnects, John gained access to an extensive network of over 200 PE firms. He attended exclusive networking events and workshops that connected him with potential partners and advisors.
  1. Research and Resources: Utilizing resources like PitchBook and Cyndx, John could perform detailed research on potential PE firms and portfolio companies. This enabled him to make informed decisions about which opportunities to pursue.
  1. Mentorship and Guidance: John was paired with a mentor who had over 30 years of experience in the PE industry. This mentorship provided him with invaluable insights and advice, helping him avoid common pitfalls and stay focused on his objectives.

Joining ACG

Joining ACG was another strategic move for John. The association’s events, conferences, and local chapter meetings offered additional networking opportunities and industry insights. Through ACG, John was able to:

  1. Build Relationships: John established strong relationships with key industry players, including PE investors, advisors, and other executives. These relationships proved crucial in identifying potential deals and gaining referrals.
  1. Stay Informed: ACG’s resources and events kept John up-to-date with the latest industry trends, best practices, and market dynamics. This knowledge was essential in navigating the rapidly changing PE landscape.
  1. Enhance Credibility: Being an ACG member added to John’s credibility in the PE community, positioning him as a serious and well-connected executive.

The Journey: 12-24 Months to a Great Deal

Over the next 12-24 months, John followed a strategic plan, leveraging the support from BlackmoreConnects and ACG. Here’s a breakdown of his journey:

  1. Months 1-3: Preparation and Planning
    • Goal Setting: John set clear, measurable goals for his PE journey, including target sectors, deal sizes, and timelines.
    • Skills Enhancement: He participated in workshops and training sessions to sharpen his PE skills and knowledge.
  1. Months 4-6: Networking and Initial Outreach
    • Events and Conferences: John attended several BlackmoreConnects and ACG events, expanding his network and initiating conversations with potential partners.
    • Cold Outreach: He used templates and strategies provided by BlackmoreConnects to reach out to targeted PE firms and portfolio companies.
  1. Months 7-12: Deep Dives and Due Diligence
    • Evaluating Opportunities: John conducted thorough due diligence on potential deals, leveraging his network and resources for detailed analysis.
    • Engagement: He engaged with a few promising targets, negotiating terms and aligning expectations.
  1. Months 13-18: Securing the Deal
    • Final Negotiations: John finalized negotiations for a deal that aligned perfectly with his goals—a mid-sized manufacturing company with high growth potential.
    • Closing the Deal: With the support of his mentors and advisors, John successfully closed the deal.
  1. Months 19-24: Post-Deal Management and Preparation for Exit
    • Value Creation: John focused on implementing strategic changes to enhance the company’s value.
    • Exit Planning: He began preparing for a lucrative exit, ensuring all processes were in place for a smooth transition.

 

DIY Approach vs. BlackmoreConnects and ACG

Let’s compare John’s approach with the traditional DIY approach and demonstrate the difference in outcomes.

  1. Networking Efficiency
    • DIY Approach: John would have to independently identify and reach out to PE firms, relying solely on his existing network. This process could take several months to build momentum.
    • BlackmoreConnects and ACG: John gained immediate access to a vast network of over 200 PE firms, accelerating his outreach and connection process.
  1. Research and Resources
    • DIY Approach: Without specialized tools, John would spend countless hours gathering and analyzing information on potential deals.
    • BlackmoreConnects and ACG: Using PitchBook and Cyndx, John conducted in-depth research quickly and efficiently, making data-driven decisions.
  1. Mentorship and Guidance
    • DIY Approach: John would navigate the complex PE landscape alone, increasing the risk of missteps.
    • BlackmoreConnects and ACG: With a seasoned mentor, John received expert advice and avoided common pitfalls.
  1. Time to Deal
    • DIY Approach: The process could extend well beyond 24 months due to inefficiencies and lack of support.
    • BlackmoreConnects and ACG: John was able to identify, evaluate, and secure a deal within 18 months.

 

Financial Comparison: Equity vs. Salary and Bonus

John’s executive package at his previous company included a salary of $250,000 and an annual bonus of $50,000, totaling $300,000 per year. Over five years, this amounted to $1.5 million in gross earnings.

In his new PE role, John negotiated an equity stake of 5% in the target company, which had an EBITDA of $5 million and a purchase price of $50 million. Assuming an exit after five years at a 3x multiple of EBITDA, the company’s value would be $75 million.

Equity Value Calculation:

  • Initial Value: $50 million x 5% = $2.5 million
  • Exit Value: $75 million x 5% = $3.75 million
  • Capital Gain: $3.75 million – $2.5 million = $1.25 million

John’s equity stake resulted in a capital gain of $1.25 million over five years. Coupled with a potential annual salary of $300,000 as a PE executive, his total earnings would be significantly higher:

Total Earnings:

  • Salary: $300,000 x 5 = $1.5 million
  • Capital Gain: $1.25 million
  • Total: $2.75 million over five years

By choosing the PE path with the support of BlackmoreConnects and ACG, John not only increased his total earnings but also gained control over his financial destiny through equity ownership.

Conclusion

John’s journey into the PE world was marked by strategic planning, continuous learning, and leveraging the right resources. With the support of BlackmoreConnects and ACG, he navigated the complexities of the PE landscape, ultimately securing a deal that promised a transformative exit. This case study highlights the importance of utilizing structured support systems and networks in achieving success in the competitive field of Private Equity, demonstrating that executives can significantly enhance their financial outcomes and career trajectories through smart choices and strategic partnerships.

 
     

Elementor

Twitter Facebook Linkedin Youtube Instagram Linktree
BMP Logo connected

Email Us