Private Equity Basics

𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐓𝐡𝐨𝐮𝐠𝐡𝐭𝐬 𝐅𝐫𝐨𝐦 𝐌𝐲 𝐃𝐞𝐬𝐤……………. #36 𝐒𝐨 𝐘𝐨𝐮’𝐫𝐞 𝐁𝐚𝐜𝐤𝐞𝐝 𝐛𝐲 𝐚 𝐏𝐄 𝐅𝐮𝐧𝐝. 𝐍𝐨𝐰 𝐖𝐡𝐚𝐭? One stat always stops people cold: somewhere between 50% and 70% of portfolio company CEOs are replaced during the hold period. That speaks volumes about how unforgiving the job can be. Private equity brings capital, but also big expectations. The bar is high, timelines are tight, and value creation can’t wait. For first-time CEOs, the learning curve is steep. Here’s how to stay ahead of it. 1. 𝐀𝐥𝐢𝐠𝐧 𝐨𝐧 𝐭𝐡𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐭𝐡𝐞𝐬𝐢𝐬. Zero in on the 3–5 value creation levers that will drive a 3x+ MOIC or double enterprise value. Make sure they dominate the board agenda, and get the resources to match. Agree on clear KPIs and don’t let them drift. 2. 𝐁𝐞 𝐭𝐫𝐚𝐧𝐬𝐩𝐚𝐫𝐞𝐧𝐭. 𝐍𝐨 𝐬𝐮𝐫𝐩𝐫𝐢𝐬𝐞𝐬. Open information flows build trust. Be honest about risks, share challenges 𝘸𝘪𝘵𝘩 solutions. Anticipate the fund’s appetite for updates; proactive communication beats reactive damage control. Keeping sponsors out of the loop is a fast path to friction. 3. 𝐎𝐩𝐞𝐫𝐚𝐭𝐞 𝐰𝐢𝐭𝐡 𝐝𝐢𝐬𝐜𝐢𝐩𝐥𝐢𝐧𝐞. Set the cadence. Define who’s doing what, and when. Designate a primary fund liaison (often the CFO) to prevent a firehose of requests. Pre-wire board members. No one likes surprises, least of all PE investors. 4. 𝐒𝐭𝐚𝐟𝐟 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐬𝐩𝐨𝐧𝐬𝐨𝐫. You may be private, but the reporting intensity is real. Plan for incremental FP&A FTEs to handle the data load. Automate where possible. Templates are your friend when the heat’s on. 5. 𝐔𝐬𝐞 𝐭𝐡𝐞 𝐞𝐜𝐨𝐬𝐲𝐬𝐭𝐞𝐦. Your fund likely has ops partners, advisors, and peer forums—use them. They speak fluent PE 𝘢𝘯𝘥 operations. They’ve seen the movie before, and their guidance can shorten your learning curve. 6. 𝐔𝐩𝐠𝐫𝐚𝐝𝐞 𝐭𝐡𝐞 𝐛𝐞𝐧𝐜𝐡. Sentimental loyalty to underperformers is a deal killer. Be honest about where talent gaps exist and act early. Execution is everything. 7. 𝐊𝐧𝐨𝐰 𝐲𝐨𝐮𝐫 𝐬𝐩𝐨𝐧𝐬𝐨𝐫. Not all PE firms behave the same. Some are hands-on, others more laissez-faire. Understand their style, decision cadence, and politics. Talk to other portfolio companies. Ask questions. Build the relationship. Private equity is high-octane. But with alignment, transparency, and a clear operating model, portfolio company CEOs and management teams can turn that pressure into performance. #privateequity #privatemarkets #privatethoughtsfrommydesk

The Carried Interest Multiple I encourage all LPs to assess and look at this metric - the amount of carried interest compensation relative to management fees. More LP capital is flowing into funds with misaligned GP incentives. Victor Echevarria shows this through the brilliant example below: "The left column depicts a firm that has raised a single $100M fund, which will collect $20M in management fees over its life. In order for the GP to make 10x that amount, or $200M in carried interest, its portfolio will collectively need to exit for $11B, a difficult but achievable target." "For a $10B series of funds, the firm will pull in $2B worth of management fees. To merely double their compensation, they would need $220B of collective exit value." "There has never been a US VC-backed company that has IPO’d or been acquired for over $100B. If a $10B exit is considered a “grand slam,” this firm would need an astonishing ability to repeatedly select winners and negotiate sufficient ownership." "In other words, to make $2B, this general partnership just needs to show up for work. To make another $2B in carried interest, it would have to accomplish a feat that no one has ever come close to achieving." As Michael Jackson said: "after a certain size you’re not a venture firm anymore. You might do some venture type deals, but most of the money you’re allocating isn’t going into actual venture." #VC #venturecapital

In private equity–backed CPG, the clock doesn’t start at Day 1. It starts at Month 36 and counts backwards. I’m seeing this shift more clearly than ever in our recent executive searches: Where companies once hired leaders to scale, build culture, and chase market share… They’re now hiring for a very different outcome, one that’s defined by readiness, optics, and EBITDA storytelling. Today, "exit-ready" is the new "growth-ready." And that change isn’t just about P&L. It’s about who gets hired, why they’re hired, and how their success is measured. In recent deals, think the sale of popchips to Utz Brands, Inc., or Justin’s moving into Hormel Foods’s fold, or how Native scaled to acquisition under Procter & Gamble, the teams behind those exits weren’t just good operators. They were narrative architects. They knew how to clean up financials, simplify org. structures, elevate DTC as an asset, and package the business in a way that made it undeniably acquirable. On paper and in meetings. And that means the hiring brief is changing. Boards aren’t just asking, “Who can drive growth?” They’re asking: → Who can optimize EBITDA without killing momentum? → Who knows how to lead a clean diligence process? → Who understands that valuation is as much perception as performance? It’s a subtle but powerful pivot. If you’re hiring in a portfolio company, you’re not just building for long-term value, you’re building for a liquidity moment. And the leaders who thrive in this world aren’t just visionary, they’re exit-literate. They understand investor psychology. They anticipate what buyers look for. And they know how to make the next 24 months look like the exact story a buyer wants to hear. 💬 Curious? are you seeing this shift on your side? How are you balancing short-term optics with long-term value? #PrivateEquity #FMCGLeadership #ExecutiveSearch #ExitStrategy #CPG #ConsumerGoods #LaurenStiebing #TalentStrategy #PortfolioCompany #LeadershipHiring

I quickly analyzed the PepsiCo portfolio for 2026 guidance. The pattern is similar to L'Oréal, The Coca-Cola Company or Mars Snacking. Your portfolio isn't just what you sell. It's a mirror of how well you understand your consumer. Their categories remain attractive, profitable, and provide them with many growth opportunities; the global beverage and convenient food opportunity  is $1.3 trillion. Yet 95% of the global population represents only 40% of their net revenue mix. In North America, the number is 5% of the global population, with 60% of the net revenue mix. The brands winning today aren't just launching products, they're orchestrating portfolio transformations that mirror three seismic consumer shifts: 1. We have had a growing health paradox for the last decade. Consumers want indulgence AND nutrition. PepsiCo's low/zero sugar portfolio just crossed $10 billion. Their functional beverages (Gatorade, energy) are approaching $20 billion combined. The insight? Don't choose between permissible and enjoyable. Do both. 2. Then we have an ongoing values revolution. Gen Z doesn't just buy products, they audit your values. 67% of beverage volume now has <100 calories from added sugar. Sodium targets hit a year early. This isn't corporate responsibility theater; it's business survival. If your portfolio doesn't reflect consumer values, you're not in their consideration set. 3. And personalization imperative will be more and more important, yes, more than the first half of this decade. SodaStream International, Ltd. ($1.5B) and Gatorade powders ($1B) aren't just product lines, they're consumer control mechanisms. We've moved from "one-size-fits-all" to "customize-everything." Your portfolio architecture should enable choice, not dictate it. Here's what intrigued me once I got back from Vermont and started looking at their financial performance reports: While PepsiCo navigated 5 consecutive quarters of North American volume declines, they maintained margin expansion through strategic portfolio mix. 💡The lesson isn't volume. It's value creation through portfolio intelligence. Every FMCG CMO should be asking themselves: - "Does our portfolio reflect where consumers ARE or where they WERE?"⚠️ - "Are we expanding occasions or just fighting for the same daypart?"⚠️ - "Can consumers see themselves in our innovation pipeline?"⚠️ The $92 billion question isn't "How big is your portfolio?" It's "How relevant is it?" 𝗧𝗼 𝗮𝗰𝗰𝗲𝘀𝘀 𝗮𝗹𝗹 𝗼𝘂𝗿 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗼𝗹𝗹𝗼𝘄 𝗲𝗰𝗼𝗺𝗺𝗲𝗿𝘁® 𝗮𝗻𝗱 𝗷𝗼𝗶𝗻 𝟭𝟴,𝟯𝟬𝟬+ 𝗖𝗣𝗚, 𝗔𝗜, 𝗿𝗲𝘁𝗮𝗶𝗹, 𝗮𝗻𝗱 𝗠𝗮𝗿𝗧𝗲𝗰𝗵 𝗲𝘅𝗲𝗰𝘂𝘁𝗶𝘃𝗲𝘀 𝘄𝗵𝗼 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲𝗱 𝘁𝗼 𝗲𝗰𝗼𝗺𝗺𝗲𝗿𝘁® : 𝗖𝗣𝗚 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗚𝗿𝗼𝘄𝘁𝗵 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿. About ecommert We partner with CPG businesses and leading technology companies of all sizes to accelerate growth through AI-driven digital commerce solutions #CPG #Growth #Strategy #Portfolio

I’m pleased to share the first article in a new EY-Parthenon series, examining how private equity leaders can find opportunity in or adapt to macroeconomic changes affecting investments. More specifically, the series will dive into three areas of focus: digital infrastructure, software and the IPO market. This first piece with my coauthor Gordon Bell examines how #digital infrastructure — spanning data centers, connectivity, cloud architecture and artificial intelligence (AI)-related technology — has rapidly become one of the most powerful engines of US economic growth. No surprise, then, that the space is a magnet for private capital across equity and private credit—with 88% of firms in the latest EY Global PE Pulse survey calling digital infrastructure one of the most compelling growth opportunities heading into 2026. In that context, PE firms evaluating where to play should focus on four factors that fundamentally shape investment fit: capital intensity, time to cash flow, obsolescence risk and the ability to create value. Read the article to learn more about how this cycle may play out. #EYParthenon #PrivateEquity

2025 will be the year private companies cement new paths for liquidity. While H1'25 didn't see a full rebound in traditional exits, the surge in AI M&A, rising secondary transactions, and innovative deal structures point to a maturing private market ecosystem. The combination of record private capital flows and creative liquidity solutions suggests the tech exit landscape is adapting to new realities, balancing growth imperatives with strategic exit opportunities. To capture the changing nature of tech exits, we partnered with EquityZen to incorporate deeper secondary transaction data in our State of Tech Exits H1'25 report. As CEO, Atish Davda, notes: "The exit market remains muted, but liquidity isn't on the sidelines. CB Insights’ report shows that secondary transaction activity has now seen its seventh consecutive quarter of year-over-year growth. This confirms what we’re seeing at EquityZen: as tech companies stay private longer, the secondary market is providing a crucial and reliable release valve for liquidity for both employees and investors." Unsurprisingly, AI companies dominate both traditional and new liquidity markets. As Atish highlights: "The AI boom is reshaping the exit landscape. The intense demand for AI companies, which are selling for a median valuation of $121M—more than 3x the median valuation of all other acquired companies—is driving both primary and secondary activity. In the secondary market specifically, AI companies are unsurprisingly the most popular amongst investors. The private market is now the primary battleground for companies and investors to gain access to cutting-edge AI technology and talent." Leading secondaries investor, Jared Carmel (Founder & CEO at Manhattan Venture Partners) adds that: “We’re witnessing a fundamental shift in how tech companies approach public markets... This shift is already playing out in the data. We’re seeing record levels of private funding, exceeding $2 trillion in cumulative investment, and explosive growth in secondary transactions. The real value creation and liquidity will increasingly occur in private markets, rather than public ones. With companies staying private for two decades, secondary liquidity becomes absolutely critical — employees, early investors, and founders can’t wait 20 years for an exit.” Our latest State of Tech Exits report covers the trends shaping exits and liquidity in the tech space. For a full recap of what happened in H1’25 and what are we likely to see in the back half of the year, attend our expert webinar with Thomas Sineau tomorrow (linked in comments).

Return of Capital: Capital Allocators investing in Private Equity expect distributions once the investment period ends. Distributions to Paid-In Capital (DPI) ratio is critical for financial planning, as investors rely on models projecting cash flows and pacing of capital distributions to reinvest capital. DPI, calculated as cash distributed divided by capital invested informs performance and liquidity, which impacts the scale and speed of new commitments for Capital Allocators. As shown in the first chart below, DPI was a record low in 2024 for LBO Funds, despite improving economic, strong public equity market returns and vibrant financial conditions. A fund with a 10-year life, for example, might aim for a DPI of 2.0x by maturity, with a DPI of 1.0 by year-6. When DPI is low, a natural response is to reduce new commitments (i.e., a $100 million commitment yielding only $20 million in distributions against an expected $60 million, might require the allocator to cut its planned investments for the following fund from $50 million to $30 million, since cash available to re-invest is lower). This explains why Buyout Funds raised less capital in 2024 than was raised in 2023 as shown in the second graph below. Private Equity is a winning strategy, despite its recent pace of deployment-monetization that is lower than expected. I believe distributions will accelerate in the coming year as PE managers are keenly focused on returning capital to investors. It’s noteworthy that Private Credit has a very different experience since DPI has kept pace with expectations. With Private Credit, monetization is not left for chance since scheduled interest payments & scheduled maturity payments are defined. 2024 was a strong year for Private Credit all around: IRR, Capital Raise & DPI have been as expected. I expect 2025 to be a strong year for Private Equity & Private Credit. What do you think?

In my experience across private equity and venture capital, I’ve come to value what I call ‘light footprint management’. This is a model grounded in lean structures, tactical execution, and deep alignment with partners. It’s a response to the reality of our time where volatility is constant, and agility is no longer optional. This is how it works: * Lean structures: Small, high-functioning teams that move fast and cut through red tape. * Equal footing: No top-down control; instead, a model built on trust, shared ownership, and aligned incentives. 🤝 * Collaborative capital: We raise and deploy capital alongside partners, not gatekeepers - seeking co-investors who bring insight, not just dollars. * Tactical execution: Strategy is a compass, not a cage. We focus on decision velocity, not bureaucratic approval loops. 🧭 * ⁠Precision governance: We stay hands-on when it matters but always with a light touch and a bias toward operator autonomy. * Full use of technology: Including AI to augment the team, reduce volume, and eliminate lower-value activity. It’s about investing alongside others as equals, building trust-based teams, and favoring flexibility over fixed playbooks. This approach allows us to respond faster, stay agile, and adapt to uncertainty without the drag of bureaucracy. In today’s volatile global landscape, this mindset isn’t just efficient - it’s essential for risk-aware, forward-looking capital deployment.

Reimagine Product Development: Unlock Efficiency and Drive Strategic Growth Organizations often struggle with outdated processes, misaligned investments, and underutilized talent, limiting their ability to grow and innovate. Transform your product development approach with this proven framework: 1. Product Portfolio Alignment • Challenge: Too much R&D spend tied to legacy products and “Keep the Lights On” (KTLO), leaving little for innovation. • Solution: Streamline portfolios to free up resources for high-growth products while maintaining competitiveness in core offerings. 2. Innovation Strategy and Execution • Challenge: Big investments fail without clear processes and focus. • Solution: Align customer needs with business priorities for impactful solutions and ROI-driven innovation. 3. Talent and Location Strategy • Challenge: High-cost hubs with limited digital talent hurt efficiency and scalability. • Solution: Shift to cost-effective locations with abundant talent to streamline operations and enable growth. 4. Customer-Centric Processes • Challenge: Rigid processes and lack of adaptability make it costly to meet customer needs. • Solution: Build agile, cross-functional teams and reimagine processes to prioritize customers and market demands. 5. Technology and Platform Strategy • Challenge: Outdated tech stacks limit scalability and interoperability. • Solution: Adopt modern frameworks like APIs and cloud to future-proof and accelerate product delivery. 6. Connect Product Management to Strategy • Challenge: Weak leadership and misaligned processes hinder growth. • Solution: Empower visionary product leaders, align market trends with business goals, and shift to outcome-driven strategies. The Zinnov Advantage With expertise in product transformation, talent strategy, and technology modernization, Zinnov has helped organizations achieve: • 30%+ increase in R&D efficiency through portfolio and innovation alignment. • Cost reductions and scalability via optimized talent strategies. • Faster time-to-market with agile processes and modern tech adoption. Transform inefficiencies into competitive advantages. Reimagine your product development for strategic growth. Amita Goyal Rohit Nair Karthik Padmanabhan Namita Adavi Mohammed Faraz Khan Dipanwita Ghosh Komal Shah Hani Mukhey Sagar Kulkarni Amaresh N. Saurabh Mehta

Value creation in a private equity environment revolves around systematically enhancing a portfolio company’s performance to achieve strong returns at exit. In my recent role as Go-to-Market Advisor for a cutting-edge AI-led health tech startup in the UK at Series B, I developed a comprehensive commercial strategy that rapidly boosted recurring revenue by 30% within 12 months. A key breakthrough emerged when we discovered extended integration timelines were deterring smaller clinics and hospital networks from adopting our solution. By designing a flexible onboarding framework, we reduced implementation time by 40% and reinvested these savings into predictive analytics features—enabling clinicians to forecast patient needs and administrators to allocate resources more effectively. Here’s a concise six-step roadmap for delivering tangible results: 1. Due Diligence: Pinpoint growth levers and operational bottlenecks pre-acquisition. 2. 100-Day Plan: Establish quick wins—revamp pricing structures, refine workflows, and optimise early partnerships. 3. Organisational Excellence: Assess leadership, align incentives with performance outcomes, and foster a culture of continuous improvement. 4. Accelerated Growth: Perfect go-to-market strategies, drive product innovation, and explore targeted acquisitions or strategic alliances. 5. Ongoing Optimisation: Monitor KPIs rigorously, remain agile, and leverage real-time data insights to pivot swiftly. 6. Exit Preparation: Ensure robust financial reporting, demonstrate sustained operational gains, and plan a smooth transition for new owners. Throughout each phase, transparency and collaboration are vital. Regular, data-driven updates to board members, management teams, and front-line staff help secure buy-in and maintain accountability. Ultimately, true value creation goes beyond financial engineering. It’s about generating sustainable growth, driving innovation, strengthening the organisation’s culture, and positioning the business for long-term success. By following a deliberate plan and staying laser-focused on top-line expansion and bottom-line efficiency, we set the stage for a transformative exit that benefits stakeholders and the broader healthcare ecosystem alike.