BMC Logo 2024

Case Study: Transitioning to Private Equity - The Journey of John and Jane Doe

Written By: Gerald O’Dwyer III 

The PE Guru — Blackmore Partners, Inc | June 20, 2024

John Doe, an accomplished executive, has enjoyed a successful career but is now grappling with the financial realities that many professionals face today. With three children in college and a rapidly consolidating hiring market reminiscent of 2008-09, John finds himself with minimal savings, largely due to the assumption that inflation would remain steady at 3%. The past two decades, however, have seen inflation well above this mark, eroding his purchasing power and savings. Over-leveraged and searching for a way to “make it,” John initially considered startups as a path to success but quickly realized the high failure rate presents a significant risk. Instead, he is now looking to transition into the world of private equity (PE), seeking real equity opportunities to build wealth.

Jane Doe sees the vast opportunities in the PE path, having witnessed many friends successfully exit. Jane is keenly aware that remaining in the W2 wage slave rut is not her future, and she wants to seize the opportunities now. She registered for the BlackmoreConnects lite program as a guest but is now overwhelmed by the volume of information and fears she may be stuck in her current situation. Despite seeing the clear, measurable path that BlackmoreConnects offers, her risk aversion keeps her paralyzed with considerations of potential failure.

Understanding PE as a Profession

Private equity is not just a career but a profession of mergers and acquisitions (M&A) investors. To succeed, one must develop the “Investor-Operator” mindset, which is crucial for achieving 3x to 10x cash-on-cash returns versus striking out.

Mindset for Success

  1. Avoid the Job Seeker Mindset: This mindset creates unnecessary challenges. Instead, focus on becoming an investor-minded executive.
  2. Long-Term Journey: PE is a long-term journey, not a quick destination. It requires thinking and actions that lead to long-term wealth for you and future generations.

Investment in Learning

  1. “Pay to Learn” Field: PE often requires an upfront investment in learning, which may not always be visible initially.
  2. Brand You: Invest in yourself as a “BRAND” rather than being a commodity. This means combining knowledge and relationships to achieve success.

Building “Brand You”

  1. Overcome Resistance: Overcome the resistance to investing in your personal brand. It’s crucial for visibility in the PE space.
  2. Conferences and Networking: Allocate at least $20K annually for PE conferences (e.g., ACG, AMAA, BlackmoreConnects). These conferences are where the majority of PE firms gather, making them essential for building relationships.
  3. Networking Strategy: Aim to meet 200 PE firms annually and maintain relationships every 90 days. Transform yourself from a job seeker to an investor-minded executive.

Understanding PE Firms

  1. Typical Deal Activity: Typical PE firms do 1-2 deals a year and prefer to keep their C-level team intact.
  2. Executive Approach: PE firms seek deal-driven executives. Demonstrate investor thinking, not a job-seeking mindset.

Building a PE Funnel

  1. Large Funnel: Create a large PE funnel (aim for 200) and maintain it year after year. PE directors receive thousands of resumes annually; timing is crucial.
  2. Just-In-Time Recruitment: PE firms usually recruit just-in-time and use recruiters only 10% of the time. They invest money, not necessarily in placing you in their portfolio companies.

Engaging with PE

  1. Offer More Than Your Resume: Learn to offer more than just your resume. For example, dissect CIMs (Confidential Information Memorandums) for PE.
  2. No Consulting Money Until an LOI: No consulting money is available until an LOI (Letter of Intent) is accepted by the owner.

Stages of Engagement

  1. Develop Deal Theses: Develop one or more deal theses based on your background.
  2. Build and Qualify an Acquisition Funnel: This involves actively engaging with industry trade shows to build relationships with owners.
  3. Proactive Relationship Building: Build relationships with future customers and reach out to your funnel of owners.
  4. Submission of IOIs and LOIs: Submit Indications of Interest (IOIs) and Letters of Intent (LOIs).
  5. Investing Your Own Money: Invest your own money at the deal’s close.

Conclusion

Both John and Jane Doe must transition from being job seekers to investor-minded executives to succeed in private equity. This transformation requires a significant investment in personal branding, networking, and understanding the PE landscape. By following a structured approach and leveraging resources like BlackmoreConnects, they can build a robust PE funnel, engage effectively with PE firms, and ultimately achieve long-term wealth.