Highest MOIC for a PE deal that you’ve heard of?
Curious as to what the highest MOIC from a private equity deal is that you know of. And the firm if you can disclose.
Thanks
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Cortec - Yeti. Forget the number exactly but you can look it up
Was ~50x MOIC
Having worked on the PE secondaries side, that was the highest MOIC I ever saw. it was 50x
William E. Simon, the 63rd U.S. Secretary of the Treasury who was appointed under Ford and served till Carter. He made a ~200x MOIC on his $330k investment into the Gibson Greeting Card Company, hitting a $66m payout in just 18 months. There's not a PE firm in the world with a deal that comes close as far as I'm aware. Reading about this deal is what got me interested in PE in the first place when I was in college. Shame that a 79x D/E ratio is impossible in the modern era.
https://www.bloomberg.com/opinion/articles/2021-10-11/permira-scored-bi…
Lottery tickets can get you 500,000,000x on a $1 investment if you play it right (hint: fortune cookies).
Seriously though, I’m sure it’s not the highest but our fund had some ~40x deals on decent LMM check sizes a while back. A buddy of mine had a SPAC exit that went from ~$50M at entry to $1B in the public markets, I don’t know the cap table but I assume they levered it and could have hit something above that, though I don’t know when their lockup ends (shit’s tanked since then).
I think a couple of the VC funds who were putting money to work in like 2009-2011 had exits north of 100x, but I doubt many of them will be able to pull it off again in the current environment.
How good do you think PE funds are at actually predicted their MOIC. When your fund made 40x on that deal was there a general sense of confidence about the deal beforehand or is it quite speculative?
Certainly didn’t underwrite to that level… it kind of depends on the deal and why the return is high. For value creation initiatives that really take off, you typically see the J curve - maybe it takes a 2-3 years to start seeing real ROI from investments you make in year 1-2, so you might be able to mark up to 1.15x after year 1, 1.5x after year 2, then like 2.75x in year 3, 5x in year 4, 6-7x in year 5, etc. - you really make your money in the last few years. We’ll keep marking up, but we never mark aggressively on those ones - once you’re above 4-5x marked, LPs kind of stop giving you incremental credit until it’s realized, but at that point we usually have an internal sense of “this is going to be a big one”
For deals where it’s really a multiple arbitrage play, you might have a rough sense that you’re buying well and seeing platforms trade high, but you never want to rely on multiples staying high. Say you create a platform at 4x thanks to your associates pounding the pavement and cold calling microcap hundreds entrepreneurs or something, and then you organically double EBITDA so that your cost basis is 2x EBITDA at exit, and 50% levered so equity is 1x (very rough math so the exit multiples match MOIC). Platforms in the double digits. You kind of have a sense of “this could be big”, but maybe that means exiting at 10x, maybe it means you find a strategic buyer with synergies and exiting at 20x, etc.
If you exit to public markets, you might have no idea - maybe you IPO at 10x MOIC and your remaining stake quintuples as the equity takes off.
We often have a pretty good sense maybe 3 years in that a deal is going “decently well”, “extremely well”, or something like “we’ll be lucky to hit our underwriting case…”, but the magnitude is tough to guess. Used to work for a family office that had a 20x exit while I was there (less impressive because they’d held it for like 18 years, but still very nice). Before we got it signed up, we felt it would probably be like a 10-12x, and then a big strategic got aggressive and almost doubled the expected price.
To be clear though, the funds I’ve worked for tend to do lots of small-ish checks in many companies - none of our fund-level returns are anything like this (still good tho)
Sun has had some stupid MOICs by buying distressed assets in the GFC - don’t remember the numbers but it’s so ridiculous that they have them on display in one of their meeting rooms.
My friend’s fund bought a distressed dental group in the midst lf lockdown from the lender in April 2020… sold for 12x MOIC and a stupid IRR in early 2021 after things opened up
Down and dirty distressed investing is so fascinating. I wish the Fed/government would stop getting involved in bailouts and quantitative easing so we'd see more big business failures for the major funds to pick through for opportunities like this.
There are some carveouts where the ParentCo has delivered cash at closing, usually some risk capital / regulatory hair there so sponsor still may have had to inject capital but if sponsor figured out a way to structure around it, no drawdown.
In VC land, Chris Sacca's first fund returned well in excess of 100x (reports were that it was marked over 250x at one point) with seed investments in Uber, Instagram, and Twitter among others.
Actual deal I worked on a few years ago:
Guy worked at a F100 company running a business unit that was underperforming. Unbeknownst to the company, this guy had been working on 2 new revenue sources that would triple the revenue at a much higher margin than they were currently operating at. Guy negotiates to buy the business unit for ~$6m.
Only reason we found out how much he paid for the business unit in the first place was his tax guy missed redacting one number in his tax return.
24 months later, sells to us for >$100m. Stays on for one year post close to assist in transition and integration then retires.
Never saw anything like it and never will again.
That's so badass! Can you share what sector this was in or would that be too identifying? I'm trying to think of what kinds of businesses can have that kind of growth turned on with the flip of a switch like that.
Sharing the industry honestly won’t help. Such a specific niche and situation he exploited. It’s a one in a 100 year opportunity that he absolutely nailed. Good guy too.
Aware of a similar story of someone buying a company/business unit that was underperforming (6-7 figure price tag, not entirely sure but took out a lot of loans) and ended up completing a massive turnaround (wasn't profitable before buyout). Richest person I know actually.
Very rare outcome but it actually does happen. You rarely hear about these guys because it's usually some small niche in an industry. You would have never heard of this person unless I gave you their name.
This is the coolest and most idealistic scenario I've heard in a while. That's why C-suite members need to have a deep understanding of every BU
I know of a couple of infinite MOICs in the power and energy space. Funded the entire purchase price with a bridge loan to be taken out by fund equity in 6-12 months, and market changed so dramatically in intervening period that cash flow from the company fully repaid bridge and no equity ever called!
Warburg Pincus has a few home-run deals. Their classic one was BEA Systems (which by nature was more venture than traditional PE). Think they put $50m in and acquired ~77%. BEA IPO'd in 1997 and recorded 16 straight quarters of record revenues after going public. The two years before the dotcom bubble crashed, the stock rose 1200%. It eventually sold to Oracle in 2008 for $8.5b. I recall reading somewhere that WP realized ~$6b on the investment, which on $50m gives an approximate MOIC of ~120x.
Crowdstrike was the modern day equivalent of BEA Systems for WP. Think they owned 51% of the company after making a $26m Series A investment ($50m post-money). Crowdstrike IPO'd at a $6.7b pre-money valuation (think they raised ~$700m) and closed the 1st day up 70%. They also cashed out partially in the IPO (along with other investors). Safe to say both MOIC and IRR are off the charts on this one as well.
There are plenty in the venture world, so if you count early-stage VC, the list is endless.
But, if you want crazy. Just remember that Masayoshi Son invested $20m in Alibaba at 1999. Again, it's venture and not growth/mature PE. But, holy crap...
May have already been stated here, didn’t scroll through all comments, but APO buying LyondellBasel during the GFC (via loan to own) is a well known home run. Lots of public info out there.
For non-tech industries, the 3i investment in Action was well over 30x. They bought it for c. 140m in 2011 / 2012 and most recent EV numbers I saw were over 10bn, though with some additional capital likely injected.
A successful investment (VC type) was Prosus, then Naspers, buying 46.5% of Tencent for $32mn back in 2001.
The firm I work for. Sector focus (non-tech, non-healthcare) + pan-European firm: 35x
Buy & Build story plus market really took off in this period. Partner always says, this is pure luck and nobody could have predicted this. Entry EV double digit million range, exit for c. 900m.
I think Riverside made ~20x on Tate's Bake Shop
35x on a plumbing services company last year
https://www.buyoutsinsider.com/mid-market-deal-of-the-year-trivest-part…
My firm focuses on "downside protection" with essentially zero losses on deals in its history. Suffice to say the biggest MOIC I've seen was 6x, which I thought was awesome, but damn this thread...
Vista?
I've seen infinite MoICs & IRRs if they used sublines to never call capital ;)
Blackstone - Hilton LBO
This is so weak. Yes, we also know Soros made a $1b in profits in a couple of days. We also know that McDonald's sells Big Macs.
100x in one MM software deal
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