More on Private equity works

Related to my previous post on PE. This isn’t exactly sports related but explains how the PE business works. The article looks at PE from the POV of an investor looking to invest in a PE syndicate so talks about risks to investors, so not exactly applicable to the party receiving PE investment. But still explains a fair bit about how PE works, and now massive the PE market is!

Takes about 15 minutes to read but for anyone interested it should he interesting.


My company invested heavily in PE until about 10 years ago when “the good deals started drying up.” In other words, the risk wasn’t worth it.

I have a very good friend who does PE. I met him because he did several new home construction loans for me for buyers who were self employed but paid themselves low salaries for tax purposes.

We really are good friends, but I know I would not want to be on the wrong side of him.

I thought PE was primarily for short term investments (like 1 to 3 years). But I’m not positive.

I would be worried if the Big12 used PE money. I know they want their money when it’s time and that to get an extension will cost a lot more.

This! Their investment horizon is not more than 5 years! Plus all risk is with the entity receiving the investment. The contracts are structured to be very much in favor of the PE.

If Big 12 is smart, we will STAY AWAY from PE…

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Not necessarily. The finances can be made to work with PE money. However Yormark will have to make certain that every is in place before signing the PE deal. Don’t do the deal and then try to get the pieces in place.

They key is making sure your post investment financial gain (eg increased media payout) is enough to not only cover what will need to pay PE, but is guaranteed to kick in once you get the PE deal signed.