Subscribe: Apple Podcasts · Spotify · YouTube · Amazon Music · iHeartRadio · Pandora · RSS
Episode Summary
You’re across the table from a private equity firm. The number they put on your business is bigger than you expected, the people seem decent, the pitch sounds great. And almost nothing about how their fund actually works has been explained to you, because nobody on your side knows to ask. I had Sunny Vanderbeck back on the show, co-founder of Satori Capital and author of Selling Without Selling Out, to walk through the full mechanics of the private equity industry. Where the money comes from (pensions, endowments, foundations). How the management company and the fund are different things. The two revenue streams: management fees that keep the lights on, and carried interest that’s the real prize. The 8% hurdle. The five-year clock to deploy capital and the ten-year clock to return it. Platform versus bolt-on. How more debt produces a higher IRR for the buyer and a higher chance your company gets blown apart. And why Sunny built Satori with indefinite-hold capital after getting laughed out of pension fund meetings in 2008. If you’re going to take PE money, you need to know what’s happening on the other side of the table before you sign.
Watch on YouTube
## Top 10 Takeaways- The management company and the fund are not the same thing. Confusing them costs you in negotiation.
- PE firms have two revenue streams: management fees that keep the lights on, and carried interest that’s the real prize.
- Your buyer has a date on the calendar when they have to sell your company. Ask what it is.
- When did their commitment period start? Six months left to deploy means very different motives than year one.
- Ask for the deck they used to raise the fund. What they care about, how they think, it all shows up there.
- If you’re getting bolted onto a platform, your overhead is gone, your team is gone, your seat is gone.
- The simplest test of platform vs. bolt-on: who do you report to the day after closing?
- More debt produces a higher IRR for the buyer. It also produces a higher chance your company gets blown apart.
- If buyer A pays more than buyer B, ask why. More debt, lower return, or a change you didn’t see coming.
- Hope is not a plan. If you can’t articulate what you want from this deal, there’s zero chance you get it.
Sound Bites
“Profit is not a reflection of value you can extract from a system. It’s a reflection of value you create in a system.” (@TBD) — Sunny Vanderbeck
“We manage a billion dollars. We don’t have a billion dollars. They’re very different things, I promise you.” (@TBD) — Sunny Vanderbeck
“There is a date in the future that you can put on your calendar that is the end of the fund. It’s mechanics. It’s not opinion, it’s mechanics. It’s just how it works.” (@TBD) — Sunny Vanderbeck
“Debt is like fire. It’s neither good nor bad. Life would be a lot harder with no fire. And you can burn yourself to a crisp.” (@TBD) — Sunny Vanderbeck
“We’re not buyers and sellers of businesses. We’re just owners of businesses. So our time horizon is the same as our portfolio company CEOs.” (@TBD) — Sunny Vanderbeck
“If the questions you’re asking don’t make people uncomfortable, you’re not asking the right questions.” (@TBD) — Sunny Vanderbeck
About This Episode
Sunny Vanderbeck is the co-founder of Satori Capital, a private equity firm built around a conscious capitalism investment thesis and indefinite-hold capital. Before Satori, Sunny was a U.S. Army Ranger, an early Microsoft employee, and the founder and CEO of Data Return, which sustained 40% quarter-over-quarter growth for more than three years and reached a $3 billion NASDAQ market cap, making him one of the youngest CEOs ever to lead a public company. He sold the business, bought it back, and sold it again. He’s the author of Selling Without Selling Out: How to Sell Your Business Without Selling Your Soul. This is his second appearance on the show, brought back specifically to do a full mechanical walkthrough of how the private equity industry actually works.
Resources Mentioned
- Selling Without Selling Out by Sunny Vanderbeck — Sunny’s book on selling your business without losing what made it worth building. — sunnyvanderbeck.com
- Satori Capital — Sunny’s private equity firm. — satoricapital.com
- sunnyvanderbeck.com — Workbooks and resources tied to the book. — sunnyvanderbeck.com
- Intentional Growth Digital Course — The course where the PE mechanics are taught with whiteboard animations and exercises. — arcona.io
- Previous interview with Sunny Vanderbeck — Sunny’s first appearance on the show, covering the Data Return story and the early days of Satori.
Connections
Phase + Module:
- Module 1 — Ownership Goals — Knowing what you want before you sit across from any buyer
Concepts referenced:
- Enterprise Value vs. Equity Value — The mechanics of what’s actually being bought and sold
- Normalized EBITDA — The number every PE multiple gets stacked on top of
- The Multiple & WACC — Why bigger companies get bigger multiples, and why debt changes the math
- The Four Value Levers — The levers a PE buyer is pulling on after they own you
- Value Gap — The space between what you’d take and what the right buyer would pay