10+ hours of podcasts, in 5 minutes.
6 quotes from 1 episode on Private Equity Funcast, each with a timestamped link to the source.
Paul Stanzik said management equity value depends directly on position within the capital stack and realistic exit modeling. Debt sits at the top of the stack, which changes the dollar amount entering a bank account after a 5-year run.
Hurdles become red flags when vesting requires aggressive multiple expansions over current performance baselines.
“Another one is just like if the hurdle seems really really ambitious. If it's all performance vesting and the performance vesting is some crazy multiple on where they're at today.”
Past sub-target exits reveal whether a sponsor pays management teams when incentive equity misses target thresholds.
“Tell me about a time when you had a tougher deal and the team came in and did a good job and it didn't quite get to outcomes for the incentive equity, but they were selling to another private equity firm in a strategic and they still got paid. How did that work?”
Debt sits at the top of the stack. Paul Stanzik explained that position and slice percentage within that specific layer govern what arrives in a bank account after a 5-year run.
“And it does not mean you get half a percent of every dollar that comes back when you sell the business because of that progression or the word that gets thrown around a lot. You've seen our lingo episode is the stack, right? The debt is the top of the stack.”
From Why a 1% Equity Pool Slice Yields Far Less Than Expected
“It that pays to understand that and to ask like what part of the stack am I in and what percentage am I getting of that part because that's what dictates what shows up in your bank account at the end of that 5-year run.”
From Why a 1% Equity Pool Slice Yields Far Less Than Expected
Paul Stanzik recommended asking more than one person for good, better, and best scenarios. Sensitivity modeling reveals whether a sponsor evaluated outcomes outside the primary plan.
“If possible, I think it's a good idea to ask that question to more than one person…”
“Make sure you get the good, better, best because if it's one case and this is what we're going to do, then it's like okay well what if we don't do that? Just a little bit of sensitivity proves that the person has thought about it.”
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