The formulas, tricks and trade secrets of Private Equity

Limited Partner Private Equity

Sample Chapter

As a result of the global economic unpleasantness, many investees are having a difficult time and private equity investors are covering this up through lies, damned lies and statistics. Today’s article from Denise Palmieri at peHub talks about improving relations with limited partners (LPs), one of which is a suggestion that general partners have some humility and don’t cover up the blatant truth.

I’m receiving many reports from roadshows that say limited partners (LPs) are becoming quite annoyed and distressed at the obvious sugar-coating that’s taking place. Apparently general partners (GPs) are talking about future earnings that are multiples of current earnings and then applying outrageous pre-2008 multiples to those with the explanation that by the time they exit they’ll receive those multiples and hence they should use those multiples now. Please.

When the chickens come home to roost, limited partners (LPs) will only give thought to what was done to combat the downturn and what the result is via the exit. Only negative thought will be given to fictitious earnings and multiples, so why do general partners bother? Probably because of ego and shortsightedness. Please show some humility, talk about what actions are being taken, and leave the excuses at home. Like many other firms, my firm has spent an inordinate amount of time on investor relations (weekly updates, roadshows, etc.), but none of that matters if you’re not honest and genuine; they’re not brainless, they can see right through it.

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