Knowledge Base
Business valuation, deal structures, succession planning, and the operational side of building something worth selling — or handing off.
22 articles in this category — page 1 of 2
The confusion between IRR and interest rate is not a beginner's mistake. It shows up in how sophisticated investors frame capital allocation decisions, set hurdle rates, and compare deals across asset classes. Get the distinction wrong on a $10M deployment and you may optimize for a metric that flat
The interest rate coverage ratio (EBIT divided by interest expense) answers one question: how many times over can a company pay its interest bill from operating earnings? A ratio of 3x means the company earns three dollars for every dollar of interest owed. Below 1.5x, according to Moody's research,
A private equity operating model is the structured framework a GP uses to improve a portfolio company's financial performance between acquisition and exit. The private equity operating model has become the primary battleground for returns: according to McKinsey's 2024 Global Private Markets Review,
Private equity incentives are the contractual mechanisms that determine whether your GP is genuinely rowing in the same direction as you. Carried interest, hurdle rates, waterfall structures, and clawback provisions collectively define who gets paid, when, and under what conditions. Getting these te
For business owners with $5M to $50M in company equity, ESOP investment banking sits at the intersection of exit planning, tax strategy, and ownership transition. The core mechanics are straightforward: an Employee Stock Ownership Plan acquires company shares, employees accumulate beneficial ownersh
Project finance investment banking structures capital for large, discrete assets where the debt and equity are repaid from that asset's own cash flows, not from a sponsor's balance sheet. For investors at the FatFIRE level, that structural distinction creates access to an asset class with inflation-
Private equity deal sizes span from $5 million growth investments in founder-owned businesses to $50 billion+ leveraged buyouts of multinational corporations. Each segment carries distinct risk profiles, return expectations, fee structures, and access mechanics that matter considerably if you're all
An investment banking haircut is the percentage discount applied to an asset's market value when that asset is used as collateral. If your $5M equity portfolio carries a 50% haircut, your lender extends $2.5M in credit, not $5M. That gap is not arbitrary. It is a calibrated buffer against price vola
Vendor loans in private equity are seller-financing arrangements where the business owner accepts a portion of the purchase price as a deferred note rather than cash at close. For sellers exiting companies in the $5M–$50M range, this structure is not just a deal-closing mechanism. Modeled correctly,
ESG due diligence in private equity is the systematic evaluation of environmental, social, and governance risks and opportunities before and after a deal closes. Done well, it surfaces liabilities that don't appear on a balance sheet and identifies value-creation levers that pure financial analysis
The 100 day plan private equity firms execute post-close is not a formality. It is the single most reliable signal of whether a GP can actually operate a business or just buy one. For FATFIRE individuals evaluating PE funds as LPs, co-investing alongside sponsors, or running their own acquisition, u
The largest private equity deal in history is KKR, TPG Capital, and Goldman Sachs's $45 billion leveraged buyout of TXU Energy in 2007. It also ranks among the most catastrophic. Understanding why that deal failed, why Blackstone's same-vintage Hilton buyout generated $14 billion in profit, and what