Anyone have thoughts on this? They look and feel like any other lower middle market private equity firm but are backed by ~$500mm of perpetual capital from a single family. On one hand you’re affected by all the issues that impact LMM PE today but on the other since you have perpetual capital from a single family you’re not worried about the constant fundraising treadmill and there may be more long term stability than elsewhere.
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Might want to scratch at the idea of “permanent capital”
It’s not a war crime if the family realizes LMM PE has heavy headwinds, closes up shop and reallocates the capital to public equities and credit
What heavy headwinds does LMM PE have that the rest of PE doesn’t? If anything, seems like successful LMM shops will do better than successful UMM/MF shops since there is still legitimate inherent value creation.
lmm deals have heavy competition that bid up valuations. and good luck with the value creation without dedicated operating resources like the MFs
MF value creation teams don’t do anything besides help look for new CEOs. Having worked at both a MF and a LMM/MM firm (~$1B fund size), the LMM value creation was much more accretive to actual business outperformance. There is legitimate low hanging fruit with the assets you buy in that segment of the market. Finding 20% cost efficiency in a $30M EBITDA, family-founded and run business is about 100x easier than a $500M EBITDA, mature business with rockstar managements teams that you’d buy at a MF.
Way underselling that the best LMM shops are operators and not finance dorks...As poster below said extracting value in tiny businesses is way easier than one that's been owned by 8 PE firms previously.
It’s not permanent capital it’s binary capital. It’s there until it’s not there.
I think it depends on what else the family office invests in. I've seen some like this where the entire family office is built upon the private equity strategy and being private equity investors/business owners is part of the family's identity (it's not solely for financial return). If it's just $500mm out of a couple billion that could be allocated to other strategies then I'd be more concerned.
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