The formulas, tricks and trade secrets of Private Equity

Private Equity Interview

Sample Chapter

A reader recently asked about deal origination and making private equity interviews with CEOs of potential investees. It can be dirty work (the reader said he felt like an Encyclopedia salesman), but it really sorts the men from the boys when deals come to fruition.

How to get past the gatekeeper to the CEO?

First and foremost, you need to give your call an elevated status. The gatekeeper (secretary, assistant, etc) is there to filter calls, for good reason, so you need to get through the filter by showing your call isn’t a broad-reach sales call (even if it is). You need to position your call more as a private equity interview and less as a pitch.

  • Try referring to the CEO by the first name – this doesn’t always work, but sometimes it makes it sound like you’re already acquainted, or at least you’re important enough to throw around first names
  • Suggest that the topic of conversation is confidential – M&A talk, especially with public companies, must be protected. So it doesn’t hurt to use this to your advantage when dealing with gatekeepers to increase your chances of a transfer through to the CEO.

How to get the owner interested in PE

If you start with a rant about your company and your credentials, then sure, you’ll come across as a salesman, and it won’t seem like a private equity interview. Just with any sales call, you need to think about the potential customer and what would press the right buttons.

  • Provide PE deal options early – an owner can sell out completely, they can accept a PE investment to help ramp up the value of their company for succession, they can use a PE investment to buy out a partner, they can use it to make a large acquisition, and much more. You need to present these options early to find what is front-of-mind
  • Create a burning platform – on the buy side, I’d say that we’re currently looking at their industry, contacting the top players, and we plan to invest a large sum to help the company grow and become the market leader. The ‘burning platform’ is that I’m calling their competitors too and they better get on board or watch someone else sail to the top.
  • Talk about lofty possibilities – you don’t want to make any promises, but simply pose the possibilities of a PE investment. For example, you could say, ‘Imagine acquiring the next best player in the market’ or ‘What you could do with a $10m capital injection.’ Help them to dream of the possibilities of a PE investment.

Example Scripts

I use scripts very loosely, that’s not what private equity interviews are about; I may jot down a few words before making a call, but mostly I’d go with the flow and keep trying new tactics. It sounds really sleazy, but it you believe in what you’re selling, then you’re just customising a message.

Say I call the CEOs personal assistant:

‘Hi Michelle, it’s Peter from PE Partners, may I please speak to John’

I’d keep it really conversational, just use the first name, and keep it flowing quickly so there was no stress or anticipation in my voice. Often, the reply would be, ‘Sure, just one moment.’

When the CEO hits the phone:

‘Hi John, it’s Peter from PE Partners. We’re professional investors looking to make a $5-10 million investment into a soil testing company. A business like yours may use our investment to purchase a competitor, grow organically, buy-out a shareholder, or anything that helps you retire richer.’

Make sure you’re very specific about the company, such as ‘soil testing company’. He’ll think, ‘oh, we’re a soil testing company’. If you just say ‘any company’, then it sounds like a blanket call. Also, you want to dangle the carrot with the $5-10m.

What Not To Do

Most of my colleagues would try to elevate the status of the call by making demands. They figured if they made demands of the CEO, he’d think we were important. For example, they’d ask what the company’s EBIT is before disclosing we’d invest $5-10m into a company. Sometimes it works, but mostly, I found it turned CEOs away. The private equity interview approach is much better in my opinion.

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