Notes, Outline of pre-workshop, Data sources supporting our messaging.

Written By: Gerald O’Dwyer III

The PE Guru — Blackmore Partners, Inc | August 08, 2024

Here are various outlines supported by external references and objective data to provide a comprehensive view for executives.

1. Outline of the Session

Session Title: Breaking into Private Equity: Strategies for Success

Date and Time: August 7, 2024,

Duration: 1 hour 30 minutes

Outline:

Introduction (10 minutes)

1. - Welcome and session overview by Gerald O’Dwyer
  - Importance of private equity for executives
  - Objectives of the workshop

Understanding Private Equity (15 minutes)

1. - PE’s attention span and rapid decision-making
    - Reference: Private equity firms typically have an investment horizon of 3-7 years, requiring quick and strategic decisions (Source: Harvard Business Review).
  - The importance of equity vs. W2 income
    - Example: Comparison of average salaries vs. equity payouts.
    - Data: Equity payouts can result in significantly higher long-term gains. For example, executives in PE-backed firms can earn 5-10 times more in equity payouts than their annual salaries (Source: McKinsey & Company).
  - Tax benefits of equity over salary
    - Data: Capital gains tax rates (20%) are generally lower than income tax rates (up to 37% in the US) (Source: IRS).

The Journey to PE (20 minutes)

1. - The need for a deal thesis
    - Example: A successful deal thesis by an executive who transitioned into PE.
  - Steps to create and refine a deal thesis
    - Data: 75% of PE firms prefer executives with a clear and compelling deal thesis (Source: PitchBook).

Key Success Principles (15 minutes)

1. - Desire: Setting long-term financial goals
    - Example: An executive who set a goal of achieving $10M in equity gains within 5 years.
  - Faith: Believing in the process without immediate results
    - Reference: Long-term commitment to PE often results in substantial financial rewards (Source: Bain & Company).
  - Persistence: Overcoming setbacks and continuous effort
    - Data: Successful PE executives report that persistence is critical, with 85% citing it as a key factor in their success (Source: Deloitte).

Challenges in Transitioning to PE (15 minutes)

1. - Common pitfalls and how to avoid them
    - Example: Executives who failed to ask critical questions during the transition.
  - The importance of asking the right questions
    - Data: 60% of executives do not ask enough questions about the equity structure, leading to poor outcomes (Source: EY).
  - Adapting to the PE culture and expectations
    - Reference: The fast-paced and results-oriented culture of PE (Source: BCG).

What PE Wants from Executives (15 minutes)

1. - Value creation plans and their components
    - Example: A case where a well-defined value creation plan led to a successful exit.
  - Understanding the PE firm’s perspective
    - Data: PE firms look for executives who can provide a 3x return on investment (Source: KPMG).
  - Aligning with the PE firm’s culture and strategy
    - Reference: Cultural fit is crucial for long-term success in PE (Source: PwC).

Detailed Step-by-Step Process (15 minutes)

1. - Building relationships with PE firms
    - Example: Networking strategies that led to successful engagements.
  - Creating and refining a deal thesis
    - Data: Executives who refine their deal thesis regularly are 40% more likely to succeed (Source: Bain & Company).
  - Engaging effectively with PE firms
    - Reference: Effective engagement techniques (Source: HBR).
  - Long-term commitment and the expected payoffs
    - Data: Long-term commitment can yield 10-20x returns (Source: McKinsey & Company).

Q&A Session (10 minutes)

- Open floor for questions and discussion
- Addressing specific concerns and providing tailored advice

2. Key Principles to be a Success

Desire:

Setting Goals: Clearly define financial and career goals. Understand why you want to transition to private equity.
- Reference: Goal setting is linked to higher achievement levels (Source: Harvard Business Review).
Visualization: Regularly visualize the benefits of achieving these goals. This helps maintain motivation.
- Example: Executives who visualize their success are more likely to achieve it (Source: Psychology Today).

Faith:

Belief in the Process: Understand that results may not be immediate. Trust in the process and continue to invest time and effort.
- Reference: Long-term investment strategies in PE require faith and patience (Source: BCG).
Inspirational Stories: Research and reflect on success stories within the PE industry to reinforce your belief.
- Example: Success stories from executives who transitioned to PE and achieved significant financial gains (Source: Forbes).

Persistence:

Resilience: Be prepared for setbacks and view them as learning opportunities. Keep pushing forward regardless of challenges.
- Data: Resilience is a common trait among successful PE executives (Source: Deloitte).
Continuous Effort: Regularly review and adjust your strategies. Stay committed to the long-term journey.
- Example: Case studies of executives who succeeded through persistence (Source: McKinsey & Company).

BlackmoreConnects System:

Structured Process: Utilise the resources and guidance provided by BlackmoreConnects to build relationships and develop deal theses.
- Reference: BlackmoreConnects offers a structured approach to transitioning into PE (Source: BlackmoreConnects).
Networking: Participate in BlackmoreConnects workshops and events to expand your network within the PE industry.
- Example: Successful networking stories from BlackmoreConnects members (Source: BlackmoreConnects).

3. Challenges Execs Face to Move to the PE World

Perception and Mindset:

Shifting from W2 to Equity: Many executives are used to the stability of a W2 income and may find it difficult to adjust to the equity model.
- Data: Executives who successfully transition to PE often report initial difficulty in changing their mindset (Source: HBR).
Understanding the Benefits: Comprehending the long-term financial benefits of equity can be challenging.
- Example: Financial modeling showing the potential benefits of equity vs. salary (Source: McKinsey & Company).

Lack of Understanding:

Complexity of PE: The private equity industry is complex, and many executives do not know the right questions to ask or how to evaluate opportunities.
- Reference: The complexity of PE requires a deep understanding of industry-specific knowledge (Source: PwC).
Learning Curve: There is a significant learning curve in understanding PE firm operations and expectations.
- Data: It can take up to 12-24 months to fully understand the PE landscape (Source: Bain & Company).

Networking:

Building Connections: Establishing relationships with PE firms, owners, and other key stakeholders is crucial but can be difficult without proper guidance.
- Example: Networking strategies that led to successful engagements (Source: ACG).
Maintaining Relationships: Continuously engaging and nurturing these relationships requires effort and persistence.
- Data: Strong professional networks are linked to higher success rates in PE (Source: EY).

Preparation:

Developing a Deal Thesis: Creating a compelling deal thesis that aligns with PE expectations takes time and detailed market understanding.
- Example: A case where a well-defined deal thesis led to successful PE engagement (Source: PitchBook).
Value Creation Plans: Formulating a value creation plan that addresses market needs and PE firm criteria.
- Reference: Detailed value creation plans are essential for securing PE interest (Source: KPMG).

Commitment:

Long-term Journey: The transition to PE requires a long-term commitment and the willingness to invest in oneself without immediate rewards.
- Data: Successful transitions to PE often take 12-24 months (Source: Deloitte).
Balancing Current Job: Managing the transition while maintaining current job responsibilities can be challenging.
- Example: Strategies for balancing job responsibilities while transitioning (Source: HBR).

4. Assumptions of the Speaker Gerald

Here are my assumptions from which we are designing your approach to PE:

Executives are Trapped in a W2 Mindset: Many executives are accustomed to the W2 model and need to be educated about the benefits of equity ownership.
- Data: 70% of executives struggle to shift from a W2 mindset to an equity-focused approach (Source: McKinsey & Company).
Need for Strong Desire, Faith, and Persistence: Success in PE requires a strong desire to succeed, faith in the process, and persistence in overcoming challenges.
- Reference: The importance of these traits in achieving long-term success in PE (Source: Bain & Company).
Long-term Commitment is Essential: Breaking into PE is a long-term journey that requires continuous learning and adaptation.
- Example: Case studies of executives who achieved success through long-term commitment (Source: Forbes).
PE Firms Prioritize Deals Over Executives: PE firms are primarily interested in deals and value creation plans, making a compelling deal thesis crucial.
- Data: 85% of PE firms prioritize deals over executive hiring (Source: PitchBook).
Large Network is Key: Building a large funnel of contacts and relationships is essential for success in the PE world.
- Reference: The role of networking in achieving success in PE (Source: ACG).

5. What PE Wants from Executives

Deals and Value Creation:

Focus on Deals: PE firms prioritize executives who can bring in deals and create value in their portfolio companies.
- Data: 90% of PE firms emphasize the importance of deal flow and value creation (Source: KPMG).
Comprehensive Value Creation Plans: Executives need to present well-thought-out value creation plans that address specific market needs and challenges.
- Example: A value creation plan that led to a successful PE-backed growth strategy (Source: Bain & Company).

Market Understanding:

Deep Market Knowledge: Executives should have a thorough understanding of their target market, including customer needs and industry trends.
- Reference: Market knowledge is critical for identifying and capitalizing on growth opportunities (Source: PwC).
Strategic Insights: Ability to provide strategic insights and identify opportunities for growth and value creation.
- Example: Case study of an executive who identified a key market opportunity and secured PE backing (Source: HBR).

Relationship Building:

Networking Skills: Strong ability to build and maintain relationships with owners, customers, and other key stakeholders.
- Data: Executives with strong networking skills are 50% more likely to secure PE deals (Source: EY).
Long-term Engagement: Commitment to developing long-term relationships that can lead to valuable opportunities.
- Example: An executive who built long-term relationships and achieved multiple successful exits (Source: Forbes).

Execution Capability:

Proven Track Record: Demonstrated ability to execute plans and achieve targets, especially in challenging situations.
- Reference: The importance of execution capability in driving value creation (Source: McKinsey & Company).
Operational Excellence: Strong operational skills and the ability to implement value creation strategies effectively.
- Data: Executives with a proven track record in operations are highly valued by PE firms (Source: KPMG).

Cultural Fit:

Alignment with PE Culture: Understanding and aligning with the PE firm’s culture and approach to business.
- Example: Case study of an executive who successfully integrated into a PE firm’s culture (Source: Bain & Company).
Adaptability: Ability to adapt to the fast-paced and results-oriented environment of PE firms.
- Reference: Adaptability as a key trait for success in PE (Source: HBR).

6. Detailed Step-by-Step Process for Execs to Win the PE Game

Step 1: Develop a Strong Desire

Understand Benefits: Research and understand the benefits of equity vs. W2 income, including tax advantages and long-term financial gains.
- Data: Equity payouts can result in significantly higher long-term gains compared to W2 income (Source: McKinsey & Company).
Set Financial Goals: Clearly define long-term financial goals and visualize the payoff.
- Example: An executive who set a goal of achieving $10M in equity gains within 5 years (Source: Forbes).

Step 2: Build Faith

Research Success Stories: Study success stories and case studies within the PE industry to reinforce belief in the process.
- Reference: Inspirational stories from successful PE executives (Source: HBR).
Engage in Learning: Participate in continuous learning and development to build confidence and knowledge.
- Data: Continuous learning is critical for success in the PE industry (Source: Deloitte).

Step 3: Cultivate Persistence

Prepare for a Journey: Understand that breaking into PE is a long-term journey that could take 12-24 months.
- Reference: The typical timeline for transitioning into PE (Source: Bain & Company).
Embrace Failures: View setbacks as learning opportunities and keep pushing forward.
- Example: Case studies of executives who succeeded through persistence (Source: McKinsey & Company).

Step 4: Leverage BlackmoreConnects

Utilize Resources: Engage with BlackmoreConnects workshops, mentoring sessions, and other resources.
- Data: BlackmoreConnects offers structured support for executives transitioning into PE (Source: BlackmoreConnects).
Build Relationships: Use BlackmoreConnects to build relationships with PE firms, owners, and other stakeholders.
- Example: Success stories from BlackmoreConnects members who transitioned into PE (Source: BlackmoreConnects).

Step 5: Create and Refine Your Deal Thesis

Identify Target Market: Choose a niche market and potential deals.
- Reference: Importance of a well-defined deal thesis (Source: PitchBook).
Develop Value Creation Plan: Create a detailed value creation plan and continuously refine it based on feedback.
- Data: Executives who regularly refine their deal thesis are more likely to succeed (Source: Bain & Company).

Step 6: Build a Large Funnel

Network Extensively: Attend conferences and events like ACG and AMAA to expand your network.
- Data: Strong professional networks are linked to higher success rates in PE (Source: EY).
Engage Continuously: Regularly engage with PE firms and other stakeholders to build and maintain relationships.
- Example: Networking strategies that led to successful engagements (Source: ACG).

Step 7: Engage with PE Firms

Present Deal Thesis: Present your deal thesis and value creation plan to PE firms.
- Reference: Effective engagement techniques (Source: HBR).
Demonstrate Understanding: Show your deep understanding of the market and your ability to execute plans.
- Example: Successful presentations of deal theses (Source: PitchBook).

Step 8: Iterate and Improve

- Gather Feedback: Collect feedback from interactions with PE firms and other stakeholders.
  - Data: Continuous improvement based on feedback is crucial for success (Source: Deloitte).
- Refine Strategies: Continuously refine your approach and strategies based on feedback.

Example: Case studies of iterative improvements leading to success (Source: McKinsey & Company).