Private Equity: The Consolidation Play and Due Diligence - John Poerink, Linley Capital

A consolidation play looks like an easy winner in the private equity world. Roll up a number of companies in the same industry and you've got scale and pricing power, among other good things. There's just one problem -- such plays are really hard to pull off. Due diligence is the key, the more thorough the better. But even then, surprises can lurk and assumptions can prove wrong.
For more on this class session, see: knowledge.wharton.upenn.edu/pe...
#private #equity #privateequity #duediligence
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[@chriswalter92]

Private equity sounds like a mechanism that extracts the most amount of value from a business, and transfers that wealth to the few general partners. Everyone loses - the business, the employees, the local consumers, the tax payers.... except for the general partners

[@tahirisaid2693]

The people you’re claiming don’t benefit wouldn’t have benefited with or without the private equity buyout. The business was failing before private equity came in, they just more efficiently manage the end of the companies life. Most likely allowing most companies to work there longer than they would have been able to do before.

[@Lemariecooper]

Thank you for this Pointer. It was easy to find her handler, She seems very proficient and flexible. l booked a session with her..

[@MrCapitanAdrados]

We do need more videos like this one! thanks Wharton!!

[@rohanvaswani9418]

Great speaker, I like the way he engages the audience and makes his talk simple so that even those who haven't had experience in PE can understand.

[@victory4172]

I like the engagement also but you can barely hear what they are saying. I think the visual people were not considered when doing this lecture.

[@oprohanoprohan6926]

@@victory4172 111 it

[@mawtaring4902]

@@victory4172 s

[@user-dx1mc1ko1n]

@@victory4172 ذتهتتتءءءءت

[@user-dx1mc1ko1n]

@@victory4172 شذته

[@abhishekrao1990]

Amazing lecture! Found it really useful

[@agpholdingllc]

This is awesome exactly what I needed this guy is very straight forward with the information ℹ️

[@asfjaojgutobe]

Very practical and helpful , thanks!

[@Jerrypiggy0331]

Thanks John Poerink for giving this spectacular speech. My key takeaways as below. 1. PE is the manager of the whole process, so it's great to have an internal and third-party team to help with accounting, law, and strategy DD. 2. DD is not just looking at financials, is more about having a sense of how the business works and where are the opportunities 3. Never overpay. Multiple arbitrage is the key to a successful investment.

[@tytbeats319]

Hello how can we communicate? I want to get in contact with an expert in LBO structuring and strategy

[@RomilCPatel]

@@tytbeats319 There are some good sites and forums online that focus on this. Reply back if you want some guidance

[@deonb.d4078]

@@RomilCPatel id like to check out those sites and forums

[@RomilCPatel]

@@deonb.d4078 Two Reddit forums that are helpful for those doing consolidation plays are "QLA" and "Dan Pena Chaos". Two good youtube channels are "Elite acquisitions and investment banking" and "Jason Paul Rogers". "Independent sponsor update" youtube channel is helpful if you're doing deals as an independent sponsor.

[@jacobhernandez4347]

I find these lectures very helpful I am taking my associates online and can’t really participate on how to valuate a business because I’m busy learning about journal entries 😴. From private to corporate I find everything about it to be very interesting. I can’t wait to get into law class

[@IbrahimAlkhulaifi]

Very informative,, Thank you John

[@guardianduediligence]

This is a great overview of due diligence as a umbrella term for assessing if you should or should not do a deal (is the deal worth what you are paying for it)!

[@sizwe_bsg]

A great teacher you're Mr Poerink, learn a lot about PE work!

[@ordealy]

Amazing lecture. Very enlightening. 👏🏽👏🏽👏🏽

[@djepifanio8901]

Great exchange of information. Thanks for sharing.

[@timvam]

Very useful insight, loved the practicality ! Thank you for sharing.

[@rachitkhanna8464]

Great breakdown of day to day responsibilities of PE professionals!

[@wharton]

So glad it was useful! We hope you'll consider subscribing to our channel for more news and insight from Wharton.

[@rachitkhanna8464]

Definitely!

[@noranel-sherif1263]

Lots of Gold Nuggets.. Many thanks Wharton School and Mr. Poerink !!!

[@laurisskraucis2247]

Amazing. You know that the content of the video if of a high quality when the time passes by really quick. Thank you for videos Wharton!

[@zes3813]

wrr

[@tytbeats319]

Hello how can we communicate? I want to get in contact with an expert in LBO structuring and strategy

[@TK-ne2yo]

This is a good video in building a foundational level of what a PE group does but also note there are multiple different PE groups out there that buy a myriad of different assets. I work in commercial real estate and encounter PE groups offering on our properties for sale all the time. The speaker obviously works in a big time PE shop that has hundred of millions in capital to buy very large businesses - so definitely more time consuming and complex.

[@Enricarenee]

Very easy to understand. Thank you!

[@luckymtshali1762]

howabout investment banker who losesjobs now andthen..every 2yrys...meansleakageand big complains...on theground..hissing murders common murders but eventually for3 trillion buisness coupleof miiions or thousandora macdonald burger no..itsa lot of money..yes

[@kerrya2128]

The best revision lecture I hv had across youtube many thnx very interesting articles lessons on point👍💯

[@aryasamaya]

Fantastic, thank you

[@teddbacon4707]

Still a great session in 2020. Very interesting and informative to even just listen. Thanks for sharing!

[@privateequitywithdarylle4731]

Agreed

[@winwin7877]

buy low, sell high. the essence of every business in the world.

[@davidgara3004]

You can also buy high and sell higher

[@joaoborges9332]

And buy higher and sell even higher

[@alexf4941]

Put basketball in hoop. The essence of every basketball game.

[@alexf4941]

Only issue is there’s lots of people trying to put the basketball in the hoop. And people who don’t want you to. And people who are better at it than you.

[@Powerplugz]

Fantastic video, do you have a video that explains the process of overseeing investments via the board?

[@mickey7211]

This channel is literal Gold

[@cstopho]

great video!

[@damilolaadekanmbi6194]

Very insightful video, even in 2024. Big up Wharton

[@ronf28]

Never had the chance to attend Wharton - thank you for this sharing.

[@maranathaahenkorah2139]

11 years later and this is good!

[@martingod25]

Very good , thanks

[@maxwellrosenfeld8166]

Fabulous video. Very digestible.

[@MrTasutasutasukun]

Anyway, the first thing we have to do as a private equity fund is sourcing and I guest it's the hardest part of the deal. The leactuarer give us the ovarall cocept of the deal relating to the fund and it's tremendous.

[@SuperBusinessManager]

Great lecture! Thanks for sharing!

[@deepayanpaul7746]

It's good to see that even a professional finds accounting difficult enough to fail in it😂 Anyways an extremely useful session

[@sikandar-ali1]

This was really good!

[@ql1couk]

love it

[@boykolove]

great talks :)

[@edwarddavis6827]

Thx for sharing

[@mistertexaz]

Great speaker

[@bruceb85]

So they are purchasing at multiples of annual earnings while keeping existing management? If free cashflow is greater than debt service + due dilligence checks out as well as relative strength to industry then go forward with the deal? And by roll up does he mean merging the companies together? New to this, thanks.

[@hankvdg8982]

i think what multiple you use depends on the industry/specific business, you could use EBITDA, earnings, some other approx of cash flow

[@tytbeats319]

@@hankvdg8982 Hello how can we communicate? I want to get in contact with an expert in LBO structuring and strategy

[@almondcave]

very helpful, thanks

[@wharton]

You're welcome, thanks for watching!

[@achmadabdul09]

This is so insightful, but also so 2011. There are no mentioning of digitalisation impact of companies future revenue potential and the role of Technology in TAM

[@tytbeats319]

Hello how can we communicate? I want to get in contact with an expert in LBO structuring and strategy

[@nketia3136]

I think that in getting to know the exit plan aside doing all the due diligence is to also look at the business from a lay man's view. is this company something I would buy into in some years to come? we tend to want to be always technical but we just have to simplistic and practical about things. my opinion though.

[@maulanarzf2391]

thank you so much

[@andersonfuller]

I wonder if the airline company he was talking about around 22:30 was WLFC, a family run company that leases airline parts. I was looking at them about 6 months ago and the family head offered an unfair take-private offer. Made profit on it but it was an unfair offer - eventually fell through. Still, interesting. It had a very strange capital structure and is now owned almost 70% by insiders (the family).

[@petrociruna2773]

Very informative video

[@ivanov568]

From my understanding, if an investment is hitting solid numbers such as EBITDA of 40% per month and nice CF, the GP or Management Company should try to acquire another company to reduce the ROI/ Income of the Investment(s), in other words a goal should be to only give investors say 3% Return per month (vs 40%)... In other words try to cap the returns given out to LP's until he withdraws his investment (while growing the GP's portfolio in the long term).

[@tytbeats319]

Hello how can we communicate? I want to get in contact with an expert in LBO structuring and strategy

[@bendoverson9893]

Mood for the entirety of the video 34:07

[@raheimbinnie4043]

Amazing video

[@dbsk06]

4:45 real start

[@Spokenwisdom1]

If I’m not mistaken, the man at 1:09:55 explained the business model of Italic, an e-commerce retail startup that is gradually making headway with luxury brands. Interesting to see that his idea was shot down.

[@ev6481]

This was also recorded in 2011 - ecommerce hadn't really taken off yet like it has today. But you are correct!

[@tj1492]

If you work in finance or know enough about banking, can someone answer this question? Where can i learn about how the process of structured finance works regarding the details of buying and selling, and all of the things that are done in conjunction with buying and selling structured finance securities? Im aware that financial institutions trade the writes to collect other peoples debt in exchange for quick cash, after these debts are bundled up and often attached with a stock option to hedge potential defaults, and this is generally done in the risk department of corporate entities, between various banks, venture capital firms, pension funds, IBs, etc. But I want to interview someone who worked in the industry before so i can understand more the exact routine and process, and what goes into selection, and how business partners are chosen etc.

[@Ealdorman_of_Mercia]

really interesting.

[@Rullyirawan]

Good Video, thank you

[@tubeyouUK1]

Very nice session,

[@clo9767]

one question: in the video the guy said MULTIPLE is the major way to create value for PE, but I saw other PE ppl say it's hard to increase MULTIPLE these days, focus is more on revenue GROWTH. Is it just a style difference or is it another time? thx

[@victornyamu2547]

C Lo its because there is too much money chasing too few good deals . Sellers are charging outrageous multiples on their companies and pe firms must pay up or risk losing the deal to another buyer. Since there is no more way up left to go, the only realistic way of creating value is increasing revenue.

[@dhoorjatifoods4405]

Nice lecture!! Emphasis on key fundamentals of PE business would be more useful.

[@clubofbusiness]

W video, still rivals content 10 years later

[@tomjens2046]

I disagree that you won't get better pricing from your suppliers when you increase your order 2-3 times, just because you are still much smaller than the dominant buyer. In most cases you can negotiate better prices if you increase your order size. Let alone as hugely as 2-3 times.

[@tytbeats319]

Hello how can we communicate? I want to get in contact with an expert in LBO structuring and strategy

[@tenacioussoul3794]

How long does it take to become a private equity guy? like to get started and all that other stuff?

[@NickSprecher]

What is the annual loan pay down? That just had interest paid on the loan I believe

[@user-wz1os9yc7s]

So, what’s the incentive? For an investment bank to be honest? They want the fees

[@davidr4523]

Several thoughts 1. Very few women in this class. 2. This speaker, John Poerink, is running a 1 person Private Equity firm. 3. This guy looks like superman. 4. Overall a good presentation. I would have like to hear how they source deals. This issue is either a. companies don't want to sell b. companies sell price is too high c. companies have very weak businesses to sell d. hard to access to the business due to poor accounting and extreme comingling of funds.

[@ziggyc4474]

Is it a must to come out of these Ivy league universities to make it huge 🤔 so u can't make it far from say getting a master in a state university?

[@lorettawolfgang403]

Thanks for this insightful video, this is brilliant and quite captivating as well! I Invest my money in forex and it has really been favorable to me this season ever since I was recommended, I make good rewards from my investment on a weekly basis best regards to Mr. Ray Perkins mentorship/guidance 🇺🇸

[@mayare1919]

Skipped unit economics, esp for this type of retail model

[@arm9933]

Listen in 2022 and still be the useful lecture

[@garryhall17]

Not much said about how Private Equity is destroying small business in this, and other countries. The due diligence is based on 3 outcomes. Either sell the parts of the company to gain a quick profit, build up sales quickly (usually by purchasing cheaper product) and then flipping, or a combination of flipping smaller pieces and purchasing cheaper product to increase sales and then flip to another private equity company. Any of these outcomes, destroys the reputation of the company purchased, and many of these are smaller family owned companies. There are many stories of PE coming in and buying controlling interest in a successful company, and then leveraging it out so, that any other interest holding partner, end up with nothing. It's all just a matter of greed, and tends to rape and pillage successful small business. All this, and they use other peoples money to do it. The main problem with due diligence, is that it doesn't analyze what made the company successful in the first place, and possibly build from there. It's all based on flipping for a profit., at any cost.

[@shin-ishikiri-no]

4:50 Linus Torvald

[@tw5139]

Wharton School of Business, graduating a-hole after a-hole since 1881.

[@Renza.masiero]

Bellissimo

[@BRACubSP]

I wouldn't say a great speaker but certainly comes off as a very savvy professional in his field. tons of buzzwords and capital markets' slang and acronyms, which is not hard to understand after google research. Private Equity firms, either leveraged buyouts, VCs, seed funds, etc., seem to be a very elitist market.

[@shin-ishikiri-no]

Translation: Money is to be earned by people with money.

[@kocahmet1]

elitist? hope you dont expect an average joe butcher decide one day that, tomorrow i will start a Private Equity firm..

[@kashansamad197]

24:11 Probably worth another video on how do you walk through that PE door. That's also a big challenge from diversity point of view cause it's the same type of people normally this door opens for.

[@SuperKillaki]

The value of an MBA is diminishing unfortunately... (Coming from someone with a Wharton MBA).

[@annajones9701]

True. Better go for specialised masters

[@whatsup4807]

Hahaha... scoop the most important salt of this class. Got it and will remember it.

[@curiouslymavismade]

Interesting.

[@ankurparashar9983]

Targeting exit strategy when buying a business is detrimental to long-term growth of the business. Short-term gain for a PE firm leads to long-term damage to the business and its employees.

[@Ricocase]

Speaking in circles. Why is Wharton expensive?

[@jamala235]

its sad that such a great videos are of poor quality

[@derricklanders1205]

What?? What type of production value do you expect from a man standing and talking..?

[@PhilVerryChannel]

I agree, the college that this was filmed at probably had student directors learning television or video production at the time in 2011, more close-ups would have been desirable, microphones in the audience, better lighting and certainly need quality microphone on the speaker but perhaps the worst was the upload of this video which was low-resolution. Even back in 2011 and before, there could have been a 720 upload even a 480 West and moderately broadcast acceptable.

[@sz8558]

Was 2011 bro..dark ages

[@RomilCPatel]

@@derricklanders1205 Most videos on KZbin are 4k This one only does to 240p

[@hahalancer]

can we all take a moment to appreciate how all the aspiring PE analysts all dress the same way.....

[@mlinganimatiwane]

Management evaluations... hmm this sounds easier than it is

[@prateeksarin3555]

I asked Wharton if they could waive my toefl they haven’t even bothered to answer WTH

[@prateeksarin3555]

Upenn data science to be precise

[@Yancish]

good video, good discussion, but too superficial

[@arwenischeify]

Yancish why do you think so?

[@drallennazericonsultingadv185]

very informative even though video is 9 yrs old

[@bahadrtaspinar4575]

11:40

[@waldemarmoskalecki7891]

All I could learn from this video- everything is 'incredibly difficult'. Every area of Private Equity is 'incredibly difficult'. Ask him any question- and you know what his answer will be- incredibly difficult.

[@kocahmet1]

but also fun..

[@thangduongtrong5729]

volume low. cant here.

[@jdladvisor]

Aswath Damodaran says "just say no"

[@michaelbraun6147]

Timestamp 19:28

[@CadeBertrand]

You need to have microphones in the room if you’re going to have this be interactive.

[@jimbojimbo6873]

For reference he’s 6ft9

[@ubercoo]

JUSTICE OVER EQUITY!

[@LilMOMMAson]

This Jeff’s boy

[@tomjens2046]

how do you know if a company is run "so so" ? Without spending 500k on bane reports :)

[@jamesbond7341]

Mire la miniatura y es igual a Mario Santos en el episodio que rescatan a la brigada b del FBI

[@Clxkenem]

wow he is big

[@PhilVerryChannel]

Finally! A camera close up after 45 minutes into the program. Good grief!

[@grybnyx]

Why do all private equity vultures look like football linebackers?

[@tomjens2046]

not all, you are wrong, you only remember those as you have a bias. When you see not linebacker PE guy you do not register, when you see a linebacker you register. And it seems like "all" are linebackers.

[@josenkap8914]

In all Dutchness

[@derGaertner1]

18:59 hahahaha