BREAKING THROUGH PE CONVENTIONAL WISDOM
Myths of PE
Contracted Revenue is the ultimate protection. Actually, it’s not always good. It’s harder to transfer in an asset purchase. It locks you as the supplier into pricing too. Recurring revenue that can be cancelled at any time can actually be a signal of higher quality of earnings.
Existing business Infrastructure will protect you and gives you salen thing to grow on top of. More often than not business infrastructure is outdated and constraining. I’d rather have no system than a bad one that’s hard to remove or migrate from because it will be risky to rip out and you’ll definitely get worse before getting better if you embark on a big IT adventure.
Seller relationships are hard to replace - often not true.
“Businesses don’t stay small on purpose” - yes they do. The best businesses are ones optimized for the seller’s personal convenience
There’s not enough cash to reinvest.
Let’s wait until the diligence is back. Don’t ever think or say this. This tells me you are outsourcing your thinking. No one should know more about any aspect of your deal than you. Targeted engagement on specific topics requiring expertise is fine. But, hiring someone to tell you the quality of your target’s earnings is the peak of stupidity.
I’m here to be CEO. I’m going to set strategy and motivate the troops. The best way to learn your company to the level of depth you’ll need to steer the ship and put it into a new trajectory is to work there. You need carve out and do a real job that your company needs done.