WEBVTT
00:00:00.000 --> 00:00:01.500
Welcome to The Deal podcast.
00:00:01.500 --> 00:00:10.769
Today we're gonna have a conversation about private equity and, and what is it, and, and some of the, the tactics and strategies behind it from a, a new friend.
00:00:10.859 --> 00:00:11.519
Mr. Mohammed.
00:00:11.519 --> 00:00:12.720
Mohammed, welcome to the show.
00:00:13.500 --> 00:00:14.490
Uh, thank you, Josh.
00:00:14.490 --> 00:00:15.083
Thank you for having me.
00:00:16.274 --> 00:00:16.814
Absolutely.
00:00:16.993 --> 00:00:28.724
All right, so when I was scouring, uh, the internet for resources on private equity, I came across your name as, as someone who speaks to the topic of private equity and your, your background in that.
00:00:28.724 --> 00:00:34.334
So kind of give us an idea of who you are and maybe some of the things that you've done in this, uh, ecosystem.
00:00:35.473 --> 00:00:35.924
Yes.
00:00:36.314 --> 00:00:40.183
Uh, let me start by mentioning like a headline of who I am.
00:00:40.573 --> 00:00:40.723
Mm-hmm.
00:00:40.963 --> 00:00:43.784
Uh, the way I see myself, uh, when related to private equity.
00:00:43.784 --> 00:00:46.244
I see myself as a person who went full circle.
00:00:46.694 --> 00:00:47.954
I started from corporate.
00:00:48.704 --> 00:01:04.965
Then I moved into traditional, you know, the MBA consulting path, then moved into the deal team, then moved into operating partner, and now I'm almost back into corporate, you know, on the corporate side for PE or with pe And that's, I think, enriched my experience.
00:01:04.995 --> 00:01:12.478
And while I say, you know, my background is very common, very similar to many of the, uh, of the people.
00:01:13.114 --> 00:01:22.685
You know, working in the private equity sphere, I would say that gave me, uh, maybe a little bit of wisdom and the ability to see things from different perspective.
00:01:23.254 --> 00:01:27.784
Uh, so let me give you a, you know, more details of where I started.
00:01:27.784 --> 00:01:31.414
I started working in corporate, I'm an engineer, so I joined Schlumberger.
00:01:31.715 --> 00:01:36.334
This was in the late nineties, so this was when, you know, oil and gas was.
00:01:36.870 --> 00:01:37.290
Big thing.
00:01:37.290 --> 00:01:41.730
Maybe, probably now still a big thing, but it was something very, very interesting.
00:01:41.730 --> 00:01:46.829
So I worked with Schlumberger as an oil feed engineer, offshore rigs, you know, land rigs, et cetera.
00:01:47.280 --> 00:01:54.930
Then as I progressed in my career with Schlumberger, I took on more leadership roles on corporate, like marketing, sales, et cetera.
00:01:55.200 --> 00:01:56.144
This opened my eyes that.
00:01:56.594 --> 00:01:58.844
Word beyond just being an engineer.
00:01:58.844 --> 00:02:07.004
And I decided I wanna do, uh, an MBA after, you know, getting exposed to Exxon and other, uh, players I worked with.
00:02:07.483 --> 00:02:09.284
So did, I'm Bay at Ziat.
00:02:09.930 --> 00:02:16.349
Typically went into consulting, so worked in consulting for almost three and a half or four years.
00:02:16.799 --> 00:02:24.389
That opened my, um, let's say my horizons to a new world that, you know, everybody was talking about, which was private equity.
00:02:24.780 --> 00:02:26.609
Someone had joined private equity because it is.
00:02:27.349 --> 00:02:29.270
I mean, and be very direct elitist.
00:02:29.599 --> 00:02:32.479
Someone joined private equity because it paid well for me.
00:02:32.479 --> 00:02:38.479
I wanted to join private equity because I wanted to make more decisions than just, you know, on the strategy design.
00:02:38.479 --> 00:02:42.020
I wanted to work on the advisory, you know, like, uh, implementing.
00:02:42.719 --> 00:02:46.199
Implementing my decisions as opposed to advising others on what they did.
00:02:46.739 --> 00:02:52.799
Obviously, this is not really what PE deal teams is mainly about, if you know, especially at the lower level.
00:02:53.250 --> 00:03:08.549
I joined a PE fund, which was focused on energy and that was my, you know, ticket into private equity, being somebody who knew oil and gas, did consulting and obviously, uh, my educational background, so worked in PE for.
00:03:08.895 --> 00:03:12.284
One fund, then another fund, then another fund.
00:03:12.794 --> 00:03:16.034
And I was practically learning more and more.
00:03:16.034 --> 00:03:23.625
So started as like a senior associate principal director, executive director, md, head of private equity.
00:03:24.044 --> 00:03:32.324
And because of my background and my family, I moved back to Canada and here I had to switch from being a deal team.
00:03:32.625 --> 00:03:37.724
Uh, let's say, uh, quote unquote expert to an operating partner.
00:03:37.724 --> 00:03:44.054
It was the easy transition or the most logical transition, and I was doing that mainly, uh, for a while.
00:03:44.084 --> 00:03:47.234
And, uh, it was, it was a good move.
00:03:47.534 --> 00:03:57.375
I stayed as an operating partner, managing director for almost, uh, two years, and then recently I decided that I want to ride a new wave of growth that's happening in the world.
00:03:58.544 --> 00:04:03.314
Which is the how technology and how innovation is going to change private equity.
00:04:03.734 --> 00:04:14.715
So I mastered my courage, uh, whatever bravery I had, and I set up my own, uh, you know, startup sort of, uh, platform.
00:04:15.224 --> 00:04:19.910
And currently I'm running a platform by the name Meit Trium, and Under Meit Trium.
00:04:20.475 --> 00:04:23.649
I am also working on something I refer to as PE tech.
00:04:23.670 --> 00:04:33.285
PE tech stands for private equity technology, as in FinTech ed tech, et cetera, focused on, uh, you know, innovating within the private equity space.
00:04:33.345 --> 00:04:44.535
So whatever technology or other, let's say innovations happen to feed or help the PE growth, you know, that's what, that's what really motivates me today.
00:04:45.194 --> 00:04:45.495
Yeah.
00:04:45.870 --> 00:04:47.759
Man, love hearing your background.
00:04:48.029 --> 00:04:51.785
I like you, um, have gone through many different.
00:04:52.694 --> 00:04:55.425
Types of deals, many different types of groups.
00:04:55.754 --> 00:05:03.675
Uh, been my own startup founder, worked in venture capital, private equity, family office, institutional investors, uh, sell side advisory, investment banking.
00:05:03.675 --> 00:05:15.615
So like I have, uh, transgressed across, you know, evolved across many different groups and I'm, I think the more I learned about myself, the more I find my flow and my fit.
00:05:16.245 --> 00:05:16.394
Yeah.
00:05:16.670 --> 00:05:17.389
When studying.
00:05:17.389 --> 00:05:21.889
Let's go back to studying engineers,'cause I've interviewed quite a few engineers in the past.
00:05:22.129 --> 00:05:27.920
Engineers' minds work a very specific way, structure and, and process and systems.
00:05:28.279 --> 00:05:31.399
So how does someone with that kind of engineering background.
00:05:32.144 --> 00:05:34.185
Go full circle now.
00:05:34.185 --> 00:05:37.125
Building own, you know, your own startup, right?
00:05:37.125 --> 00:05:41.475
Like walk to us about like why you got into engineering and then the fears.
00:05:41.475 --> 00:05:43.814
You said it took some courage to jump to startup.
00:05:43.964 --> 00:05:44.535
I get it.
00:05:44.595 --> 00:05:46.514
Especially probably the way your brain works.
00:05:46.514 --> 00:05:47.564
So walk us through that.
00:05:49.035 --> 00:05:52.004
First, you're hitting on, on a very, very interesting topic.
00:05:52.035 --> 00:05:58.545
Engineers are very, very, um, I would say, you know, like unique characters in the way they think.
00:05:58.550 --> 00:05:58.959
Mm-hmm.
00:05:59.045 --> 00:06:00.884
They, they want to solve problems.
00:06:00.884 --> 00:06:03.014
They wanna see a problem and they wanna solve it.
00:06:03.165 --> 00:06:04.485
That's what they wanna do.
00:06:04.995 --> 00:06:12.584
Now, uh, you know, as a person who thinks like an engineer, actually I. Tend to talk like an engineer.
00:06:12.584 --> 00:06:18.404
You know, like I'd like to start with a sentence, then bullet points, then a closing sentence, and that's how my brain works.
00:06:18.884 --> 00:06:22.904
That might be helpful in certain areas that might be inhibitive in other areas.
00:06:23.264 --> 00:06:25.964
So I was lucky and I consider myself.
00:06:26.579 --> 00:06:32.670
A lucky person in my career progression because Schlumberger is a leadership school, while they hire engineers.
00:06:33.329 --> 00:06:36.389
And those engineers, you know, we call, used to call them.
00:06:36.389 --> 00:06:39.449
I mean, there's a big, uh, big debate about the king of the hill.
00:06:39.449 --> 00:06:44.220
So the engineer, they could, they used to say the engineer is the king, and that was inappropriate then.
00:06:44.220 --> 00:06:47.795
And probably now, but the reason is they used to say engineers.
00:06:48.529 --> 00:07:01.610
You know, because the way they behave, the way they, they are, um, you know, they approach problems the way even they approach even things that they have to visit in, which is like client relationship, you know, dealing with clients and so.
00:07:03.180 --> 00:07:11.970
Shamberg J was good in the sense that it's a leadership school, so engineering with a bit of leadership, with a bit of soft skills can go a very, very long way.
00:07:12.269 --> 00:07:22.529
Now, I used to remember very well that, for example, one of my employers, Procter and Gamble, their perfect hire was not a marketing degree or a business degree.
00:07:22.740 --> 00:07:24.089
It was a mechanical engineer.
00:07:25.019 --> 00:07:26.730
I'm an electrical engineer, so why?
00:07:26.730 --> 00:07:30.245
Because the mechanical engineer, the way they think, the way they discovered with time.
00:07:30.915 --> 00:07:33.045
And maybe, you know, this is my own holistics.
00:07:33.045 --> 00:07:43.185
Maybe some other people have different thoughts, but I still remember that Proctor and Gamble, a marketing company, a soft marketing company, used to, you know, prefer.
00:07:43.605 --> 00:07:45.014
Mechanical engineers to others.
00:07:45.285 --> 00:07:47.444
Now, let's fast forward this to private equity.
00:07:47.774 --> 00:08:00.225
You know, would a an engineer mindset thrive in private equity when consultants and, you know, investment bankers and others, maybe even lawyers, you know, probably are the common archetypes?
00:08:00.495 --> 00:08:01.370
I would say absolutely yes.
00:08:02.014 --> 00:08:02.615
Absolutely.
00:08:02.615 --> 00:08:02.915
Yes.
00:08:02.944 --> 00:08:21.064
I mean, it just needs a little bit of fine tuning, a little bit of context, a little bit of, uh, you know, like thought process being, you know, how are you going to, you know, manage that kind of skill, you know, bring it to your own terms as a pe gp trying to create value, try create growth.
00:08:21.064 --> 00:08:28.954
So, yes, I mean, engineering is a very interesting, uh, discipline to have in, in, you know, in even a PE firm.
00:08:29.384 --> 00:08:31.995
Yeah, and I can see why you've been successful.
00:08:31.995 --> 00:08:37.605
You have, you have the engineering brain, but you also can, you know, communicate very, very well.
00:08:37.965 --> 00:08:43.543
And you know, like going through corporate to consulting, there's a shift in mindset.
00:08:44.429 --> 00:08:44.909
Right.
00:08:45.269 --> 00:08:46.470
And responsibilities, right?
00:08:46.470 --> 00:08:51.210
You, you create the strategy and then, you know, like, here you go.
00:08:51.210 --> 00:08:53.190
And then it's up to them to, you know, execute.
00:08:53.549 --> 00:08:58.350
There's, uh, the world of corporate and consultants, there's a view on consultants.
00:08:59.039 --> 00:09:02.639
Private equity has a different view on consultants in my, my thoughts and my opinion.
00:09:02.639 --> 00:09:11.759
So, um, you know, like I, what are, what are your thoughts on how consultants are viewed in, you know, either by co corporations or private equity groups?
00:09:13.634 --> 00:09:15.674
I mean, yes, there's stereotypes there.
00:09:15.679 --> 00:09:16.000
Mm-hmm.
00:09:16.085 --> 00:09:18.585
There's definitely a, an elephant in the room.
00:09:18.945 --> 00:09:19.034
Mm-hmm.
00:09:19.274 --> 00:09:23.715
Some corporates, they, they appreciate consultants for various reasons.
00:09:24.195 --> 00:09:36.914
Some of them, they say they want that formal, you know, rubber stamp, that they justify their actions five years when, you know, things go south or north or sideways, you know, so they, so there is reason why they bring in consultants.
00:09:36.919 --> 00:09:45.350
But nonetheless, you have to admit, I do believe in that, that some of the brightest mind, you know, in our corporate world are consultants.
00:09:45.799 --> 00:09:45.889
Mm-hmm.
00:09:46.909 --> 00:09:47.039
You know, mbbs.
00:09:47.818 --> 00:09:52.828
McKinsey, Bain BCGs and others, they are, you know, very, very brilliant people.
00:09:52.828 --> 00:09:53.938
They hire brilliant people.
00:09:53.970 --> 00:09:56.068
They motivate and they train brilliant people.
00:09:56.519 --> 00:10:00.360
The issue is not about how smart these individuals are.
00:10:00.568 --> 00:10:02.429
The issue is what do they bring to the table?
00:10:02.429 --> 00:10:06.568
Consulting is a three layer, you know, their strategy, design, and implementation.
00:10:06.568 --> 00:10:09.750
Now, yes, people now can, you know.
00:10:10.575 --> 00:10:12.195
Come up with ideas, strategy.
00:10:12.585 --> 00:10:16.065
They need to be smart to come up with, you know, innovative strategies they design.
00:10:16.065 --> 00:10:32.955
So they need to be meticulous, they need to be knowledgeable, they need to implement, okay, some consultants, this is not their cup of tea and they, they know it like a corporate CEO, you know, when it comes to, you know, bringing in a consultant as an implementation, let's say, uh, a catalyst, you know, might just, you know, take it with a grain of salt.
00:10:32.955 --> 00:10:38.595
But they admit that, or I admit, I believe that consultants are excellent when it comes to designing.
00:10:39.000 --> 00:10:41.129
And creating strategies for growth.
00:10:41.129 --> 00:10:43.139
For now there is issues.
00:10:43.200 --> 00:10:43.590
Okay.
00:10:43.590 --> 00:10:44.580
There's definitely issues.
00:10:44.580 --> 00:10:50.580
You know, how can you, how can you really take seriously a person regardless if they have an IQ of one 40 and above?
00:10:51.000 --> 00:10:57.450
How can you take them seriously if they have never really worked in a company like they, I mean, a typical consultants, I mean, these are high achievers, overachievers.
00:10:57.450 --> 00:11:03.210
They, they want ace, the, their SATs, their GMATs, they, you know, they, they are brain wired to do those.
00:11:03.210 --> 00:11:08.070
So it's in their DNA, how can you take them seriously when they haven't really dealt with a real business?
00:11:08.085 --> 00:11:12.254
Case they haven't really had to, you know, look, look a person in the face when they fire them.
00:11:12.914 --> 00:11:23.715
When, you know, how can you deal with somebody who really hasn't, you know, shared, you know, uh, probably their time with another colleague for more than you know.
00:11:24.164 --> 00:11:29.144
One day on a, on a post or on a job site, you know, how can you take them seriously?
00:11:29.625 --> 00:11:32.174
Uh, they, I mean, yes, they know it.
00:11:32.475 --> 00:11:33.705
I mean, these are smart people.
00:11:33.705 --> 00:11:36.315
They, they are even emotionally smart people, and they progress.
00:11:36.524 --> 00:11:42.315
Actually, the more emotionally smart they are, the more they go higher in their, in their leadership role towards partnership.
00:11:42.315 --> 00:11:43.455
Uh, tracks.
00:11:43.784 --> 00:11:51.225
Now they know it, and they have, and this imposter, Romy, there's nothing wrong by, it's not a negative word, it's just a mechanism that people adapt to.
00:11:51.404 --> 00:11:54.134
So they have this imposter, Romy, and they adapt to it.
00:11:54.554 --> 00:11:54.794
Now.
00:11:55.350 --> 00:12:07.289
My, my thinking and my advice is if you read, if you need brilliance, if you need creativity, if you need innovation, if you need, you know, somebody who tells you, you know, points that you haven't thought about, bring in consultants.
00:12:07.559 --> 00:12:12.600
But if you really want to drive major change as a CEO, you know, rely on yourself more.
00:12:12.629 --> 00:12:12.899
Okay?
00:12:12.899 --> 00:12:17.399
Just ask yourself, why are we bringing the consultants rather than, you know, what the consultants bring.
00:12:18.000 --> 00:12:18.419
Yeah.
00:12:18.600 --> 00:12:19.828
Yeah, that's, that's a great point.
00:12:20.250 --> 00:12:25.860
When it comes to PE groups, now you were corporate to consultant, cult consultant to PE group.
00:12:26.129 --> 00:12:34.500
I think, you know, PE groups look at consultants in a different lens, especially when working with portfolio companies and maybe even how it affects ebitda.
00:12:34.860 --> 00:12:35.159
Right.
00:12:35.159 --> 00:12:39.090
Do you have any opinions on, you know, how PE groups view consultants?
00:12:40.198 --> 00:12:42.179
Uh, it's.
00:12:42.345 --> 00:12:55.274
I mean, this is a very, you know, I'm not, I will not say I am an expert on that topic because you need to see, probably this is a research driven sort of question, but I will tell you my, my personal view consultants can actually improve.
00:12:55.634 --> 00:12:58.544
I mean, you, we, as PE firms, we need consultants.
00:12:58.575 --> 00:12:58.754
Okay?
00:12:58.754 --> 00:13:00.524
We need them for, definitely for due diligence.
00:13:00.855 --> 00:13:01.875
Sometimes even we're setting.
00:13:02.269 --> 00:13:04.700
The fund, the thematic theme, the strategy of the fund.
00:13:04.700 --> 00:13:05.120
Why not?
00:13:05.419 --> 00:13:06.860
You know, you're, you're gonna get paid.
00:13:06.919 --> 00:13:13.009
You know, if on a, on a $1 billion fund, you're gonna get paid $20 million a year, you know, and you're gonna get paid a lot of money on.
00:13:13.875 --> 00:13:16.514
Deal expenses, you might as well spend some money on consultants.
00:13:16.514 --> 00:13:17.264
There's no issue there.
00:13:17.894 --> 00:13:20.865
Uh, they might actually enrich what you are going.
00:13:21.105 --> 00:13:23.174
I mean, I'm being just realistic and pragmatic.
00:13:23.174 --> 00:13:24.075
They enrich what you do.
00:13:24.644 --> 00:13:27.735
Uh, consultants definitely need it on due diligence.
00:13:27.764 --> 00:13:36.705
Definitely needed on even certain elements post acquisition, you know, including, you know, issues pertaining to, uh, realignment, turnaround, et cetera.
00:13:36.705 --> 00:13:38.835
Especially when you bring in specialist consulting firm.
00:13:39.434 --> 00:13:42.644
Now, again with the consultants.
00:13:43.379 --> 00:13:49.235
Play a key role in driving value creation or the, the IRR?
00:13:49.240 --> 00:13:49.259
Mm-hmm.
00:13:49.830 --> 00:13:50.610
Yes, they would.
00:13:50.610 --> 00:13:51.330
They would help.
00:13:51.690 --> 00:14:06.090
But sometimes, sometimes, again, the issue is this, if intrinsically a PE firm, a gp, a fund, an opco cannot absorb what the consultants are telling them because it takes time and they cannot really adapt fast to it.
00:14:06.095 --> 00:14:06.235
It's just.
00:14:07.019 --> 00:14:08.039
Decks and paper.
00:14:08.039 --> 00:14:15.480
And that's, we, we go back to the stereotype consultants get paid by the number of papers, which is, or the number of pages that they generate.
00:14:16.350 --> 00:14:31.440
I, I would, I would, I would try to avoid that, you know, if, if I was an Opco, CEO, that's the last thing I wanna have on my, uh, you know, on my resume or on my reputation that I paid 200,000 or a million dollars for a consulting firm just to give me a deck that I didn't choose,
00:14:31.919 --> 00:14:32.370
right?
00:14:32.820 --> 00:14:33.120
Yeah.
00:14:33.269 --> 00:14:36.149
Implementation at the end of the day, execution implementation.
00:14:36.840 --> 00:15:05.070
Value creation is, you know, what I wanted to kind of dig in and, you know, in some of the notes that I've had from, um, our intake is, you know, when it comes to execution problems for PE acquisitions or, you know, PE strategy, you know, like one of the notes we we see here is, you know, from your perspective to vine, like maybe execution, you know, 'cause consultants, which there's, I think there's always a great place for it, but you know, who's gonna actually do the work?
00:15:05.639 --> 00:15:11.220
So let's now move you from consult, from corporate to consultant, to consultant to now PE now.
00:15:11.220 --> 00:15:15.720
Now you're sitting in the PEC and we're looking at execution.
00:15:15.809 --> 00:15:16.200
Cool.
00:15:16.350 --> 00:15:18.330
We got this package that says, do this.
00:15:18.929 --> 00:15:23.759
Talk to us about, you know, execution and then what you define as total value creation.
00:15:23.789 --> 00:15:23.820
Okay.
00:15:25.200 --> 00:15:25.529
Thank you.
00:15:26.070 --> 00:15:28.830
Uh, there is an inherent.
00:15:29.745 --> 00:15:49.424
Issue within PE Currently the issue is the following, that the traditional PE game of buying low, selling, high, uh, over leverage, playing the, you know, traditional financial engineering, uh, arbitrage, all of that was nice and still maybe a little bit valid, but now we.
00:15:50.220 --> 00:15:52.049
Much more robust systems.
00:15:52.049 --> 00:15:55.259
We need value creation to do value creation.
00:15:55.740 --> 00:16:09.539
Some different PE firms, keep in mind there are many, okay, thousands, probably 18,000 PE firms in North America, or 17,000, only probably 1000 of these have a certain embedded system to follow that they follow.
00:16:09.544 --> 00:16:13.259
You know, like they have their own system of who does what, when, where.
00:16:13.799 --> 00:16:15.120
Now the rest.
00:16:15.690 --> 00:16:16.679
There needs to be a system.
00:16:16.740 --> 00:16:25.259
There needs to be a way to govern value creation from the point of origination sourcing, all the way to exit.
00:16:25.919 --> 00:16:33.120
And to do that, you need to have the ability, the team alignment and.
00:16:33.840 --> 00:16:38.970
Much more, you know, like in depth knowledge of what's going on to get to that point.
00:16:38.970 --> 00:16:47.220
So while people try to oversimplify private equity, and I respect that, I think private equity by nature is a little bit complex.
00:16:48.419 --> 00:16:50.700
We don't want complexity that we don't understand.
00:16:50.700 --> 00:16:52.620
We want complexity that we can understand.
00:16:52.649 --> 00:16:53.849
Okay, that's, that's fair.
00:16:54.240 --> 00:16:57.839
Now going with this notion, let's, let's look at the complexity.
00:16:58.200 --> 00:17:00.299
PE is a five dimensional sort of play.
00:17:00.299 --> 00:17:08.884
You need to know where are you buying, so the region, the industry, the stage, you know, early stage growth capital, pre IP au around.
00:17:09.384 --> 00:17:10.914
Et cetera, platform plays.
00:17:11.244 --> 00:17:18.174
Then you have also another dimension, which is the dimension of practically, you know, what deal size are you dealing with?
00:17:18.535 --> 00:17:19.105
Okay.
00:17:19.105 --> 00:17:22.704
The, you know, small cap, mid cap, you know, large cap, et cetera.
00:17:23.095 --> 00:17:25.674
And there's a fifth dimension, which is learning curves.
00:17:26.154 --> 00:17:33.684
Every single PE firm that you assemble, whether you bring in, you know, new players or old players, you, there's a learning curve.
00:17:34.045 --> 00:17:34.974
That learning curve.
00:17:35.329 --> 00:17:42.409
Has to match all the four dimensions that I mentioned, and they have to, you know, hit the ground running at speed and it takes time.
00:17:42.829 --> 00:17:52.579
So what's the, what's the implication of that and when it, we come, you know, to the point of value creation, the implication is that the better systems a PE firm builds.
00:17:53.519 --> 00:18:00.900
On how it creates value and where it creates value, and how to align the resources regardless of who is actually calling the shot.
00:18:01.065 --> 00:18:11.430
Regardless, regardless of who do you have today as your deal team members, as your operating partners, as your opco, let's say C-Suite, uh, SLT leadership team.
00:18:11.670 --> 00:18:13.025
So regardless of who you have.
00:18:13.309 --> 00:18:14.779
Do you have a system in place?
00:18:15.109 --> 00:18:16.490
And what is this system?
00:18:16.490 --> 00:18:35.029
So that brings me to the point of total value creation, the way I see it, total value creation is a concept that I have been working on for a while, and it's a concept that I started developing as a. Uh, let's say a thought process and then, you know, as an actual mechanism for value creation.
00:18:35.359 --> 00:18:42.140
Total value creation, in a way, breaks down how we create value as private equity firms into buckets.
00:18:42.200 --> 00:18:47.210
And these buckets could be the traditional buckets that are, you know, financial.
00:18:48.210 --> 00:19:05.039
So whether it's playing with multiples contraction, expansion, arbitrage, leverage, et cetera, playing with operational value creation, which is probably the one or the value creation that everybody practically knows or the, you know, like it's the, it is the what people refer to as value creation.
00:19:05.429 --> 00:19:06.595
Then you have others, you have synergy.
00:19:07.724 --> 00:19:08.023
Okay.
00:19:08.023 --> 00:19:10.034
Currently we're talking about digital value creation.
00:19:10.184 --> 00:19:11.204
Actually not currently.
00:19:11.773 --> 00:19:16.065
5, 6, 7, 10 years back, digital value creation became a thing.
00:19:16.065 --> 00:19:19.184
How can you create value by digital transformation?
00:19:19.394 --> 00:19:20.684
Nowadays, things have shifted.
00:19:20.684 --> 00:19:21.555
We have now ai.
00:19:21.795 --> 00:19:24.884
Now the question is, is AI part of the digital value creation?
00:19:24.884 --> 00:19:28.305
Is it a subset or is it a something else?
00:19:28.305 --> 00:19:29.924
To my mind, I would argue it's something else.
00:19:30.279 --> 00:19:32.769
Digital value creation, AI value creation, are totally different.
00:19:33.159 --> 00:19:45.279
Are these value creation levels, the five that I mentioned, and even maybe six in the future, you know, like, uh, you know, are these value creation, uh, buckets, uh, you know, uh, like overlapping?
00:19:45.398 --> 00:19:46.539
Are they complementary?
00:19:47.150 --> 00:19:54.470
You know, we can, we can talk about, you know, that for a while, but it's more complex than that, to my mind, a good PE firm has a system.
00:19:54.680 --> 00:20:05.690
That system, regardless of who is running the, the, the play, they will continue to follow a mechanism for value creation across all of these nonstop.
00:20:06.134 --> 00:20:06.434
Okay.
00:20:06.644 --> 00:20:14.414
It's like total quality management concept when it came to, you know, industry and, you know, six Sigma and lean manufacturing.
00:20:14.924 --> 00:20:21.015
It's a continuous flywheel, and that's what PE firms, they need a continuous flywheel for value creation moving forward.
00:20:22.605 --> 00:20:26.174
I love the flywheel approach, the flywheel thought on this.
00:20:26.265 --> 00:20:28.964
Let's go with that and let, let's, let's wrestle on this a little bit.
00:20:28.964 --> 00:20:41.535
If you think that there's one KPI or one metric that forces that flywheel to, to move and you're measuring, like if you could look at one KPI, that is the lever that spins that flywheel.
00:20:41.714 --> 00:20:46.365
What is the most important fly, uh, KPI in your, in your viewpoint?
00:20:47.744 --> 00:20:51.134
I mean, I don't wanna say something very cliche, but I would look at ebitda.
00:20:51.134 --> 00:20:57.375
I mean, that's my, you know, EBITDA growth, EBITDA momentum, ebitda, uh, you know, EBITDA metrics, anything to do with ebitda.
00:20:57.523 --> 00:21:02.144
Some people like to see EBITDA as, if I was a finance person, I would look at EBITDA as just a number.
00:21:02.325 --> 00:21:04.904
For me, it's not just a number, it's more than that.
00:21:05.174 --> 00:21:08.115
I have to see, you know, where EBITDA is coming from.
00:21:08.115 --> 00:21:14.865
So when you look at the, you know, waterfall, visualize the waterfall, bridge of entry, EBITDA versus ebitda, I want to see not.
00:21:15.414 --> 00:21:18.744
Where the EBITDA came from, you know, the, the, the, the step case.
00:21:18.744 --> 00:21:24.023
I want to know exactly which attribute of EBITDA came from financial engineering.
00:21:24.085 --> 00:21:30.474
Which attribute of EBITDA came from, let's say, uh, uh, ai.
00:21:30.534 --> 00:21:33.174
Which attribute of EBITDA came from digital transformation?
00:21:33.174 --> 00:21:36.414
Which attribute of EBITDA came from operational value creation?
00:21:36.414 --> 00:21:39.138
And I wanna see them, you know, I want to tie every single decision.
00:21:40.214 --> 00:21:42.314
In the business to that EBITDA number.
00:21:42.884 --> 00:21:59.714
So if I can, the, the, the way, the way I see value creation, it's a process where speech decision talk between members of the team is translated into the tri statement, p and l, you know, financial statements, and those are translated into value.
00:21:59.984 --> 00:22:06.194
So if I can visualize something that goes from what I say, what others hear.
00:22:07.109 --> 00:22:14.700
The financial statements and back to the valuation, I would be a very happy person Now that, that, that's not how, you know, people work.
00:22:14.700 --> 00:22:19.740
That's not how, you know, most people work and that's why you need different people running different parts of the show.
00:22:20.565 --> 00:22:20.855
Yeah.
00:22:21.299 --> 00:22:21.450
Yeah.
00:22:21.450 --> 00:22:21.898
I like it.
00:22:22.200 --> 00:22:26.099
So if we were to look at, you know, the, the mindset of PE right?
00:22:27.119 --> 00:22:28.950
Primarily EBITDA driven, right?
00:22:28.980 --> 00:22:34.500
So they, they buy, they could borrow on it, they could grow it, they can, you know, sell upstream to, to later things.
00:22:34.500 --> 00:22:35.910
So they're looking at it this lens.
00:22:36.240 --> 00:22:41.819
Now, founders, founder led business, are almost trained to think opposite of that, right?
00:22:41.819 --> 00:22:46.559
So they're, they're trying to, uh, you know, like, how, how could I get the business to pay for my personal stuff?
00:22:46.559 --> 00:22:48.420
How do I write off taxes?
00:22:48.420 --> 00:22:50.069
How do I not pay as much taxes?
00:22:50.069 --> 00:22:51.359
How do I do those kind of things?
00:22:52.194 --> 00:22:57.263
With those kind of, you know, founder led businesses who one day wanna work with private equity groups.
00:22:57.263 --> 00:23:04.855
What are some, what's some advice or some thoughts that you might want to share with them as they're maybe one day wanting to work with private equity?
00:23:06.295 --> 00:23:07.734
I absolutely like that question.
00:23:07.734 --> 00:23:17.065
It's a very, very interesting discussion because there's a love hate relationship between those founders and PE One, they need their money.
00:23:17.065 --> 00:23:17.944
They want their money, but.
00:23:19.230 --> 00:23:20.519
They think it's an easy money.
00:23:20.519 --> 00:23:21.150
It's not easy.
00:23:21.539 --> 00:23:22.980
It's money that doesn't come easy.
00:23:22.980 --> 00:23:27.480
There's lots of, you know, hoops to jump for in order to attract that kind of money.
00:23:28.079 --> 00:23:32.940
Uh, founders, they should acknowledge the fact that y PE firms, they are never in their shoes.
00:23:32.940 --> 00:23:40.859
They're never in their, you know, the struggles or the, uh, tribulations they went through, but they are smart people and they should admit that.
00:23:40.859 --> 00:23:45.359
That's the kind of, you know, I was on both sides of the, so I can tell some.
00:23:46.214 --> 00:23:48.674
Individuals on the founder side, they look at pe.
00:23:48.674 --> 00:23:52.095
These are, you know, the blue chip guys.
00:23:52.095 --> 00:23:57.644
They're just think papers, you know, and spreadsheets and that's not true.
00:23:57.795 --> 00:23:58.934
Okay, that's not true.
00:23:58.964 --> 00:24:03.884
They should start to embrace value that PE firm brings.
00:24:03.944 --> 00:24:05.505
So what kind of value PE firms bring?
00:24:06.194 --> 00:24:07.424
I mean, let me ask this.
00:24:07.515 --> 00:24:13.095
A CEO or a founder, do you know any founder or a CEO of a company that actually thinks.
00:24:13.349 --> 00:24:16.559
Every day how I'm going to increase the exit multiple.
00:24:17.009 --> 00:24:17.609
No, they don't.
00:24:17.759 --> 00:24:18.180
They don't.
00:24:18.180 --> 00:24:23.700
I mean, that's what a PE guy, a deal team guy or an operating partner should think about on the other side.
00:24:23.700 --> 00:24:24.269
Yes.
00:24:24.390 --> 00:24:25.019
Same thing.
00:24:25.349 --> 00:24:28.920
Does a deal, team person thinks how I'm gonna motivate.
00:24:29.150 --> 00:24:36.200
The CFO, the CEOO or the head of the plant to stay with us when we actually exit the business.
00:24:36.289 --> 00:24:42.500
They think, you know, you know, like, you know, the golden handshakes will, will carry them over, you know, into the next exit.
00:24:42.529 --> 00:24:43.069
No, not true.
00:24:43.069 --> 00:24:51.109
You have to listen to what the founder or the Opco CEO is going to share with you about how to, you know, prepare this business for exit.
00:24:51.470 --> 00:24:54.230
So that kind of mindset and that kind of, uh.
00:24:54.845 --> 00:24:58.355
Uh, information asymmetry between both parts should be built.
00:24:58.565 --> 00:25:03.994
I think the best, the, I mean, I spoke about the learning curve on the deal team side.
00:25:04.755 --> 00:25:15.615
I think if you ask me what is really missing and, and I compare that to the J curve, just for, you know, for fun, you know, like people say J Curve, yeah, J curve is important, but the learning curve is much more important.
00:25:15.674 --> 00:25:18.194
It can actually ruin a fund if you don't fix it from day one.
00:25:18.525 --> 00:25:23.535
Now, on the deal, you know, on the post acquisition side, it's the trust curve.
00:25:23.714 --> 00:25:24.194
Trust.
00:25:24.795 --> 00:25:31.349
If you're not able to build a, a, a medium for communication and trust early on, you are not gonna go.
00:25:32.299 --> 00:25:36.200
You know, like you, you're gonna go and you're gonna have lots of challenge.
00:25:36.200 --> 00:25:36.259
Yeah.
00:25:36.799 --> 00:25:47.299
And that's the role of the operating partner to build that trust from, you know, like even before the acquisition, not when we hit the role that we acquired a company, just, you know, months and months before that.
00:25:47.299 --> 00:25:50.210
That's why I encourage bringing an operating partner before.
00:25:51.859 --> 00:25:52.009
Yeah.
00:25:52.640 --> 00:25:54.799
I, great, great feedback, man.
00:25:55.099 --> 00:25:58.940
Um, now we, we've gone from corporate consultant.
00:26:00.075 --> 00:26:08.204
Pe you've almost gone full circle and you're building PE tech to serve the industries of that which you, which you served.
00:26:08.474 --> 00:26:13.125
I would be remiss to, to like dive into what are you building now?
00:26:13.154 --> 00:26:21.974
Like talk to us about what kind of tools, what kind of problems do you see PE have that ecosystem that you're trying to fix right now by building those tools?
00:26:23.144 --> 00:26:23.535
Absolutely.
00:26:23.924 --> 00:26:25.214
Uh, I think technology.
00:26:25.950 --> 00:26:27.180
Has evolved.
00:26:27.329 --> 00:26:40.648
You know, like I want, I mean, I would ask people, you know, would you have imagined 10 years back that we would reach a point in technology today that we would solve, you know, big problems with using, for example, generative AI or other tools?
00:26:40.769 --> 00:26:45.234
I think not really even crypto, I think AI and crypto.
00:26:46.244 --> 00:26:55.335
Both when combined these or blockchain to be even fair, these would actually be like a Pacman pill for PE firms.
00:26:55.875 --> 00:27:04.964
Like they should change the pe the way private equity firms at both the fund level and the opco level, uh, to extremes that we haven't thought.
00:27:04.964 --> 00:27:08.684
Now I want, before I answer your question about ptech, I wanna go one step back.
00:27:09.045 --> 00:27:09.224
Sure.
00:27:10.325 --> 00:27:20.345
On private equity, there's a mindset that you, as a private equity GP general partner, you are supposed to do your best to create as much value as you can.
00:27:20.345 --> 00:27:27.875
So let's say you are targeting an net IRR, I mean the, the, the higher the high percentile top percentile is 22 or 23%.
00:27:28.174 --> 00:27:31.085
Now you wanna target, let's say 30, 40% if you can.
00:27:31.204 --> 00:27:32.319
So what's holding you back?
00:27:33.299 --> 00:27:34.440
I mean, it's, it's a question.
00:27:34.440 --> 00:27:35.400
What's holding you back?
00:27:35.670 --> 00:27:39.779
Is it because you are tired or is it because your steam is limited?
00:27:40.109 --> 00:28:01.589
Is it because you spend so much effort and you don't have any, or is it because you're using the Pero 80 20 rule that, you know, 80 20, 80% of my effort now that whatever you're gonna answer here as a gp, be careful because if you are an LP and you're listening, okay, whatever, your answer is wrong, because I'll explain like.
00:28:01.964 --> 00:28:04.694
I'm paying you 20% split in the carry.
00:28:04.694 --> 00:28:07.089
I'm giving you 2% plus in the A.
00:28:07.638 --> 00:28:07.930
Yeah,
00:28:08.039 --> 00:28:08.329
yeah.
00:28:08.444 --> 00:28:09.345
In the management fee.
00:28:09.375 --> 00:28:16.184
And I expect you to bring in the right people and to give them enough motivation and carry and pay to do whatever it takes.
00:28:16.424 --> 00:28:18.924
So telling me that an analyst, you know.
00:28:19.424 --> 00:28:26.835
It takes much time to, you know, crunch these numbers or do this model or telling me you're playing.
00:28:26.835 --> 00:28:33.315
The 80, 20, 90 10 rule doesn't really gel well because I expect you to be a principal.
00:28:33.315 --> 00:28:33.859
You're not an agent.
00:28:34.845 --> 00:28:37.964
You are an owner, you have to get as much as you can.
00:28:38.144 --> 00:28:39.224
So what's holding you back?
00:28:39.284 --> 00:28:40.154
Okay, that's the question.
00:28:40.154 --> 00:28:41.744
Now let's go back to ptech.
00:28:41.744 --> 00:28:46.334
So now if somebody goes and say, listen, now we have this silver lining in ai.
00:28:46.334 --> 00:28:56.894
You know, it's great, you know, we are gonna all be well in AI and we're gonna use AI technologies or tools or systems to create value or tool.
00:28:57.284 --> 00:29:03.855
So if the answer is you're using that AI tool to save hundreds of hours of an analyst.
00:29:04.304 --> 00:29:06.585
As an LP or as a gp?
00:29:06.644 --> 00:29:11.835
You know, I'm not really, I mean, this is, this is what, this is really what's going on today.
00:29:11.865 --> 00:29:22.125
Many technology driven startups or innovators, they're approaching the PE ai innovation from the perspective of saving them hours and saving them salaries.
00:29:22.513 --> 00:29:24.615
That shouldn't be really the challenge.
00:29:24.615 --> 00:29:33.220
So analyst level AI is not really, yes, it's most, most of the work is happening today and most of the innovation, but it's not really what.
00:29:34.305 --> 00:29:40.003
You know, should be the thought process or the driving motivation for PE firms.
00:29:40.694 --> 00:29:47.865
It should be, you know, how can I use AI tools, systems, technologies, et cetera, to maximize the value.
00:29:47.865 --> 00:29:57.013
So the question is, are you using AI as an an efficiency tool to save those, you know, hours or resources?
00:29:57.585 --> 00:29:59.924
Which is not really, I'm an NLPI don't really care.
00:30:00.075 --> 00:30:00.285
Okay.
00:30:00.285 --> 00:30:00.974
I'll be honest with you.
00:30:01.454 --> 00:30:07.335
So, or are you using this to elevate the innovation level or the quality level?
00:30:07.694 --> 00:30:12.855
So is it an efficiency tool or a creativity innovation tool to bring above and beyond?
00:30:13.500 --> 00:30:16.230
Answers or solutions to the problems you're facing.
00:30:16.589 --> 00:30:17.609
So this is a big debate.
00:30:17.640 --> 00:30:18.029
Okay.
00:30:18.059 --> 00:30:22.769
Yeah, this is a huge debate and for me, this is exactly what I'm trying to build today.
00:30:22.829 --> 00:30:27.960
I'm not really interested in doing the same technology driven.
00:30:29.009 --> 00:30:39.420
Technology driven innovation into private equity technology whereby we solve the efficiency problem, you know, saving hours on the analyst time or the associate, or even the principal time.
00:30:39.869 --> 00:30:49.559
We are trying to figure out ways whereby our systems which create value above and beyond what the human factor can bring to the table.
00:30:50.069 --> 00:30:53.940
I mean, that's, that's what we're being, so that's what exactly I'm working on now and you know.
00:30:55.109 --> 00:30:57.240
It's a little bit of, uh, a lot of work.
00:30:57.240 --> 00:30:57.299
Yeah.
00:30:57.480 --> 00:31:01.680
But hopefully we will, we will share something, you know, in the future with, with our clients.
00:31:02.714 --> 00:31:08.263
I think when people sell to PC or pc, when people sell to private equity, right?
00:31:08.414 --> 00:31:10.753
They built a software and I've seen tons of different software.
00:31:10.753 --> 00:31:14.744
You know, we've interviewed a few thousand people in, in this ecosystem space.
00:31:14.924 --> 00:31:18.763
When people sell, are selling to pe, they're, they're, I think they are looking at this stuff.
00:31:19.035 --> 00:31:22.065
We could reduce your cost of lead generation of deal acquisition.
00:31:22.065 --> 00:31:24.525
We could reduce your cost in analyst, you know.
00:31:24.815 --> 00:31:31.115
Time and this and that, and yes, you're, you might be solving a problem for the, the GP for sure.
00:31:31.355 --> 00:31:36.575
What I think most people are missing is what problem are you solving for the lp?
00:31:36.575 --> 00:31:41.674
Because at the end of the day, they're the ones putting their money into the gp.
00:31:41.674 --> 00:31:45.125
So without the lp, the limited part, you don't have a thing.
00:31:45.125 --> 00:31:47.345
That's interesting that you've, that you took that approach.
00:31:47.345 --> 00:31:48.694
Why did you do that?
00:31:49.964 --> 00:31:50.355
Josh.
00:31:50.384 --> 00:31:50.865
Absolutely.
00:31:50.865 --> 00:31:52.005
I mean, you what I mean.
00:31:52.005 --> 00:32:06.525
You, I mean, what you said is exactly the, the, the problem when you have innovation or software being driven by technology person, so saying it in a very polite way, it might actually miss the point that.
00:32:07.605 --> 00:32:10.305
You know, who is actually paying, why are they paying?
00:32:10.335 --> 00:32:11.894
Why are they buying this?
00:32:12.404 --> 00:32:15.255
Are they buying this to save, you know, analyst time?
00:32:15.404 --> 00:32:16.724
Expedite the process.
00:32:17.085 --> 00:32:18.255
Guess what I mean?
00:32:18.375 --> 00:32:20.684
Let's, let's be very, very clear.
00:32:21.105 --> 00:32:24.734
PE is driven by integrity and alignment.
00:32:24.765 --> 00:32:26.805
Integrity is highly underrated.
00:32:27.255 --> 00:32:30.105
You want a pe GP to think about.
00:32:30.750 --> 00:32:32.940
The LP money as their own money.
00:32:33.059 --> 00:32:39.119
You know, it is other people's money and it's, you know, I'm just, and they need to think about it, that they own it as well.
00:32:39.150 --> 00:32:39.480
Okay.
00:32:39.720 --> 00:32:43.769
Now to do that, it's how do we, how do we make the system work?
00:32:43.829 --> 00:32:46.950
We bring in the concept of carried interest carry.
00:32:47.309 --> 00:32:50.460
So we split the carry in a way that aligns interests.
00:32:50.789 --> 00:32:58.829
So if you have a GP who is happy to get the 30% IRR, when they get to 40%, when they could have got 40%, then there's a problem.
00:32:59.595 --> 00:33:00.555
It's not their choice.
00:33:01.154 --> 00:33:03.525
They have, I mean, did they consult the LP when they said that?
00:33:03.585 --> 00:33:04.065
I don't know.
00:33:04.305 --> 00:33:05.744
Now let's go back to technology.
00:33:05.744 --> 00:33:15.704
When technology drives, you know, innovation and they start solving the cost problem, you know, the management fee, the 2% problem, that's wrong.
00:33:16.125 --> 00:33:16.394
Okay.
00:33:16.394 --> 00:33:18.375
That's, that's not, I wanna say wrong.
00:33:18.375 --> 00:33:19.394
I mean, maybe I'm a bit harsh.
00:33:19.694 --> 00:33:19.904
That's.
00:33:20.654 --> 00:33:21.494
Shortsighted.
00:33:21.795 --> 00:33:32.144
The real value is when you use AI and technology to maximize the ai, uh, sorry, the, the IRR, you can call it AI IRR or contribution.
00:33:32.414 --> 00:33:36.464
Are you creating an IRR in the opco in the fund level?
00:33:36.795 --> 00:33:40.539
Above and beyond the ev, the traditional IRR that you would have gotten.
00:33:41.140 --> 00:33:41.710
Without.
00:33:42.130 --> 00:33:43.630
And if that's the case, who takes that?
00:33:43.630 --> 00:33:44.020
IRR.
00:33:44.319 --> 00:33:48.069
See, there's an issue in PE people, you know, people who work in sales don't understand it.
00:33:48.069 --> 00:33:49.119
Who is paying and why?
00:33:49.869 --> 00:33:56.319
When software companies approach PE firms and they tell them about, you know, savings, okay, yeah, it's fine, you know, and.
00:33:56.848 --> 00:34:07.109
Let's say you, you are an operating partner in a company, and let's say you are the one calling the shots and you are promised a 2%, or, you know, carry or phantom shares, ltip, whatever.
00:34:07.378 --> 00:34:13.108
The last decision, the last decision you want make is bring me another operating partner to the table.
00:34:13.168 --> 00:34:15.509
Who gonna split with me that carry?
00:34:15.509 --> 00:34:21.449
Because that's the vision you would say, I'm gonna work, yeah, I wanna work more, I want to work more, I want to work harder.
00:34:21.659 --> 00:34:22.648
But please don't.
00:34:23.429 --> 00:34:27.958
Put me into that discussion whereby I have to split my carry with somebody else.
00:34:28.108 --> 00:34:31.559
This applies to MDs, this applies to the house, you know, to the gp.
00:34:31.559 --> 00:34:35.728
Gp, you know, the house, and nobody wants to split that carry with others.
00:34:35.969 --> 00:34:41.188
Now, how much of your technology being built around PE actually is trying to answer that problem for them?
00:34:41.789 --> 00:34:42.059
Okay.
00:34:42.059 --> 00:34:48.869
As opposed to saving them, you know, the 200, $300,000 salary of an analyst or two analyst or three analysts.
00:34:49.108 --> 00:34:49.378
Okay.
00:34:49.378 --> 00:34:50.278
That's, that's the debate
00:34:50.639 --> 00:34:51.358
one is.
00:34:52.184 --> 00:34:55.514
Let me, let me feed this back to you and to the our, our audience.
00:34:55.844 --> 00:34:57.764
One is approaching subtraction in addition.
00:34:58.710 --> 00:34:59.068
Right.
00:34:59.099 --> 00:34:59.190
Yeah.
00:34:59.429 --> 00:35:01.289
We could save you a little bit of money.
00:35:01.409 --> 00:35:03.269
And they're like, okay, that's great.
00:35:03.750 --> 00:35:12.778
The other is multiplication and exponential growth, which could return the, the, the carried interest a, a huge return.
00:35:12.778 --> 00:35:17.625
That's the difference between a five x return, 10 x return, and a hundred x return, right?
00:35:17.625 --> 00:35:17.670
Yeah.
00:35:17.670 --> 00:35:24.539
If we're, if we're playing a multiplication in exponential growth, whereas subtraction in addition, that might be the little small wins.
00:35:25.378 --> 00:35:26.278
Super interesting.
00:35:26.338 --> 00:35:33.719
I think you've only been able to see that because you went full circle in the different, sitting in the different seats.
00:35:34.108 --> 00:35:38.159
Corporate consultant, pe now, you know, startup, right?
00:35:38.159 --> 00:35:40.378
In your own, you know, your own lp.
00:35:40.679 --> 00:35:44.878
Uh, so like as you're building this, how do you do it?
00:35:44.969 --> 00:35:50.009
Talk to us about some of your technology that actually is gonna pull these levers to do that.
00:35:51.358 --> 00:35:52.048
Uh, first.
00:35:53.250 --> 00:36:00.840
Any person who worked in corporate consulting, private equity, they see the value of new technology and its impact.
00:36:01.349 --> 00:36:02.699
I see the value of systems.
00:36:02.849 --> 00:36:05.880
I see that, for example, AI is brilliant.
00:36:05.880 --> 00:36:09.900
It can do lots of things, but it is still a short site.
00:36:09.900 --> 00:36:16.829
To look at AI as a, what you call a, a minimal solution, it has to fit the bigger picture.
00:36:17.190 --> 00:36:18.750
How do you make it fit the bigger picture?
00:36:18.929 --> 00:36:20.489
It's by designing a human.
00:36:22.199 --> 00:36:23.789
LED or human augmented.
00:36:24.449 --> 00:36:24.539
Mm-hmm.
00:36:24.778 --> 00:36:27.628
You can say human or expert in the loop sort of system.
00:36:28.318 --> 00:36:43.469
If you're able to map a process and you're able to generate a system that actually maximizes the value of the human knowledge, the human value, and bring AI to complement that as opposed to the other way around.
00:36:43.469 --> 00:36:49.230
When you start with the technology and say, okay, you are humans, okay, you learn how to use it, save money, goodbye.
00:36:49.528 --> 00:36:50.338
That's not how.
00:36:50.778 --> 00:36:51.739
I see it, I see.
00:36:51.739 --> 00:37:08.748
Build a system first in which a human can actually is supposed to manage and benefit from, and that, that is brought from holistic knowledge, from learning, you know, new concepts every day or you know, across time, and then actually over complicate that.
00:37:09.048 --> 00:37:09.378
Okay.
00:37:09.498 --> 00:37:10.938
People want to simplify systems.
00:37:11.028 --> 00:37:13.278
I would like to over complicate systems.
00:37:13.789 --> 00:37:14.418
And why?
00:37:14.449 --> 00:37:16.639
Because, let me, let me be clear.
00:37:17.568 --> 00:37:17.628
Ai.
00:37:19.543 --> 00:37:24.403
Technologies is what will actually solve the problem.
00:37:25.153 --> 00:37:40.349
In, in, in a very simple way, if I'm able to complicate a system, come up with a complex system, robust system that solves a problem and bring AI to handle or to, you know, lift that complexity, I mean, that would be brilliant.
00:37:41.230 --> 00:37:41.519
Okay.
00:37:41.519 --> 00:37:41.530
Mm-hmm.
00:37:41.954 --> 00:37:50.653
As opposed to, you know, simplify a business scenario or a business case and then bring AI even to simplify it even further, I mean, I don't see the value there again.
00:37:50.653 --> 00:37:55.003
So if you ask me specifically what I'm building now, uh, okay.
00:37:55.034 --> 00:38:03.585
We are building something, I mean, just to, we are building something we refer to as Aros AI value Readiness operating System under one of our, uh.
00:38:04.059 --> 00:38:06.009
Business businesses or units, it's called skill.
00:38:06.998 --> 00:38:23.708
What we are building is it's, we we're still like semi stealth, so, so we're building a platform that assesses the readiness of a company or an opco or even a fund in a PE firm, or even in any normal corporate, assesses the readiness and then creates.
00:38:24.554 --> 00:38:27.583
Second layer of value on top of that readiness.
00:38:27.583 --> 00:38:31.003
So it relates readiness and value creation to one another.
00:38:31.543 --> 00:38:49.213
So there's a readiness score, there is a value score, and there is obviously our, uh, ability to optimize which areas, which departments, which units, which businesses that are the best fit for piloting in an ai.
00:38:50.054 --> 00:38:51.585
Growth strategy eventually.00:38:51.585 --> 00:38:56.775
What we are targeting, and we are there already, we are targeting to create an AI VCP.00:38:57.824 --> 00:39:07.784
So we believe that some businesses in the world, let's say you have a business, it's, it's now, you know, trading or, you know, fair market valuation is a hundred million dollars now.00:39:08.384 --> 00:39:15.074
Using operational value creation, you can even wait two years and you can bring it to, let's say one 40 million.00:39:15.074 --> 00:39:16.184
One $50 million.00:39:16.574 --> 00:39:19.934
Now, somebody can argue and you can say, listen, I can go not to one 50 million.00:39:19.934 --> 00:39:24.644
I can go to one 80 million if I implemented an AI strategy, a growth strategy.00:39:25.125 --> 00:39:28.364
An AI VCP with AI value creation levers.00:39:28.934 --> 00:39:35.775
And these value creation levers utilize ai, as you said, you know, not just the subtraction and addition.00:39:35.775 --> 00:39:43.335
It's actually for innovating the business model even, you know, where you can get the multiple expansion, not just the, and you can even enhance.00:39:43.335 --> 00:39:51.644
And that's what we are trying to build, and our system is so robust that all of this can be done in a very, very short.00:39:52.139 --> 00:39:54.628
Time as opposed to, you know, months.00:39:54.628 --> 00:39:56.548
So we can do this in days if we wanted to.00:39:57.898 --> 00:39:58.259
Wow.00:39:58.259 --> 00:39:58.978
Super cool.00:39:59.579 --> 00:40:02.429
You, um, you've been in this space for a while.00:40:02.548 --> 00:40:04.018
You became a thought leader in the space.00:40:04.199 --> 00:40:06.748
You wrote a book about it, and that's how we found you.00:40:07.139 --> 00:40:10.199
Um, you know, as you're creating this.00:40:11.233 --> 00:40:12.134
This work?00:40:13.184 --> 00:40:15.193
What, what kind of drives you?00:40:15.193 --> 00:40:18.313
Like, why do you keep on innovating yourself?00:40:18.313 --> 00:40:19.963
Why do you keep on evolving yourself?00:40:19.963 --> 00:40:21.134
Why do you take that?00:40:21.134 --> 00:40:23.173
Why did you muster the courage to do that?00:40:23.173 --> 00:40:30.463
Because in my mind, there's a few motivational drivers that will encourage someone to take a leap of faith.00:40:30.824 --> 00:40:31.244
Right.00:40:32.264 --> 00:40:35.864
So what was yours that encouraged you to take that leap of faith to do that?00:40:36.224 --> 00:40:37.784
'cause that is, you did take a risk.00:40:38.623 --> 00:40:41.623
I will answer this from a different angle, but I will answer it.00:40:41.653 --> 00:40:41.864
Okay.00:40:41.864 --> 00:40:42.224
So00:40:42.494 --> 00:40:42.793
please00:40:43.184 --> 00:40:43.634
bear with me.00:40:43.963 --> 00:40:44.114
Yep.00:40:44.864 --> 00:40:48.974
Uh, there, there's an issue in private equity nowadays in this sphere of private equity.00:40:49.273 --> 00:40:53.713
Those people who really actually work in private equity, they don't talk a lot about private equity.00:40:54.074 --> 00:40:54.313
Okay.00:40:54.313 --> 00:40:58.784
I, you know, like we might argue that they are bound by confidentiality.00:40:58.784 --> 00:41:04.753
They're busy, they show they're busy, so they're not really those linked in social media sort of extroverts.00:41:05.233 --> 00:41:10.344
So the voice of private equity is held with another realm, another a.00:41:10.903 --> 00:41:15.134
Group of persons who actually talk more about private equity, that's one.00:41:15.673 --> 00:41:24.284
Another area is that thought leadership, and I don't, I'm sorry, I'm, my modesty, you know, dictates that I will not accept myself being a thought leader.00:41:24.284 --> 00:41:25.838
I'm just a person with an opinion or with a view.00:41:25.978 --> 00:41:26.398
Mm-hmm.00:41:26.478 --> 00:41:26.599
Uh,00:41:26.739 --> 00:41:30.224
you know, thought leadership is an issue that we really need to address.00:41:30.673 --> 00:41:35.264
Many people who talk or write about private equity are mainly academics.00:41:36.284 --> 00:41:50.233
And consultants and unfortunately, and let's be very polite and you know, have some decorum about it, there is a sense of entitlement of who speaks about what, not necessarily in private equity.00:41:50.233 --> 00:41:53.878
It's across the, you know, different disciplines, unfortunately.00:41:53.878 --> 00:41:58.094
Unfortunately, the private equity voice or library.00:41:58.934 --> 00:42:01.483
Is somehow hijacked in a way.00:42:01.994 --> 00:42:07.063
And if you look at the private equity library, there are many, many, many missing gaps.00:42:07.393 --> 00:42:14.083
I'm not really interested in, you know, people sharing with me, you know, statistics about private equity to buy a book.00:42:14.684 --> 00:42:22.634
I'm not really interested in, you know, what engagement they had with Swiss Air, you know, or with another firm.00:42:22.784 --> 00:42:24.103
I'm not really interested there.00:42:24.583 --> 00:42:27.643
I'm interested in learning what a PE practitioner.00:42:28.409 --> 00:42:36.929
Has to say, I still remember, I still remember when I was young, I went to my md I saying, you know, we have to do a due diligence on reputation.00:42:37.349 --> 00:42:40.528
Do you know how can we do a reputational due diligence on a person?00:42:40.858 --> 00:42:42.358
He said, listen, you are the PE guy.00:42:42.358 --> 00:42:43.438
You are the MBA guy.00:42:43.438 --> 00:42:45.509
You are the person who's getting paid.00:42:45.509 --> 00:42:49.168
I don't know how much when you are 26 years old, so you figure it out.00:42:49.168 --> 00:42:53.548
I don't, you know, and I disagree with that, and I kept this with me for a while.00:42:53.548 --> 00:42:53.909
So when.00:42:54.494 --> 00:42:58.574
I became more capable of sharing as opposed to learning.00:42:59.114 --> 00:43:02.085
I decided I want to write something and I wanna change things.00:43:02.085 --> 00:43:09.974
So the first, the first driver of change, and here I'm answering your question, is one, I want to give voice to actually people who worked in the industry.00:43:10.485 --> 00:43:11.114
That's one.00:43:11.565 --> 00:43:18.403
Two, I want to fulfill or upgrade the, I mean, I consider myself, I'm with all modesty.00:43:18.434 --> 00:43:21.014
I'm on a mission to elevate the private equity library.00:43:22.139 --> 00:43:24.929
From a PE practitioner's perspective.00:43:26.190 --> 00:43:28.380
So that's the second, you know, driver for me.00:43:28.829 --> 00:43:32.969
The third driver is that, you know, like any other person, I'm fascinated by technology.00:43:32.969 --> 00:43:34.230
I'm fascinated by innovation.00:43:34.619 --> 00:43:44.849
I like to have, you know, a say in that, and I would like to participate in this, uh, you know, what you call shapeshift that we are facing in the industry.00:43:44.849 --> 00:43:47.264
It's a, it's a, it's a huge, you know.00:43:48.193 --> 00:43:54.134
It's a huge, uh, uh, change that we are, you know, over, you know, seeing now, and I wanna be part of it.00:43:54.344 --> 00:44:04.963
I, I do believe that what is happening today when it comes to technology influencing private equity and investment, I think it's gonna shape the future of private equity for sure,00:44:05.954 --> 00:44:06.403
man.00:44:09.494 --> 00:44:09.853
All right.00:44:09.853 --> 00:44:11.324
You get to choose the next path.00:44:11.684 --> 00:44:12.134
All right.00:44:12.793 --> 00:44:17.173
We can, we can talk a little bit more about, uh, the LP vantage point.00:44:17.579 --> 00:44:17.909
Right.00:44:18.838 --> 00:44:27.509
Or I could, I can wrestle with you a little bit on some of those, uh, those things that you're looking to, to accomplish and, and dive into.00:44:27.509 --> 00:44:32.668
Give voice to the PE community, which I, I love build that library and elevate that.00:44:32.668 --> 00:44:33.418
I love that.00:44:33.719 --> 00:44:36.989
And the curiosity and also the shape shifting, right?00:44:36.989 --> 00:44:42.179
So which direction you go, do you want to go LP vantage points or those motives?00:44:42.778 --> 00:44:45.273
I would like to talk about the future, the, the second, the latter.00:44:45.478 --> 00:44:47.818
You know, that's, that's more interesting to me at this point.00:44:48.088 --> 00:44:48.389
Okay.00:44:48.449 --> 00:44:54.119
So moving forward on, on your own personal, on your own personal motives and drivers.00:44:54.449 --> 00:44:56.128
Give voice to the PE community.00:44:56.548 --> 00:45:01.349
Elevate the PE library, you know, your own curiosity, and to be a shapeshifter.00:45:01.500 --> 00:45:02.608
Let's do this.00:45:02.909 --> 00:45:03.509
Who cares?00:45:03.509 --> 00:45:04.108
Why?00:45:04.829 --> 00:45:06.010
Why does that matter to you?00:45:07.528 --> 00:45:08.309
First, who cares?00:45:08.309 --> 00:45:08.759
That's me.00:45:08.878 --> 00:45:17.458
Now, why it matters to me, I think, I think personally there is lots of, uh, you know, like there's lots of value being left on the table.00:45:17.458 --> 00:45:18.539
There's lots of mistakes.00:45:18.748 --> 00:45:28.648
See, I can tell you one thing I still remember when I used to be a Schlumberger engineer, we used to do, you know, we used to do telemetry in a 5,000 meter deep.00:45:28.648 --> 00:45:29.009
Well.00:45:29.414 --> 00:45:32.773
So whatever goes on that, well, nobody knows about it except us.00:45:33.284 --> 00:45:39.074
It's about us as field engineers telling the company, man, the client, what happened there?00:45:40.409 --> 00:45:42.298
It's all about integrity and the truth.00:45:42.358 --> 00:45:44.668
Sometimes we would say it, you know, a hundred percent.00:45:44.668 --> 00:45:57.418
Sometimes we would just say it in a different way just to maintain, you know, and sometimes, you know, some people can say whatever they want, what happened in that borehole, you know, whether it's, uh, telemetry or same thing with private equity.00:45:57.699 --> 00:45:57.969
Okay.00:45:57.969 --> 00:46:08.829
Same thing with private equity and private equity as an investor deal team, you know, and even operating partner or even a, it's what you admit to of what could you have done, right?00:46:08.829 --> 00:46:13.599
So there's this saying of, you know, we used to talk about lessons learned when you deal with private equity.00:46:13.599 --> 00:46:18.938
And one of my colleagues used to say, you know, those lessons learned are, excuse me, I'm gonna use a bad word.00:46:18.938 --> 00:46:20.619
It's gonna be like they are like toilet paper.00:46:20.619 --> 00:46:21.414
Nobody cares about, okay.00:46:22.380 --> 00:46:22.980
We don't need them.00:46:23.460 --> 00:46:24.329
I say, no, we need them.00:46:24.329 --> 00:46:25.079
We need to learn why.00:46:25.079 --> 00:46:25.798
We need to improve.00:46:25.798 --> 00:46:26.909
We need to have best practices.00:46:27.150 --> 00:46:30.900
Say there's no best practices, is what you say, what you tell, what the story you tell.00:46:30.900 --> 00:46:33.778
If you got an an net IRR of 30%, who cares?00:46:34.259 --> 00:46:35.309
I say, no, I care.00:46:35.340 --> 00:46:36.509
I wanna say, you know what?00:46:36.509 --> 00:46:44.639
If we can get to 35% IRR now, I believe now and now more than ever, that we are at this inflection point that.00:46:44.954 --> 00:46:48.375
PE as an asset class, it's being challenged.00:46:48.434 --> 00:46:52.634
There are very, you know, there are more attractive asset classes, you know, growing.00:46:52.634 --> 00:46:54.255
Some people say crypto thematics.00:46:54.255 --> 00:46:56.025
Some people say, you know, AI investments.00:46:56.025 --> 00:46:57.914
Some people can say lots of things.00:46:58.125 --> 00:47:09.945
As a matter of fact, on a, on a basis point, the gap or the, the difference between the advantage of a PE asset class investment above the SB 500 has been almost 500 basis points, 5%.00:47:10.244 --> 00:47:10.929
So, you know.00:47:11.835 --> 00:47:18.914
If you think about it, if you think about it, PE needs to reinvent itself and as an industry and move forward.00:47:19.184 --> 00:47:26.775
I think what we need to do is we need to be able to, I mean, I mean I can even approach this from a different angle.00:47:27.045 --> 00:47:28.425
How much what?00:47:28.635 --> 00:47:38.775
What effort pays more, increasing your fund size from, let's say 1 billion to 1.5 billion, or increasing your IRR from 30 till.00:47:39.853 --> 00:47:41.414
Let's say 40% IRR,00:47:41.653 --> 00:47:42.463
yeah, IR00:47:42.644 --> 00:47:42.793
you.00:47:42.884 --> 00:47:45.224
You might, you might get to the same actually cash on cash.00:47:45.224 --> 00:47:47.983
You might get to the same actually carry, et cetera.00:47:48.014 --> 00:47:54.074
But it's about time people focus more on increasing that IRR and technology will increase it.00:47:54.074 --> 00:48:00.583
So today, more than ever, this is the time when you can actually use technology to be able to increase that.00:48:00.733 --> 00:48:01.213
IRR.00:48:01.963 --> 00:48:06.884
Yeah, I think, uh, you know, I think ego will.00:48:08.443 --> 00:48:10.873
Will always be a driver over logic.00:48:11.713 --> 00:48:13.938
Um, and I might be wrong on this and I'm, I'm.00:48:14.608 --> 00:48:16.199
Let me process this verbally.00:48:16.409 --> 00:48:23.759
I think a UM is, is such a, an important thing for that, that people focus on is, you know, what's your a UM?00:48:23.759 --> 00:48:39.838
And yeah, we're getting a percentage of that to kind of manage it, but I think if I had to ma manage something as an LP coming in, or the LPs that I talk to, they want to see, you know, IRR and what's our carried interest, like how, how, what, what do our distribution checks look like and how do we get paid?00:48:39.838 --> 00:48:42.688
Or how do our, you know, how are kids making money on this in the future?00:48:42.688 --> 00:48:42.748
Yeah.00:48:42.793 --> 00:48:42.954
Yeah.00:48:43.438 --> 00:48:43.798
Right.00:48:44.460 --> 00:48:53.159
So I guess who you're asking is who you're gonna get the que and I love how you're approaching your PE tech to, so to solve a problem that the LPs are facing.00:48:53.909 --> 00:48:53.969
Yeah.00:48:54.298 --> 00:48:55.110
That's fascinating.00:48:55.259 --> 00:48:55.949
Really nice job.00:48:55.949 --> 00:48:56.309
Mohamed.00:48:56.548 --> 00:48:57.269
We're outta time.00:48:57.778 --> 00:48:59.818
I know that people are gonna want to check out your book.00:48:59.969 --> 00:49:01.289
Give a quick shout out to your book.00:49:02.443 --> 00:49:07.184
Uh, my most recent book currently is Private Equity Next.00:49:07.693 --> 00:49:10.934
Uh, it's a book that we published last year.00:49:11.414 --> 00:49:11.594
Mm-hmm.00:49:11.833 --> 00:49:16.903
And, you know, it's a book that talks about the future of private equity, given the limitations that you mentioned.00:49:16.903 --> 00:49:24.164
Liquidity, uh, you know, growth IRR, and you know, if you keep on doing the same repeating patterns, you're gonna get the same.00:49:24.509 --> 00:49:25.469
You know, outcomes.00:49:25.469 --> 00:49:26.728
So it's about time to change.00:49:27.059 --> 00:49:30.239
It's about systems, it's about, you know, personalities.00:49:30.239 --> 00:49:33.778
As you said, you know, even looking into, you know, the ownership.00:49:33.778 --> 00:49:39.989
You know that all PE individuals, they should, they should feel like owners as opposed to agents.00:49:40.494 --> 00:49:42.023
And I think that's, that's key.00:49:42.414 --> 00:49:59.000
Uh, I'm just to say, you know, while this book is very interesting and attractive from my perspective, uh, I'm currently working on a trilogy that I would like maybe between now and hopefully end of this year to be part of the PE library and this trilogy.00:49:59.568 --> 00:50:03.079
Uh, it's called the private equity pri uh, quarterback.00:50:03.199 --> 00:50:09.798
It's mainly about the Opco, CEO and the pressure they have to deal with to grow the private equity coach.00:50:09.829 --> 00:50:22.099
It's about the operating partner who has to, you know, evolve to become actually a mentor and a coach and a system leader, and also the private equity game plan.00:50:22.099 --> 00:50:26.778
So that's the third trilogy of the, of the, of the book and of the trilogy.00:50:26.778 --> 00:50:28.429
And that book is about.00:50:29.059 --> 00:50:33.829
A different way to approach value creation as a system of innovation.00:50:34.219 --> 00:50:36.320
And that's something I'm working on currently.00:50:36.320 --> 00:50:36.559
So00:50:37.250 --> 00:50:42.230
man, what we'll do there, Mohamed, for, for people listening in, man, the, the time really flew.00:50:42.289 --> 00:50:45.380
I, I loved having this conversation with you and I'm super grateful for your time.00:50:45.380 --> 00:50:51.380
Thank you, uh, for people listening in fellow deal makers, uh, his contact information will be in the show notes.00:50:51.619 --> 00:50:54.050
You can find a lot of his content.00:50:54.079 --> 00:50:56.239
This is how I found him on LinkedIn.00:50:56.798 --> 00:50:57.969
Is where I found it.00:50:57.969 --> 00:50:59.768
And then I started digging into his content.00:50:59.858 --> 00:51:00.759
I reached out to him.00:51:00.849 --> 00:51:02.619
He responded really quickly.00:51:02.619 --> 00:51:08.018
We started having a conversation and here we are in, in a, uh, podcast interview together, getting to know each other.00:51:08.498 --> 00:51:12.789
Um, so my encouragement to the audience is reach out to our guests and say thank you.00:51:12.878 --> 00:51:15.998
Their contact information's in the show notes if you miss that opportunity.00:51:16.143 --> 00:51:17.043
That's on you.00:51:17.344 --> 00:51:30.934
Uh, for fellow deal makers in the audience, we, we want to continue this pe conversation, especially around what we've seen as like the capital crunch, but also maybe the liquidity issues and maybe some of the, the thoughts that you guys have on that.00:51:31.293 --> 00:51:35.643
IPO strategic sale, a sale, upsell, divestiture, whatever it is.00:51:35.914 --> 00:51:36.844
I wanna talk to you about it.00:51:36.844 --> 00:51:43.684
Head over to the deal podcast.com, fill out a quick form, maybe get you on the show next till then we'll talk to you all on the next episode.00:51:43.954 --> 00:51:44.583
Cheers guys.
