The Earnout Spring 2025

Maximizing the Lifecycle of Your Investment

CONTENTS

By Paul Marino

By Drew Brantley

By Amana Manori

By Paul Marino

THE

CFO

WELCOME

ABOUT SADIS

The firm maintains a diverse, businessoriented practice focused on investment funds, litigation, corporate, real estate, regulatory and compliance, tax and ERISA.

Drawing on the experience and depth of our lawyers in these distinct areas, we can leverage each lawyer’s industryspecific knowledge to help our clients succeed. This collaborative approach brings to the table a collective insight that contributes to sensible, efficient resolutions, and allows us to remain attentive to the cost and time sensitivities that may be involved.

Sadis’s clients include domestic and international entities, financial institutions, hedge funds, private equity funds, venture capital funds, buyout funds, commodity pools, and numerous businesses operating in various industries around the world.

PUMP UP THE VOLUME

BY PAUL MARINO

SADIS & GOLDBERG

In 1987, in a Stamford, CT high school gym, a 14-year-old Paul Marino was mustering up the courage to break free from the invisible shackles holding him back from asking a girl to dance, when a song by M.A.R.R.S. reverberated throughout the gymnasium and motivated this young man to abandon the rest of his adolescent cohorts and get on the dance floor. The song? “Pump Up the Volume,” an homage to Eric B. and Rakim’s groundbreaking song (and LP), “I Know You Got Soul.”1

Why am I mentioning this all-too-familiar prepubescent high school dance encounter?

Because while U.S. M&A deal values were up in the third quarter of 2023, deal volume was down 25% year over year.2 To further underscore the bleakness of that number, 2023 was one of the worst post-World War II M&A markets on record— and that just makes 2024 that much worse (ever wonder why economists always use “post-World War II”—see below).3

On the positive side, the average U.S. transaction size increased materially, largely driven by a concentration of mega-deals exceeding $10 billion that skewed the overall statistics. in 2024 to $736 million, about $150 million over the 10-

year average. Unfortunately, most of that increase centered on deals larger than $10 billion. On the negative side, the majority of the market didn’t participate in this valuation uptick.

So why is deal volume more important than valuation? Simple. One or two deals (especially in the large-cap space) can skew valuations, while volume—with more participants buying and selling—better reflects the true health of the market.4

Without deal volume, middle-and lower-middlemarket companies don’t grow, and wealth isn’t

created. It may sound simplistic, but it’s true: unless public equity markets experience a dramatic shift and small-cap stocks make a comeback (where have you gone, Bud Fox), private equity remains the greatest wealth creator for most business owners in the middle and lower-middle market. This wealth creation motivates entrepreneurs to start businesses, which in turn creates jobs, products, services, and more wealth. Volume matters.

KNOW THE LEDGE

In the third quarter of 2024, 10.75% of active credit card accounts paid only the minimum balance, the highest rate in 12 years, according to the

Philadelphia Federal Reserve Bank. This trend reflects increasing reliance on credit cards amid rising inflation. In short, the American consumer may be showing signs of fatigue: revolving card balances hit $645 billion from July through September 2024, representing 52.5% growth since a decade low in mid-2021.5

What does this mean for the broader economy?

Banks may soon feel the pinch of rising defaults. Let’s break down why. Banks may soon feel the pinch of rising defaults. Remember, it’s not Mastercard or Visa that bears the credit risk— it’s the banks behind the cards. Banks tolerate minimum payments until they start stacking up and defaults rise. While it may be too soon to short bank stocks, these numbers certainly set off alarm bells.

A few additional data points to consider as we approach the end of Q1 2024:

1. Small Business Capital Expenditure declined by about three points from a three-year high of 28%.6

2. Core CPI saw a slight month-over-month uptick (even though it excludes food and energy, which are arguably the costs most households feel).7

3. Food prices rose 2.5% year-over-year; energy increased by 1%.8

4. U.S. proposed M&A and investment deal activity nosedived: deal count fell 55%, while volume dropped 80%.

5. Consumer sentiment dipped to its lowest level since July 2024, down 11.8% from a year ago. It’s now 19.9% below its historical average. What does it all mean? While some polling data suggests optimism about the nation’s direction,

consumer sentiment remains historically low. Still, capex continues to grow in certain sectors, particularly artificial intelligence, utilities infrastructure, and power generation.

FOLLOW THE LEADER9

Lastly, let’s address the oft-cited “dry powder” phenomenon. While penalties exist for missing capital calls, LPs might still hesitate due to concerns about liquidity and uncertain market conditions. As of this writing, the estimated dry powder stockpile stands at approximately $2.5 trillion—larger than Canada’s GDP (sorry, Amana [for Amana’s article, see, infra]). But when will that capital be deployed? While most LP agreements penalize investors for missing capital calls, liquidity concerns could cause some hesitation.

Despite this uncertainty, middle-market private investment in the U.S. remains poised for growth. Private equity firms continue to focus on middlemarket companies due to their strong earnings growth and comparatively lower valuations. In fact, these companies have seen annual earnings growth of 9.3%, outpacing larger private firms and public equities.10

The technology sector remains a focal point for investors, with deal value up 19% year-over-year— the highest level in two years—thanks to growing demand for AI and automation.11 Healthcare has also attracted substantial private equity interest, especially in healthcare IT and biopharma megadeals. Meanwhile, the private credit market has expanded to approximately $1.5 trillion in early 2024, with forecasts suggesting it could reach $2.6 trillion by 2029.12

Overall, strong earnings growth, sector-specific opportunities, favorable economic policies, and a growing private credit market have positioned U.S. middle-market private investment for continued success in 2025. The music is still somewhat sanguine but I can feel the bass start to kick-in, the beats increasing and clearly make out the lyrics: pump up the volume, pump up the volume, pump up the volume, dance, dance.

DON’T SWEAT THE TECHNIQUE

In case you missed it, The Earnout held its first summit in Miami at the Faena Hotel—and it was a success. The event attracted over 200 industry professionals, with attendees praising the insightful panels and valuable networking opportunities in Miami at the Faena Hotel—and it was a success. We designed the event around independent sponsors and capital providers, guided by our motto: non nobis, sed omnibus. For those who didn’t take Latin (or don’t live in the Vatican), that means “not for us, but for everyone.”

Our goal was to create an event that served the broader independent sponsor and capital provider community—not just our own interests. We hope

every attendee, from PE firms to independent sponsors, recognized that intention. Thanks again to everyone who joined us. We look forward to seeing you next year if we don’t see you beforehand.

1 To listen to Pump Up the Volume: https://www.youtube.com/watch?v=TPr1rwQkzWY&t=3s; to listen to Eric B. & Rakim’s, Know You Got Soul: https://www.youtube.com/watch?v=FfOvPDAAfMs, which was a single on the groundbreaking Paid in Full album.

2 Houlihan Lokey Market Overview: Q3 2024: https://cdn.hl.com/pdf/2024/m-a-market-overview-q3-2024.pdf

3 World War II created big government, big debt, and big reconstruction needs, all consistent with an increasing role for economists. The tools of macroeconomics, managerial economics, and computing were all born during this time. In the early post-war years, economists grew in numbers and confidence, becoming embedded in official government positions and establishing themselves as the applied professional discipline we see today. See, https://www.weforum.org/stories/2019/09/world-war-economics/

4 https://en.wikipedia.org/wiki/Dumb_agent_theory

5 The Philadelphia Fed provides aggregate data on credit card and first-lien mortgages, including portfolio composition, credit performance, origination activities, credit card payment behavior, and credit card line utilization

6 Source: Bloomberg, JPMAM, 12/31/24

7 Source: https://www.usinflationcalculator.com/inflation/food-inflation-in-the-united-states/#google_vignette

The average price of food in the United States rose by 2.5% in the 12 months ending January, matching the annual increase of 2.5% in December, according to the latest inflation data published February 12, 2025, by the U.S. Labor Department’s Bureau of Labor Statistics (BLS). As recently as August 2022, the rate of inflation for food at 11.4% was the highest since May 1979.

8 Source: https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/ eye-on-the-market/from-here-to-eternity-amv.pdf

9 The most influential album of its genre (in this writer’s opinion): https://en.wikipedia.org/wiki/Follow_the_Leader_(Eric_B._%26_Rakim_album) 10 fsinvestments.com

11 cbh.com

12 morganstanley.com

PAUL MARINO Partner

Sadis & Goldberg pmarino@sadis.com

Paul Marino is a partner in the Financial Services and Corporate Groups. Paul focuses his practice in matters concerning financial services, corporate law and corporate finance. Paul provides counsel in the areas of private equity funds and mergers and acquisitions for private equity firms and public and private companies and private equity fund and hedge fund formation.

Do I Need a CEO at Close?

BY DREW BRANTLEY

CAPITAL

When buying a company, there are a LOT of things to consider. Valuation, capital structure, revenue mix, end customers, the list goes on. However, AI has not taken over most industries today, so that means that people are still a vital part of every organization. If that is the case, the CEO is the leader of those people, and arguably one of the most important things to consider when buying a company. The CEO is the LEADER of the business, the CEO sets the tone, culture and drives the vision of the board.

When we, Frisch Capital, are looking at a potential new deal with an Independent Sponsor, one of the first things we ask and consider is “who is going to be the CEO post close?”. The Independent Sponsor will often respond with the question, “do we have to know who the CEO is going to be at close”? In short, the answer is, YES!

If a capital provider is going to back you and invest

millions of dollars into a business, one of the first things they want to know is who the CEO is going to be. Because, while they are investing in the business, many investors have realized that the leader of that business is sometimes more important than the business itself. Why can one HVAC company fail almost overnight post close despite having the perfect service revenue mix on paper, while another HVAC company with a lessthan-ideal revenue mix somehow triples revenue in 4 years? Often, it’s the CEO! Talk to people who have been in this industry for more than 5 years, and most of them have a story about a business that did not go as planned because the CEO was not the right person for the job. So, getting to know and vetting the CEO of the business is going to be very important not only for you but definitely for your capital providers.

But wait you say, “The current seller is going to stay

on for a 12-month transition period. We will just figure it out in the next 12 months.” Nope. While this sounds good on paper, there are two issues that can come up.

First, most owners in this scenario mentally check out the day after close. They might show up, but you put a lot of money into their pocket, and you now own the business. Some might be focused on that new beach house and putting their feet up in the sand, but others are mentally moving on to their next project or the next thing they want to conquer. This issue is typically unique to a 12 month or less transition period. Someone who says they will transition the business within 12 months or less is indicating they want out. Someone that wants to transition in 2-5 years is a totally different story. We are not saying that someone cannot transition out, it has to do with the timing of the transition that can be an issue for capital providers.

Second, a transition of ownership is a huge event for any company. It can often cause significant disruption to the people in the organization. While change, death and taxes are three constants in life, change is often one that is feared the most. It’s the unknown in the “what if” column. The “will I still have a job” keeps employees up at night. Having a CEO who can set the culture, and reassure the employees of where the new owners want the business to go, and lead the business at close is obviously ideal, however, there are ways to solve those two problems and we are not saying “if you don’t have any CEO candidates yet that you should be pencils down until you find a CEO.”

THERE

ARE MULTIPLE WAYS THAT YOU CAN FILL THE CEO ROLE.

First, the existing CEO could be rolling equity into the deal and staying on post close to run the

FRISCH

business. Having him have an equity stake where he could conceivably get a big bite of the “next apple” is important. This happens a lot and is an easy button to push to keep things the way they are. If this is the case, you want to make sure that the CEO is the person that can actually lead the business to the next level. Some CEO’s are “boxing well below their weight class” and just need a new partner to work with to grow the business to the next level. On the other hand, be careful, some CEO’s are great founders, but are not the person to scale the business and will need to be transitioned out at some point, often sooner rather than later.

Second, you (the Independent Sponsor) could step in and be the CEO post close. A portion of Independent Sponsors plan to step in and lead the company, as CEO post close. Many Independent Sponsors have operating experience and are great candidates to be the CEO. This often comes with the intention of being the CEO for the next 2-5 years, and then putting someone else in place before a potential exit, so that the Independent Sponsor can exit and move on to the next opportunity.

Third, you can go out and find a new CEO. This

could be someone from your existing network. It could be someone internally that you promote at the company. Or you could hire an executive search firm and go and find someone new. We have seen all three of these things successfully work in deals with Independent Sponsors over the years. If you are bringing in someone new from the outside you don’t have to know who the person is going to be the day you sign the Letter of Intent. Figuring out who the CEO is going to be is often done in parallel while you are doing other due diligence on the company.

Regardless of who is going to be the CEO, and where they come from, having a plan, and being able to communicate that plan to capital providers is the important part. Getting them on board with your vision of where you want to go and how you plan to get there is what is going to help capital partners getcomfortable with the investment.

What won’t work to repeat is , “we will figure it out post close” is a quick way to get a quick pass from a capital provider.

Independent Sponsor Capital

DREW BRANTLEY Managing Director

Frisch Capital Partners drew@frischcapital.com 706-227-4144

Drew is a serial entrepreneur having started 5 businesses, sold a few and still owns some. He knows what it’s like to be in your shoes. He sees the Independent Sponsor model as the method executives and industry experts can take to own and run already established businesses. He now dedicates his career to helping individuals buy companies, find greater success and live life on their own terms.

DOUGLAS SONG From Investment Banking to Private Equity: Doug Song’s Evolution as an Independent Sponsor

Doug Song, co-founder of Protos Capital, shares his journey from immigrating to the U.S. from South Korea to becoming an independent sponsor in private equity. With a background in investment banking and M&A, Doug transitioned from executing deals to taking a principal role, driven by his passion for building businesses alongside management teams.

In this discussion, Doug reflects on his early career in investment banking, where he gained experience in structuring transactions and working with institutional investors. Over time, he recognized a growing opportunity in the independent sponsor model, which allowed him to take a more hands-on approach in guiding companies through growth and transformation. He describes the challenges and rewards of raising capital on a deal-by-deal basis, as well as the importance of aligning with the right investors who understand the nuances of independent sponsorship.

DOUGLAS SONG

Doug explains how Protos Capital evolved from working with hedge funds and institutional capital sources to focusing on partnerships with family

offices and SBIC funds. He highlights key considerations when evaluating businesses, emphasizing that financial metrics alone don’t tell the full story—understanding a company’s culture, leadership, and operational potential is crucial.

As the independent sponsor model continues to grow in prominence, Doug shares his perspectives on the future of the space. He predicts continued expansion as private equity firms move up-market, leaving greater opportunities in the lower middle market for independent sponsors. He also underscores the increasing role of collaboration among independent sponsors and how family offices are becoming more active in direct investments.

Doug’s insights provide a comprehensive look into the evolving landscape of private equity, offering valuable takeaways for independent sponsors, investors, and professionals navigating this dynamic space.

THE ALLURE OF CANADA’S MIDDLE MARKET

BY AMANA MANORI HIGHNESS GLOBAL CAPITAL INC.

Canada has solidified its position as a premier destination for middle-market transactions, encompassing deals with companies valued between C$10 million and C$500 million. This article explores Canada’s institutional investor landscape, highlighting the significant capital allocations and global rankings that underscore its appeal. Supported by a resilient economy, a well-regulated investment environment, and a sophisticated, globally minded investor base, Canada offers foreign managers distinctive opportunities within an evolving private market.

CANADA VERSUS U.S.

While both Canada and the United States present attractive opportunities in the middle market, there are key differences in transaction scale, activity, and investor composition. The U.S. middle market typically spans companies valued between US$10 million and US$500 million, with significant deal flow in both the lower and upper segments.

In contrast, Canada’s middle market, though similar in scope, is smaller in terms of transaction volume and enterprise size. The U.S. middle market benefits from a larger pool of institutional investors, private equity firms, and corporate acquirers, with middle-market M&A transactions surpassing US$500 billion in 2023 alone. (Source: PitchBook, 2024).

In contrast, Canada’s market is distinguished by a concentrated, yet sophisticated investor base, particularly pension funds and family offices, which often have globally diversified capital allocations. This creates unique opportunities for foreign investors seeking a stable, well-regulated market underpinned by long-term, global investment strategies. While the U.S. market remains larger in terms of overall activity, Canada’s middle market is increasingly seen as a strategic, stable, and attractive destination for those seeking geographic diversification. (Source: Preqin Global Private Equity Report 2024).

KEY TAKEAWAYS:

Canada’s Institutional Strength

With over C$2 trillion in assets, Canadian pension funds are global leaders in private market investing, offering international managers access to long-term, diversified capital.

Middle-Market Appeal

Canada’s stable economy, transparent regulatory environment, and steady deal flow make it an increasingly attractive destination for middlemarket transactions, especially in private equity.

Global Reach, Local Expertise As Canadian investors expand globally, foreign managers can benefit by partnering with local Exempt Market Dealers (EMDs) to navigate regulations and align with sophisticated investor preferences.

WHY CANADA?

Canada’s middle-market sector is supported by robust, long-term fundamentals. According to Preqin’s 2024 report, Canadian pension funds manage over C$2 trillion in assets, with industry giants such as CPP Investments and the Ontario Teachers’ Pension Plan consistently ranked among the world’s most influential institutional investors. These organizations exemplify a disciplined, forward-looking approach to capital allocation, directing substantial investments into private markets globally. For middle-market investors, the implications are significant:

Globally Oriented Capital: Canadian institutions actively seek international diversification, allocating over 35% of their portfolios to private equity, infrastructure, and other alternative assets.

(Source: Preqin, 2024). Recognized as global leaders, Canadian investors are celebrated for their strategic foresight and commitment to sustainable investment practices. (Source: Global SWF, 2024).

Resilient Market Fundamentals: Despite global macroeconomic volatility, Canada’s middle market continues to exhibit steady deal flow. According to PitchBook’s Q2 2024 report, middle-market M&A activity increased by 6% year-over-year, largely driven by private equity-backed transactions. (Source: PitchBook, 2024).

A Trusted Regulatory Framework: Canada’s transparent and reliable regulatory environment provides global investors’ confidence in the stability and integrity of their investments.

THE GROWING INFLUENCE OF CANADA’S CAPITAL MARKETS

Canada’s private investment landscape is undergoing a significant transformation, shaped by several key factors.

First, Canadian institutional investors, including pension funds, are increasingly allocating capital to international assets. This global perspective is expanding the scope of investment opportunities within the Canadian market, reshaping the types of available investments, attracting new capital, and fostering a more diverse investment landscape (Source: CVCA).

Second, there has been a notable shift toward alternative assets, such as private equity, infrastructure, and real estate. Investors are increasingly seeking higher returns and greater diversification, moving away from traditional stocks and bonds. This trend is fundamentally altering the nature of middle-market transactions (Source: Statista).

Third, Canada’s well-regulated investment environment is adapting to accommodate emerging market trends, such as the growing role of digital technologies, sustainable investing, and more flexible structures for private market deals. These regulatory adjustments offer expanded opportunities for foreign managers seeking to enter the market (Source: Chambers).

Fourth, the Canadian middle market has seen a rise in cross-border transactions. Both domestic and international players are recognizing the

potential of Canada’s stable economy, signaling an evolving market where global and local investment strategies intersect (Source: CVCA).

Finally, Canada is witnessing the return of highly skilled professionals, entrepreneurs, and innovators who had previously sought opportunities in the U.S. This influx of talent is having a profound impact on Canada’s economic landscape, driving innovation and strengthening key industries such as technology, finance, and clean energy. Many of these individuals bring valuable international experience and global networks, further positioning Canada as a competitive player in the global middle-market sector. This convergence of political shifts and talent migration is accelerating Canada’s growth as a leading investment destination and is enhancing its appeal to both domestic and international investors.

In summary, the Canadian market is evolving rapidly, driven by global investment trends, regulatory adaptations, and the return of talent, which collectively foster new opportunities for growth.

Canada’s middle market is increasingly recognized for its strategic value, particularly by institutional investors who understand the merits of diversification. As Canadian investors extend their international reach, the opportunities for foreign managers to tap into this sophisticated capital pool continue to grow. However, entering this market requires careful navigation of Canada’s regulatory environment. Partnering with a registered Exempt Market Dealer (EMD) ensures compliance with investor protection protocols, marketing regulations, and disclosure obligations. Engaging with knowledgeable Canadian allies — experts familiar with local regulations, investment preferences, and industry trends — can significantly enhance your market entry strategy. In addition to facilitating regulatory compliance, this partnership offers a strategic advantage by aligning your business with the expectations and preferences of sophisticated investors. With the right guidance, you can confidently enter the Canadian market, wellpositioned for success in one of the world’s most stable and attractive investment environments.

Amana Manori is the CEO and Founder of the Highness Group of Companies which includes Highness Global Capital. Amana boasts over two decades of experience in global capital markets originally specializing in structuring alternative investments for ultra high-net-worth individuals, family offices, and institutional/institutional-grade investors..

Increasing Your HVAC Efficiency After Acquisition

BY PAUL MARINO

SADIS & GOLDBERG

Acquiring an HVAC company through private equity is a significant investment that presents both opportunities and challenges. Proper management post-acquisition can determine whether the business thrives or struggles. This article outlines key strategies for ensuring success while avoiding common pitfalls.

Conclusion: A private equity acquisition of an HVAC company offers the potential for significant returns if managed correctly. By retaining talent, focusing on customer relationships, enhancing operational efficiency, and avoiding common pitfalls, private equity owners can ensure the company’s long-term success. Thoughtful planning, investment in people and technology, and a commitment to maintaining service quality are essential to achieving a thriving, profitable enterprise.

PRO TIPS

Don’t be in a rush to replace the people who got you to purchase the company. Your best talent is likely in-house. Coach them up and give them the tools to exceed expectations.

Maintain a customer-focused culture. That’s the difference maker. Create a mandatory employee training program that preaches customer first to every member of your team.

Create a code of conduct that applies to everyone.

UNDERSTANDING THE INDUSTRY

The HVAC industry operates on thin margins and is driven by customer trust, operational efficiency, and regulatory compliance. Post-acquisition, private equity firms must focus on preserving these fundamentals while implementing value-driven strategies. Along with customer retention an issue often overlooked is worker retention.

Generally, the most important employees of an HVAC company are its technicians, mechanics and junior mechanics (collectively, the “Mechanics”). These employees, much like manufacturing companies, range is skill and acumen but each person on the service team is integral and vertically integrated. To an HVAC shop the Mechanics are its lifeblood and many of them will not necessarily “fit” into a model created by a human resource professional. Remember, it’s a people business run

by Mechanics whose variables and profiles will not fit into a spreadsheet and therefore it is imperative that personnel diligence is conducted prior to acquisition.¹

Understanding the work-flow, the idiosyncrasies of personnel and the local hiring pool are equally important. The last point is vitally important and often overlooked diligence question: “Where are you hiring/finding junior Mechanics?” To that point, one of the biggest issues plaguing the trades is filling worker vacancy. And while, data shows young men are not entering four year colleges at the rate once seen, it is unclear if they are entering trade schools. Therefore, ensuring your rollup has a pipeline to talent is an integral part of growing your portfolio company.

WHAT TO DO

Retain Key Talent:

• The success of an HVAC company heavily relies on experienced Mechanics and support staff. Identify key personnel and provide incentives to ensure their retention.

• Don’t try to shift job functions and/or try to make Mechanics salesmen. Focus on personnel strength and fill gaps with external hires.

• Implement training programs to enhance skills and align employees with new goals.

Evaluate Operational Efficiency:

• Conduct an operational audit to identify inefficiencies in scheduling, inventory management, and service delivery.

• Invest in modern software for customer relationship management (CRM), fleet tracking,

and dispatching to streamline operations. The foregoing is likely the easiest and quickest path to greater efficiency.

Enhance Customer Relationships:

• Maintain strong relationships with existing clients by ensuring seamless service transitions post-acquisition.

• Use customer feedback to improve services and address concerns proactively.

Focus on Marketing and Branding:

• Revamp the company’s branding to reflect professionalism and reliability while maintaining its local roots.

• Leverage digital marketing strategies, including local SEO, pay-per-click advertising, and social media outreach to increase visibility and attract new customers.

Adopt Financial Best Practices:

• Implement transparent financial tracking and reporting systems.

• Identify cost-saving opportunities without compromising service quality, such as bulk purchasing agreements for equipment and parts.

Maintenance Contract Assessment and Growth Strategy:

• Review all maintenance agreements. Look at length, cost, profitability, and ability to achieve and/or meet customer expectations.

• Develop a plan to grow service agreements for both residential and commercial clients. Discuss with clients your maintenance agreements and choose a plan that best suits your client’s needs.

Especially true with commercial clients, this technique of discussing service contracts will eventually lead to “pull-through” (i.e., repairs awarded to the company by the customer that do not go to bid); the foregoing will grow revenue organically because of the avoidance of a bidding process.

Scale Strategically:

• Expand into new markets or add complementary services (e.g., plumbing or electrical work) to diversify revenue streams.

• Use data analytics to identify high-potential areas for growth.

WHAT NOT TO DO

Neglect Company Culture:

• Avoid imposing drastic cultural changes too quickly. A rigid corporate approach can alienate employees and disrupt service quality.

• Instead, blend the existing company culture with new performance-oriented goals.

Cut Costs Recklessly:

• Overly aggressive cost-cutting can lead to poor service quality, customer dissatisfaction, and employee turnover.

• Ensure that any cost reductions are strategic and sustainable.

Overlook Compliance and Safety:

• Neglecting regulatory requirements or safety standards can lead to fines and damage to the company’s reputation.

• Regularly train staff on compliance and safety protocols.

Ignore Technology:

• Sticking to outdated systems and practices can hinder growth and efficiency.

• Invest in technology that enhances customer experience and operational productivity.

Overextend Too Quickly:

• Rapid expansion without proper planning can strain resources and lead to subpar customer service.

• Focus on stabilizing the current business before pursuing aggressive growth strategies.

MEASURING SUCCESS

To ensure the HVAC company thrives postacquisition, establish clear metrics for success:

• Customer Satisfaction: Track Net Promoter Scores (NPS) and online reviews.

• Employee Retention: Monitor turnover rates and employee engagement levels.

• Operational Efficiency: Measure metrics such as job completion rates, average service times, and first-time fix rates.

• Revenue Growth: Compare year-over-year financial performance and profitability.

INSIGHT ON RECENT M&A ACTIVITY

The HVAC sector continues to witness sustained M&A activity spurred by increased construction activity, growing awareness of environmental implications and energy efficiency resulting in stricter regulations and government subsidies, mounting concerns regarding indoor air quality and the ongoing need to replace legacy infrastructure.

1.

the residential HVAC segment is now midway through its consolidation cycle, whereas M&A activity in the commercial HVAC segment is still in its early stages. Existing private equitybacked residential HVAC platforms are expected to continue executing their roll-up strategies to enhance scale and geographic footprint, while private equity interest is likely to gradually shift toward commercial service businesses. This is expected particularly with commercial businesses that have a more diversified, yet durable, customer base in less cyclical end markets (e.g., health care, semiconductors, digital infrastructure, etc.) and those that have a large portion of their business stemming from direct-to-owner relationships.

KEY COMPANY ATTRIBUTES AFFECTING PRIVATE EQUITY INTEREST

Several critical business attributes influence private equity interest in the HVAC industry. Aside from a track record of sustainable profitable growth and margin profile, financial investors have put emphasis on the following aspects when evaluating a potential acquisition:

Direct-to-Owner (“DTO”) Versus General Contractor (“GC”) Relationships:

smaller transactions vis-à-vis GC work, which tends to be centered around larger construction projects with elongated lead times (at times well over 12 months).

Customer Reoccurrence:

Customer stickiness denotes the likelihood of a customer reengaging a service business for repeat project work with regular cadence.

Service and Maintenance as a Percentage of Revenue:

Business models relying primarily on continued upgrades, maintenance, repairs and replacements (as opposed to more lumpy project work) guarantee a more predictable flow of business.

Renovation vs. New Construction as Percentage of Revenue:

In general, renovation jobs are perceived as less risky than new construction activity given that the latter is typically tied to macroeconomic cycles.

Diversification:

The notion of “diversification” indicates the degree of dependency of the business on end customers, GC relationships, suppliers, sector of reference (i.e., residential, commercial and industrial or a mix thereof), as well as specific projects.

End-Market Exposure:

The nature of the end markets where service businesses operate also affects value. Service businesses with an established footprint in more stable sectors like education, healthcare, pharma, government, warehouse, offices and data centers are expected to trade at healthy multiples.

Project Size:

Smaller projects (in dollar terms) are usually seen more favorably than larger projects with the latter carrying an inherent concentration risk associated with cash conversion cycle, human capital allocation and overall project slippage. A business mix overindexing smaller projects is much more likely to achieve a stronger valuation.

Service Differentiation:

Businesses having access to mission-critical technologies and differentiated capabilities are likely to boast a strong financial profile, making them compelling M&A targets.

1 Fun fact: I worked in HVAC during high school, college and law school and was blessed to work for one of my friend’s family business. I learned many things but one in particular was everyone complains about the boss (except my employees of course)—it’s a matter of course and a right.

Looking ahead, the broader sentiment is that

DTO reflects a direct relationship between the service business and the end customer, whereas GC projects are typically procured via a competitive bid process. DTO work includes recurring revenue from repair and maintenance contracts as well as replacement projects and is thus less susceptible to macroeconomic trends. Also, DTO work typically generates higher gross margins and comprises shorter project cycles and an increased number of

PAUL MARINO Partner Sadis & Goldberg pmarino@sadis.com

Paul Marino is a partner in the Financial Services and Corporate Groups. Paul focuses his practice in matters concerning financial services, corporate law and corporate finance. Paul provides counsel in the areas of private equity funds and mergers and acquisitions for private equity firms and public and private companies and private equity fund and hedge fund formation.

The Modern CFO: Critical

- like Mechanics and Plumbers, Systems Matter Most

BY WILL BRUCE SILVER FERN FINANCIAL

When I started my career in New Zealand I had the opportunity to work with Westfield shopping malls. One of the greatest business success stories out of Australia. Westfield was founded by Frank Lowry, survivor of WWII tragedies who later immigrated to Australia to start the shopping center in the Western suburbs of Sydney. Westfield now has centers all over the world and his successors run a multi-billion-dollar family office. I had the good fortune to work with one of Westfields key executives in their growth story, who candidly, in great self-deprecating humor, referred to himself as a plumber i.e. keep the $hit running. No spillage, or there will be problems!

When it comes to running a smooth operation—be it a car, a home, a business or a fund —there’s a critical need for expertise. For a car, you have a mechanic. For your plumbing, you call the plumber. And for your business’s financial health, you turn to a Chief Financial Officer (CFO). While these roles might seem worlds apart, they share one striking similarity: their success hinges not just on their skills but on the systems they oversee.

The CFO as a Systems Manager

The CFO as a central hub

Effective CFOs reduce business emergencies and enhance business resilience

The Shift to Outsourcing and Flexibility – the rise of fractional CFO services

THE PLUMBER: FLOWING SMOOTHLY

A plumber’s role is essential when something goes wrong—a burst pipe, a leaking faucet, or a clogged drain. But a well-designed plumbing system, installed correctly with high-quality components, minimizes emergencies. Routine inspections and upkeep mean that homeowners rarely have to call for urgent repairs.

THE MECHANIC: KEEPING THE ENGINE RUNNING

Similarly, a mechanic ensures your car operates efficiently. Their expertise is invaluable when diagnosing and fixing problems. But in truth, their job is much easier—and often less frequent—when the car’s systems are properly maintained. Regular oil changes, proper tire pressure, and a functioning engine management system reduce breakdowns. A car with a solid maintenance regime doesn’t need constant expert intervention.

THE CFO: MANAGING FINANCIAL FLOW

Now consider the CFO. A CFO is the architect and overseer of a company’s financial systems. They ensure the financial engine runs smoothly, guiding the business toward profitability and growth while preventing crises. But just like mechanics and plumbers, much of their value comes from ensuring the right systems are in place.

THE CFO: THE INTEGRATION HUB OF ALTERNATIVE ASSET MANAGEMENT

In an alternative asset management business, the

role of the CFO is far more than simply managing the books. A CFO acts as the critical nexus where various stakeholders—regulators, investors, auditors, tax preparers, advisers, and legal teams—converge. This integration role ensures that the financial systems are not just operational but optimized, compliant, and aligned with the business’s strategic objectives.

Navigating Regulatory Compliance

The alternative asset management industry operates in a highly regulated environment, with stringent requirements imposed by agencies like the SEC, FCA, and other jurisdictional bodies. The CFO ensures that the company’s financial practices and reporting adhere to these regulations. This includes:

• Implementing robust compliance systems to meet filing deadlines and maintain transparency.

• Overseeing regulatory audits and addressing inquiries to safeguard the firm’s reputation and operational continuity.

• Staying ahead of regulatory changes, ensuring the business remains proactive rather than reactive.

Building Investor Trust

Investors in alternative asset funds demand detailed insights into the performance and risk profile of their investments. The CFO ensures that communication with investors is seamless and credible by:

• Providing accurate and timely reporting on fund performance, fees, and expenses.

• Maintaining transparency through detailed financial disclosures that align with investor agreements and regulatory standards.

• Managing distributions and capital calls, ensuring investors receive returns efficiently while safeguarding liquidity.

Collaborating with Auditors

The CFO plays a pivotal role in managing the audit process, ensuring financial statements and fund reporting are accurate and adhere to accounting standards such as GAAP or IFRS. This involves:

• Coordinating with external auditors to provide the required documentation and explanations.

• Ensuring internal systems can produce auditready financials at all times.

• Addressing any audit findings promptly to strengthen financial integrity.

Streamlining Tax Strategy and Compliance

In the complex world of alternative asset management, tax strategy is a critical function. The CFO works with tax preparers and advisers to:

• Optimize fund and entity structures for tax efficiency, often across multiple jurisdictions.

• Ensure accurate and timely filing of tax returns, avoiding penalties.

• Prepare investor-level tax documents, such as K-1s or equivalents, to meet distribution timelines.

Facilitating Legal Coordination

Legal complexities abound in alternative asset management, from fund structuring to contract negotiations and compliance matters. The CFO acts as a liaison with the legal team by:

• Ensuring contracts, including Limited Partnership Agreements (LPAs), align with financial practices.

• Collaborating on compliance documentation for new regulations or litigation risks.

• Coordinating fund launches, ensuring the legal setup supports the financial and operational framework.

Advising on Strategy and Growth

Beyond operational tasks, the CFO is also a strategic adviser. They provide critical insights to the business’s leadership, identifying opportunities for growth, managing risks, and ensuring the longterm sustainability of the firm. This involves:

• Forecasting cash flow and liquidity needs, especially during fundraising or acquisition phases.

• Aligning commercial terms to standards – management fees, carry and OPEX benchmarking

• Evaluating and implementing technology solutions, such as portfolio management and reporting software, to enhance efficiency.

• Managing relationships with banking and financing partners to ensure adequate funding and favorable terms.

• Side letters, SMAs and other revenue sources

The CFO as the Ultimate Integrator

In essence, the CFO is not just a financial manager but the integrator who ensures that all parts of the alternative asset management business work in harmony. By creating streamlined systems and fostering collaboration among stakeholders, the CFO reduces friction, minimizes risk, and allows the firm to focus on delivering value to investors.

Just as a mechanic ensures the engine runs smoothly or a plumber guarantees the pipes flow freely, the CFO in alternative asset management is

the linchpin ensuring that the financial, regulatory, and operational infrastructure is strong, efficient, and built for long-term success.

The Power of Systems and Outsourcing

In both cars and homes, the system—not the individual expert—is paramount. The same holds true for businesses. When a CFO sets up robust financial reporting, forecasting, and cash management processes, the company doesn’t need constant hand-holding.

This is where outsourcing becomes a viable option. Just as you wouldn’t hire a full-time mechanic to sit in your garage or a plumber to live in your basement, you don’t necessarily need a full-time CFO in-house. Fractional CFOs or outsourced

CFO services provide the expertise you need, precisely when you need it, without the long-term commitment of a full-time hire.

Systems: The Great Equalizer

A well-maintained car doesn’t care whether a mechanic is on speed dial. A plumbing system with strong foundations doesn’t depend on daily inspections. Similarly, a business with robust financial systems can thrive with part-time CFO support.

By focusing on establishing the right processes and tools—like advanced financial software, regular audits, and clear reporting structures—businesses can ensure their financial health without overreliance on a single individual.

The Future of CFOs

In today’s business environment, the role of the CFO is evolving. Companies are embracing the flexibility of outsourced CFOs, recognizing that the true value lies in expertise applied efficiently. Like mechanics and plumbers, CFOs shine brightest when they’re building and maintaining systems that

WILL BRUCE Founder Silver Fern Financial

empower businesses to succeed independently. So, the next time you consider the role of a CFO, think of them as your financial mechanic or plumber. With the right setup, you’ll spend less time fixing problems and more time focusing on the road ahead—or in the case of plumbing, enjoying the steady flow of success.

Our firm is comprised of the industry’s best. We each have +20 years of experience helping funds launch and grow. We’re not your everyday outsourced C-Suite Firm. We have been on the ground and in-house in the USA, the Cayman Islands, and New Zealand. We excel with hedge fund strategies across all structures, asset classes and AUM ranges.

The Best Thing That Ever Happened to Me: How Getting Fired Launched

a Risk Management Revolution

BY KEITH MCCULLOUGH HEDGEYE

The below is adapted from Hedgeye CEO Keith McCullough’s recent book, “Master the Market: A Hedge Fund Manager’s Guide to Process & Profit.”

In late 2007, I got fired. That’s easy to say now, but at the time, it was one of the most jarring experiences of my life. It was also the best thing that ever happened to me. It set me on the path to founding Hedgeye, a company that was built to do what Wall Street refused to—tell the truth and manage risk without conflicts of interest.

I was a portfolio manager at Carlyle-Blue Wave, the hedge fund arm of The Carlyle Group. I had a big title—Managing Director and Partner—a seat on the Investment Committee, and what I thought was a golden ticket. But as the summer of 2007 wore on, I saw the warning signs of an economic downturn everywhere. I turned bearish on the U.S. economy. I started positioning accordingly.

I was early—just by a few months—but that’s all it took. On November 2, 2007, I walked down Fifth Avenue in Manhattan to buy a new pair of black loafers, preparing for the birth of my son, Jack.

Hours later, I was called into an office and let go. Five days later, Jack was born. And then my mom asked me a question that changed my life: “How do you change the world with your job?”

The answer wasn’t to go back to another hedge fund. The answer was to build something different—an independent risk management firm that could guide investors through market cycles without the toxic biases of Wall Street. That’s how Hedgeye was born in 2008, just as the financial crisis was beginning to rip through the global economy.

HOPE IS NOT A RISK MANAGEMENT PROCESS

If 2008 taught investors anything, it was that hope is not a strategy. The crisis exposed the worst of Wall Street: rampant conflicts of interest, opaque financial products, and an industry designed to extract fees rather than provide real risk management.

I’d seen enough. The traditional sell-side research model was designed to keep investors in the dark, selling them on whatever story fit the incentive structure of the banks. I wanted Hedgeye to be the antidote—transparent, accountable, and rooted in a repeatable process that investors could actually use.

The stock was trading near $40, and Kaiser’s work suggested it was worth closer to $15. The response from the establishment was swift and brutal. Jim Cramer, who had been pumping the stock on CNBC, called our work “unscrupulous.” Billionaire hedge fund manager Leon Cooperman accused Kaiser of “distorting” the truth.

At Hedgeye, we built our entire investment framework around risk management and what I call Full Cycle Investing—a process designed to help investors navigate the inevitable booms and busts of the economy. This meant developing our GIP (Growth, Inflation, Policy) Model, which identifies which uses the rate of change in growth and inflation to predict the future of the economy at any given time, and our Risk Range™ Signals, which provide real-time, data-driven levels for buy and sell decisions.

We don’t tell stories. We don’t make forecasts based on gut feelings. We measure and map economic data in real-time and make decisions accordingly.

WALL STREET HATES WHAT WE DO

Since launching Hedgeye, I’ve been blacklisted by virtually every major financial media outlet. Why? Because we expose the conflicts that run rampant through the industry. When our team makes a call—whether it’s a bullish stance on a market trend or a short position on a fraudulent company—we do it based on our own research, not because we’re getting paid by investment banks.

One of our early battles with Wall Street’s old guard came in 2013 when our analyst Kevin Kaiser exposed accounting issues at Linn Energy (LINE).

Fast forward to 2016, and Linn Energy declared bankruptcy. Our research was right. The stock went to zero.

The establishment media won’t tell these stories, but the track record of Hedgeye’s independent research speaks for itself. We’ve consistently made calls ahead of major market moves, including:

• 2008: We signaled investors should go to 85% cash before the financial crisis.

• 2016: We got bullish on U.S. stocks ahead of a major rally.

• 2020: We predicted the COVID crash and, later that year, the subsequent recovery.

• 2022: We warned investors about a 25% market crash before it happened.

Wall Street doesn’t like when someone disrupts their business model. But I don’t care. I didn’t build Hedgeye to make friends—I built it to help investors protect and grow their wealth.

RISK HAPPENS SLOWLY, THEN ALL AT ONCE

One of the most dangerous myths on Wall Street is that risk is something you react to rather than proactively manage. In reality, risk happens slowly, then all at once. By the time it’s obvious, it’s too late.

This is why Full Cycle Investing matters. Markets don’t move in straight lines. They oscillate through

1. cycles of growth, inflation, and central bank intervention. Understanding where you are in the cycle is the key to compounding wealth over time.

advertising dollars. Our incentives are aligned with our subscribers.

At Hedgeye, we don’t chase momentum, and we don’t buy into Wall Street narratives. We measure and map economic and market data every single day, and we adjust our positioning accordingly. Our subscribers—ranging from self-directed investors to hedge fund managers overseeing trillions in assets—rely on this framework to avoid catastrophic losses and capture major opportunities.

A BETTER WAY TO INVEST

In the 16 years since I was fired, Hedgeye has grown into one of the most respected independent research firms in the industry. We have over 40 analysts covering every major sector, and our research reaches investors across the world.

Our mission remains the same:

• Transparency—No hidden agendas. Our calls are public and accountable.

• Accountability—We track our hits and our misses. No revisionist history.

• Trust—We don’t take banking fees or

Wall Street wants to keep you uninformed. We want to give you the tools to navigate markets with confidence. That’s why we built Hedgeye. That’s why I wake up every morning at 4 a.m. to analyze the data before the market opens. That’s why we do this work.

Getting fired in 2007 was the best thing that ever happened to me. Because without that moment, there would be no Hedgeye. And without Hedgeye, there would be a lot more investors getting steamrolled by the conflicts and chaos of Wall Street.

The old system is breaking. A new era of independent research is here. It’s time to play The Game differently.

If you enjoyed the above, consider downloading Hedgeye CEO Keith McCullough’s recent book, “Master the Market: A Hedge Fund Manager’s Guide to Process & Profit.”

KEITH CCULLOUGH CEO & Head of Macro Hedgeye

As a former hedge fund manager, Keith McCullough is a 24-year industry veteran who challenges mainstream financial media and Wall Street with independent research. Serving institutional investors managing over $10 trillion globally, Keith’s team also produces research for professional investors and financial advisors. Hedgeye is a bold, trusted, no-excuses provider of real-time investment research and a premier online financial media company. Our all-star research team is unafraid of rocking the boat and is committed to delivering the highest caliber investment ideas through rigorous quantitative, bottom-up and macro analysis with an emphasis on timing.

EARNOUT SPOTLIGHT

Prior to working with Frisch Capital, Drew’s background is comprised of being an entrepreneur, having started multiple companies, and also a consultant helping drive operational improvement and leadership and performance coaching to companies around the world. As an entrepreneur, Drew has started companies including Bay Blasting, BAM Adventures, Resilient Families Institute (RFI) and the national family race series, the Families On! Challenge, and CMC Beverage Solutions.

In 2017 Drew joined Frisch Capital partners as a Managing Director to bring his sales and marketing expertise and help grow the business to be the most prominent Investment Banks working with Independent Sponsors today.

Drew lives in Athens Georgia with his wife, Elizabeth, and two kids Lilly and Bear.

for

For 29 years Frisch Capital (www.frischcapital. com) has specialized in raising both debt and equity for Independent Sponsors. Frisch Capital has successfully raised over $1.5 Billion in capital for Independent Sponsor. Frisch Capital not only helps Independent Sponsors raise capital, but we also have deep expertise in helping our clients navigate the unique process of successfully closing Independent Sponsor deals.

Diligence Discussions at The Earnout Independent Sponsors Conference in Miami

BY STEVE BRADY WITHUM

Earnout held a very productive and curated conference for Independent Sponsors and Capital Providers in Miami on January 30th. As part of the day, there were roundtable discussions on timely topics for Independent Sponsors. This article outlines the key takeaways from these discussions on the unique diligence challenges for Independent Sponsors.

The are several important aspects of Independent Sponsors which drives a heightened awareness of these issues as compared with private equity firms with a dedicated fund. These factors include more limited internal personnel; any dead deal costs directly impacting partners’ cash flow; the need to be laser focused on how they spend their time while maximizing their ability to find, execute and close deals; and managing time during diligence while usually working with potential capital sources.

A consistent theme across the spectrum of diligence areas on a deal was that for Independent Sponsors, the first focal point of diligence is the quality of earnings to validate the Adjusted EBITDA on which the deal in underwritten. This is important in every deal regardless of the type of buyer,

yet it is a gating item for Independent Sponsors to move their processes forward. Making sure this threshold is crossed before engaging other diligence workstreams and offering the ability to supply financial and key performance indicator data to potential capital sources is critical.

Many Independent Sponsors do extensive work internally to minimize costs and make sure key issues are vetted before hiring outside resources. This was an interesting takeaway since Independent Sponsors do not have the level of internal resources of their Private Equity fund counterparts. It was clear in our discussions the drive of the Independent Sponsors to work to clear as many issues as possible upfront before engaging professionals.

The Capital Providers perspective in most cases was to rely upon the Independent Sponsor to drive the diligence process, although there were certainly those who preferred to be more involved in the process, or at least have some input into the scope of work.

The fact that most Independent Sponsors in these discussions were targeting the lower end of the

middle market, it is common that they and their advisors are collaborating with unsophisticated sellers with substandard data and processes. Cash basis is a frequent method of accounting, and GAAP compliant financial information is a rarity. As a result, Independent Sponsors and their advisors are in tune with digging through challenging situations to get to the right answer. This heightened both the due care the Independent Sponsors are exercising in moving deals along, but also the increased importance the scope of work of managing outside service providers.

Another important takeaway was that Independent Sponsors are as thorough as the Private Equity fund peers, working diligence streams across financial, tax, legal, technology, cyber and commercial aspects of the target companies. Tax issues were consistently the most likely to derail a deal, the most prevalent of which are sales taxes.

Like all financial sponsors, integration and value creation are of paramount importance. The way Independent Sponsors go about integration and value creation is very different from private equity firms who have committed capital. Independent Sponsors are generally more hands-on earlier in

the process, preferably before the LOI stage. Most have the experience and networks to use a mixed universe of internal operating partners or outside service providers.

Other diligence workstreams are managed in a comparable way with most Independent Sponsors holding off the legal work, technology. cyber, and commercial diligence until the Q of E has validated EBITDA and other key financial aspects of the target company. It was interesting that despite more limited resources, incurring the cost for thorough commercial diligence was just as important to Independent Sponsors as it is to funded private equity firms.

Finally, there were discussions on the rapidly evolving nature of AI and how that will affect the diligence process. The observations were that everyone recognizes the importance of AI, but no one yet has a complete handle on the future impact of AI. We discussed the importance of not just relying upon AI tools that pull data from the ‘universe,’ but rather it was critical to preserve the institutional knowledge embedded in existing processes and data used by Independent Sponsors.

STEVE BRADY

Partner

and Market Leader - Transaction Advisory

Steve is a Partner and Market Leader for Withum’s Transaction Advisory practice. He is a licensed certified public accountant in the state of Illinois and specializes in mergers & acquisitions and transaction advisory, advising clients to realize value from middlemarket transactions across multiple sectors.

Withum

AUGMENTING THE HIPPOCRATIC OATH: FIRST, DO NO HARM TO YOUR BUSINESS

SELLING A MEDICAL AND MEDICAL BASED PRACTICE: A COMPREHENSIVE GUIDE

BY PAUL MARINO SADIS & GOLDBERG

Until recently, most licensed medical professionals (doctors, dentists, chiropractors, pharmacists, physical therapists, etc.) (collectively, “Medical Professionals”, singular, “Medical Professional”) do not embark on the educational journey for their chosen profession with the idea of selling their practice for a multiple of EBITDA, but many now realize there is an enterprise value attached to their profession and that multiple can lead to a windfall. Although, with this windfall comes a significant financial and legal undertaking that requires careful planning and execution. This article provides an overview of the process, essential do’s and don’ts, legal considerations, and insights into current market trends, including EBITDA multiples for such transactions.

It is not a stretch to say Medical Professionals (as opposed to Venture Capitalists, Private Equity Partners, or owners of manufacturing or service businesses) do not go to work every-day thinking about a potential exit and what an exit would look like (and if you’re one of their patients, you’re happy that the focus isn’t on maximizing EBITDA) but their practice COO’s, if they have one, likely do focus on EBITDA growth.

Today Medical Professionals generally bifurcate their practices to take advantage of the increasing interest and multiples attached to their practices: “one part providing medical services and the other managing billing and other related services.” Since most if not all states prohibit a non-Medical Professional from owning a medical practice, Medical Professionals create an entity that runs all of the non-core activities (billing, coding, scheduling, and all of the non-health care delivery activities)

through a company that provides business process outsourcing (“BPO”). These BPO’s are a key component of the sales process, as they are the entities that hold the equity value in the sale.

The Medical Professionals then operate their own company and bill the BPO for services rendered.

A key piece in the structure for most medical practices is the services contract with the BPO. The Medical Professionals provide the practice’s medical services (examination and testing, diagnosis, treatment) for either an hourly fee and/or a fixed amount per diem/week/month or year. After the Medical Professional provides the medical services, the BPO bills the patient, insurance company and/ or government, pays all employees, etc. The BPO, for all intents and purposes, operates the business.

As the revenue comes into the BPO, all liabilities are paid and profit (if any) is distributed to the owners (usually the Medical Professionals and other investors).

In seeking to sell a BPO, there are a number of steps to follow. Below we outline the same.

STEP 1: EVALUATE THE PRACTICE’S VALUE:

If a BPO is seeking to sell, it should engage an investment banker and/or business broker to help with the sale.¹ Contemporaneous with engaging professional sell side help, seek to hire a reputable accounting/advisory firm that can provide a full GAAP (generally accepted accounting principles) analysis/quality of earnings report. The foregoing will provide your sell side team with a roadmap on how to increase your profitability and the ultimate value of your BPO. According to Steve

Brady, Partner and Market Leader of Withum’s Transaction Advisory Practice, “a sell-side Quality of Earnings will prepare the practice for sale and provide the investment banker with a solid foundation to build the story for the marketplace, thus increasing Speed to Closing, Certainty at Closing and Valuation.”

Finally, work with the investment banker or consider engaging a professional valuation expert to assess the fair market value of your practice.

Valuation factors include:

• Revenue streams (sports teams, organizations, etc.)

• EBITDA

• Profit margins

• Client/patient retention rates

• Location and equipment condition

• Continuity and retention rate of doctors

• Strength of systems upon which to build a larger practice

• Diversity and quality of medical care and specialties

Organize Financial Records:

• Ensure financial statements (profit and loss, balance sheets) for the past 3–5 years are accurate and up to date.

• Strengthen billing processes and ensure coding, collection rates and denials are accurated tracked.

• Highlight consistent revenue growth and any investments in technology or staff.

Streamline Operations:

• Ensure compliance with all regulatory and licensing requirements.

Legal Review:

• Conduct a thorough legal review to identify potential risks, such as unresolved claims and disputes, outstanding liabilities, or noncompliance issues.

• Confirm ownership of assets, including intellectual property, real estate, and equipment.

STEP 2: MARKETING AND FINDING BUYERS:

• Optimize operational workflows to make the practice more appealing to buyers. Address inefficiencies and reduce unnecessary expenses.

Once you’ve completed the first step and you’ve closed all of the financial, legal and personnel gaps, the next step is working with your advisory team (investment banker, accountant, legal) and putting together your CIM.²

A few points: One, while your CIM is a marketing piece to sell your firm, there should not be any hyperbole, unsubstantiated facts or statements and all information about personnel, etc. should be thoroughly vetted and as accurate as possible.³

Two, if you are rolling over equity make sure your CIM is marketed to a firm that is right sized (i.e., if you started your own practice because you have a hard time operating in a large bureaucracy then instruct your advisory team (i.e., your banker) whom to solicit.⁴ And Three, do not go it alone. Most likely this is your first and biggest transaction, and (even if you’ve done it before) there is no reason to try to navigate the waters without a seasoned advisory team.

Confidentiality:

• Use a non-disclosure agreement, (“NDA”) to protect sensitive information during negotiations.

• Execute an NDA before any information is exchanged.

Targeted Outreach:

• Market your practice to a relevant audience such as:

ƹ Other healthcare professionals

ƹ Private equity firms

ƹ Regional healthcare groups

Leverage a Broker:

• Hire a healthcare investment banker (“Advisor”) to connect with qualified buyers and

• negotiate favorable terms.

• Be honest with your Advisor as to what is most important to you: best price, rollover equity, employees, control of day to day operations, etc.

STEP 3: NEGOTIATION AND DUE DILIGENCE:

As set forth above, preparing to sell before you go to market is an important way to increase your price (in some cases as much as 20%). Surround yourself with the right advisory team that not only understands and specializes in medical transactions but also, and as important, that understands you. Your advisory team needs to understand what you’re looking to accomplish, and what your ultimate goals are, for you and your team, and how it will affect your patients.5

EBITDA Multiples:

• Current EBITDA multiples for healthcare practices vary depending on specialty and market conditions:

ƹ Medical practices: 4x–8x EBITDA

ƹ Med spas: 3x–7x EBITDA

ƹ Physical therapy practices: 3x–6x EBITDA

• Practices with strong recurring revenue and high-growth potential typically command higher multiples.

Key Negotiation Points:

• Sale price and payment terms (e.g., lump sum vs. structured payments/earnouts).

• Equity rollover.

• Transition period agreements, where the seller assists in the practice handover.

• Retention of key employees and staff contracts.

• Non-compete agreements (these agreements and enforceability of the same vary from state to state).

Buyer Due Diligence

:

• Expect buyers to request detailed financial, legal, technology, and operational information.⁶

• Be prepared to address questions about patient demographics, payer mix, and referral sources.

STEP FOUR: LEGAL CONSIDERATIONS

Compliance with Healthcare Regulations:

• Ensure compliance with federal and state laws such as:

ƹ Stark Law: Prohibits physician selfreferrals.

ƹ Anti-Kickback Statute: Prohibits remuneration for referrals.

ƹ HIPAA: Protects patient information during and after the sale.

Licensing and Accreditation:

• Verify that all necessary licenses and accreditations are transferable to the new owner.

Restrictive Covenants:

• Include non-compete clauses in the sales agreement to protect the practice’s goodwill.

• Ensure non-compete terms comply with state laws to avoid legal challenges.

Contract Review:

• Engage legal counsel to draft or review all contracts, including the practice purchase agreement, lease assignments, and employment agreements.

• The foregoing should be followed out and diligenced before the CIM is sent to investors.

WHAT TO DO

Plan Early: Start preparing for the sale at least 1–2 years in advance.

Engage Experts: Work with accounting advisors, investment bankers/brokers, and legal advisors.

Be Transparent: Provide full disclosure to buyers to build trust and avoid post-sale disputes.

Maintain Operations: Continue running the practice efficiently to maintain its value during the sale process.

WHAT NOT TO DO

Rush the Sale: Avoid rushing the process, which can lead to undervaluation or legal oversights.

Overestimate Value: Be realistic about the practice’s worth based on current market conditions.

Ignore Staff Concerns: Address employee questions and concerns to ensure a smooth transition.

Neglect Legal Requirements: Failure to comply with healthcare regulations can derail the sale.

CONCLUSION: Selling a medical practice, med spa, or physical therapy clinic is a complex but rewarding process. By following a structured approach, engaging professional advisors, and understanding legal and financial considerations, sellers can maximize the value of their practice while ensuring a smooth transition for staff and patients.

If engaging a non-licensed broker it should ensure that it is legally allowed to engage in representation https://www.sadis.com/insights/ma-broker-exemption vehicles ² https://mergersandinquisitions.com/confidential-information-memorandum/ ³ If your COO said he went to State College but actually only attended classes for one day, and that COO is a key employee, that could be deemed a material misstatement. ⁴ https://www.sadis.com/insights/equity-rollovers-in-connection-with-the-sale-ofa-business. Keep in mind that any limitation on the sales process will likely limit the universe of buyers which in turn could limit potential bidders.

⁵ The last point is key because if you’re like me your patients (in my case clients) end up being your good friends and you always want to ensure they’re in good hands. ⁶ Before you go out with your CIM to the marketplace, ask your law firm to send you a representative due diligence request list. Review it with your counsel and populate all applicable data/documents in a separate data room; if you are lacking certain documents, ask your counsel to help you prepare the same.

PAUL MARINO Partner

Sadis

&

Goldberg pmarino@sadis.com

Paul Marino is a partner in the Financial Services and Corporate Groups. Paul focuses his practice in matters concerning financial services, corporate law and corporate finance. Paul provides counsel in the areas of private equity funds and mergers and acquisitions for private equity firms and public and private companies and private equity fund and hedge fund formation.

Enhancing Commercial Diligence in M&A:

A Customer-Centric Approach

BY NICOLE LEV ROSS LITERAL NORTH, LLC

Nicole Lev Ross offers an enlightening perspective for buyers seeking to optimize due diligence, particularly commercial diligence, in the critical final stages of an acquisition.

EVOLVING BEYOND THE SUPERFICIAL “CHECK THE BOX”

As part of the acquisition due diligence process, private equity investors historically conducted limited customer diligence compared to the time and dollars spent on the overall process. Much effort focused on customer concentration, year over year sales per key customer, and basic financial metrics. Then a partner may have a conversation with the top two to three biggest customers just before the deal closes. This approach, while still somewhat prevalent, represents a missed opportunity to proactively identify value creation opportunities and get a head start on delivering true value to investors--before the deal even closes.

A NEW APPROACH TO TRANSPARENCY

Today, experienced buyers are taking a different approach and leveraging a third party, not just for market assessment early in the diligence phase, but also for gaining a customer-centric assessment.

Curious investors want to know where the target company stands among its peers and how existing or new leadership can build a path toward customer loyalty that can be embraced by staff and noticed by customers.

In the post-Salesforce.com world of building sustainable, predictable and profitable growth, buyers--both private equity and corporate buyers--are taking a more disciplined approach to identifying and implementing a commercial strategy that is logical, methodical and metric oriented. That commercial strategy can start in the first 100-days post-acquisition.

OVERCOMING BARRIERS TO CUSTOMER ENGAGEMENT

Engaging with customers at a critical point in the transaction can be scary for both sellers and buyers. Sellers may fear negative feedback or fear that a third-party call is an imposition on their customers’ time, while buyers fear alerting the market that a transaction is in play, potentially exposing the target’s vulnerabilities. However,

effective customer outreach, when positioned as a collaborative effort to enhance value, often yields positive results and valuable insight. In fact, customers tend to respond more favorably than expected, providing constructive feedback and ways to improve the relationship to win in the market together.

EARNOUTS AND VALUE CREATION

Recall data from the May Issue of “Earnout”, the more recent 2024 data from SRS Acquiom reveals a notable trend: while the frequency of earnouts in M&A deals has slightly declined by Q3 2024 compared to the peak in 2023, the potential value of these earnouts has risen significantly, from 32% to 43% of the closing payment. This underscores the strong incentive and strategic alignment for both buyers and sellers to prioritize value creation in the initial years post-transaction.

METHODICALLY ASKING THE RIGHT QUESTIONS

A prudent investor who is relentlessly curious, looking to build long-term value and takes an interest in non-financial growth drivers will want to find out (1) where the target stands on price,

performance, quality and innovation, (2) how the target is perceived in the marketplace vs. the competition, (3) what outlook the customer is forecasting among the shared sector and (4) how effectively the target company is delivering its offerings, among other items.

Taking a few points from Jim Collins’ “Good to Great”, it is very realistic to come away from commercial diligence with three big ideas:

• Understanding customer drivers: Identify the core factors driving customer economic engines.

• Target Company Positioning: Assess how customers perceive the target company’s role in their businesses.

• Enhancing Customer Profitability: Develop tangible strategies for the target company to positively impact customer profitability.

CONCLUSION

By prioritizing a customer-centric approach to diligence, new ownership can learn early on how to influence the acquired company through the lens of the customer, thus driving efficiencies, differentiating offerings and creating more profit, ultimately benefiting both the company and its valued customers.

NICOLE LEV ROSS Founder and Managing Director Literal North, LLC nlr@literalnorth.com

Nicole Lev Ross, Founder and Managing Director of Literal North, leads a Chicago-based commercial diligence practice that takes investors on a journey with their most important stakeholder: their customer. Ms. Lev Ross and her team provide private equity and corporates with customer diligence, customer-centric value creation planning, market intelligence, and acquisition target analysis.

STUCK IN THE MIDDLE WITH YOU

HOW NON-CIRCUMVENT AGREEMENTS FOR INDEPENDENT SPONSORS HELP THEM AVOID BECOMING JUST A MIDDLEMAN

DOUGLAS R. HIRSCH, JIM ANCONE AND PAUL MARINO

SADIS & GOLDBERG

“This case presents yet another example of the dangers of being a middleman. Once a middleman has put together two parties who do not need him to do a deal,heisvulnerableifthosetwopartieschoosetodealwitheachother,without payingcompensationtohim.”ViceChancellorStrineinCuraFin.ServicesN.V.v. ElectronicPaymentExchange,Inc.,2001WL1334188,*1(Del.Ch.2001).

Non-circumvent agreements (“NCAs”) are essential tools for independent sponsors to safeguard their interests in complex commercial transactions. These agreements ensure that the independent sponsor maintains leverage during negotiations and is protected against being unfairly excluded from deals. Without

a properly drafted NCA, equity investors may try and bypass the independent sponsor, diminishing their bargaining power or eliminating their role entirely. This article explores the critical aspects of NCAs, emphasizing their enforceability, provisions for damages, attorney fees, and the importance of venue and governing law provisions.

THE IMPORTANCE OF NONCIRCUMVENT AGREEMENTS

Independent sponsors play a pivotal role in identifying and structuring investment opportunities. They bridge the gap between equity investors and investment opportunities, contributing significant expertise and effort to deals. However, the absence of an enforceable NCA leaves the independent sponsor vulnerable to circumvention by equity investors who might exploit the independent sponsor’s efforts without fair compensation.

To that point, often the act of “circumventing” is not nefarious but more akin to a “pot/poker-bully” in a game of Texas Hold’em. The investor with a large sum of money may just negate the fact that you’ve spent hundreds of hours cultivating the target, getting it amenable to a sale, and developed a plan and strategy to actually buy, build and exit the business. In short, you’re more than a middleman or finder but in fact a sponsor.

Accordingly, a well-drafted NCA provides an independent sponsor with:

Negotiating Leverage: NCAs create a framework that discourages equity investors from bypassing the independent sponsor. With a clear agreement in place, investors are more likely to negotiate fairly, knowing that legal consequences could follow any attempt to circumvent the independent sponsor.

sponsor’s contributions might go uncompensated, leaving them with limited options to recover their share of the deal’s value.

DRAFTING NONCIRCUMVENT AGREEMENTS PROPERLY

For an NCA to be enforceable, it must be specific and well-defined. Courts often scrutinize these agreements, and poorly drafted clauses can render them unenforceable. One notable case is Glob.

Energy Consultants, LLC v. Holtec Int’l, Inc., 479 F. App’x 432, 2012 WL 1528904 (3d Cir. 2012). In this case, the court refused to enforce the NCA due to a lack of definiteness in its terms.

THE NEED FOR A LIQUIDATED DAMAGES PROVISION

An effective NCA should include a liquidated damages clause to address potential breaches. Liquidated damages provide a pre-determined amount that the breaching party must pay, simplifying the process of seeking compensation. Without this provision, proving damages can be challenging, as courts may deem them speculative.

clauses include:

Reasonableness: The amount must not be punitive but should reasonably estimate the harm caused by a breach. Notably, the court in Schwartz held that the liquidated damages provision was not plainly disproportionate even though it entitled the plaintiff to more than double the fee that the plaintiff would have received had the defendant not breached (i.e., 7% of the amount of any investment).

Legal Protection: In the event of a breach, an NCA provides an independent sponsor with a basis for legal recourse. Without this, the independent

To avoid similar outcomes, NCAs should:

Clearly Define Prohibited Activities: Specify the actions that constitute circumvention. For instance, prohibit investors from directly approaching or transacting with parties introduced by the independent sponsor without the independent sponsor’s consent.

Limit Scope and Duration: Overly broad agreements are more likely to be struck down. Define reasonable geographic, temporal, and activity-specific limitations to ensure enforceability.

Include Comprehensive Terms: Cover scenarios such as indirect circumvention, ensuring the agreement accounts for creative methods equity investors might use to bypass the independent sponsor.

The case of Cura Fin. Services N.V. v. Electronic Payment Exchange, Inc., 2001 WL 1334188 (Del. Ch. 2001), highlights the risks of omitting liquidated damages provisions. In this case, the court rejected the plaintiff’s damages theory and adopted the defendants’ damages theory because of the lack of reliable information to support the plaintiff’s damages theory. By specifying liquidated damages in advance, an independent sponsor can avoid this pitfall and reduce the burden of proving harm.

The importance of including a liquidated damages provision is also illustrated by Schwartz v. Sensei, LLC, 2022 WL 576301 (S.D.N.Y. Feb. 25, 2022). In that case, the defendant breached a non-circumvent provision by failing to pay the plaintiff whose introduction resulted in a successful investment in the defendant. Fortunately for the plaintiff, the contract included a liquidated damages clause. That clause entitled the plaintiff to 15% of the total value of the transaction that breached the non-circumvent provision. The court enforced that liquidated damages provision and awarded the plaintiff money damages in that amount.

Key considerations for drafting liquidated damages

Clarity: The clause should be clear and specific to avoid disputes over interpretation.

Alignment with Jurisdictional Standards: Ensure compliance with the legal requirements of the chosen jurisdiction to enhance enforceability.

PROVISIONS FOR ATTORNEY FEES

Litigation can be costly, and without a provision for attorney fees, the expense of enforcing an NCA might outweigh the potential recovery. Including a clause that allows the prevailing party to recover reasonable attorney fees ensures that the independent sponsor can pursue legal action without fear of financial ruin.

Without such a provision, even a successful lawsuit might become a Pyrrhic victory. The independent sponsor could win the case but lose in economic terms because the attorney fees exceeded the damages award. To mitigate this risk:

1. the circumstances under which attorney fees are recoverable.

Convenience: Ensure the chosen venue is practical for all parties involved.

Ensure Fairness: Avoid overly one-sided provisions that might discourage a court from enforcing the clause.

VENUE AND GOVERNING LAW

Selecting the appropriate venue and governing law is another critical aspect of drafting NCAs. Delaware and New York are preferred jurisdictions for many commercial transactions due to their sophisticated court systems and experienced judges. Both states have well-established legal frameworks for handling complex business disputes.

Delaware: Known for its Court of Chancery, which specializes in corporate and commercial law, Delaware offers predictability and expertise in resolving disputes related to NCAs.

New York: As a global financial hub, New York’s Commercial Division courts are adept at addressing intricate commercial agreements. The judges in New York’s Commercial Division have extensive experience in interpreting NCAs, providing additional certainty to parties.

When choosing a venue and governing law, consider:

Jurisdictional Expertise: Opt for jurisdictions with a strong track record in enforcing similar agreements. For example, the court in Schwartz applied well-settled rules of New York law to enforce a liquidated damages provision against a party that breached a non-circumvent provision.

Enforceability: Verify that the jurisdiction’s laws support the specific provisions of the NCA.

CONCLUSION

Non-circumvent agreements are indispensable for independent sponsors seeking to protect their interests and contributions in commercial transactions. However, their enforceability and effectiveness hinges on careful drafting and the inclusion of critical provisions that address liquidated damages, attorney fees, venue, and governing law. By addressing these elements, an independent sponsor can create robust agreements that deter circumvention, provide legal recourse in case of breaches, and ensure fair compensation for their efforts.

Independent sponsors must collaborate with experienced legal counsel to draft NCAs tailored to their specific needs and circumstances. With a well-crafted agreement, they can navigate the complexities of commercial transactions with confidence, secure in the knowledge that their interests are safeguarded.

DOUGLAS R. HIRSCH

Partner

Sadis & Goldberg dhirsch@sadis.com

Douglas Hirsch is a founding member and co-head of Sadis & Goldberg’s litigation department and has over 30 years of trial and appellate experience. Doug has successfully represented clients in complex securities and business litigation, including class action and derivative cases. Doug advises, litigates and arbitrates primarily for clients in the financial services and real estate industries, and therefore, has extensive experience in the areas of hedge fund, venture capital fund and private equity fund litigation, investment and securities fraud, business and partnership disputes, business divorce and dissolution, corporate governance, cross border insolvency litigation, fraudulent transfer and claw back claims, and real estate litigation.

JIM ANCONE Partner Sadis & Goldberg jancone@sadis.com

James Ancone is a partner in the Securities Litigation department of Sadis & Goldberg LLP. His practice focuses on complex commercial litigation before state and federal trial and appellate courts. Jim has significant experience representing domestic and foreign financial firms and directors and officers in shareholder disputes, securities fraud, common law fraud, and breach of contract actions, including actions relating to residential mortgagebacked securities (RMBS), collateral debt obligations (CDOs) and other complex financial products.Jim also has experience representing clients in partnership disputes involving real estate.

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titled: GP-Led Secondaries, Sizing the market for exits to continuation vehicles

PAUL MARINO Partner

Sadis & Goldberg pmarino@sadis.com

Paul Marino is a partner in the Financial Services and Corporate Groups. Paul focuses his practice in matters concerning financial services, corporate law and corporate finance. Paul provides counsel in the areas of private equity funds and mergers and acquisitions for private equity firms and public and private companies and private equity fund and hedge fund formation.

Leveraging Networking for Long-Term Success

BY ROGER KOWALSKI

IGLOBAL FORUM

M&A dealmaking is a high stakes world. Whether you are in private equity or legal advisory, relationships are everything. A well-nurtured network can open doors to capital, deals, partnerships, and industry insights— but leveraging those connections for long-term success requires more than just a handshake and an exchange of business cards.

A study by LinkedIn1 found that 80% of professionals believe strong relationships are critical for career success. Yet, only 49% of professionals actively work to maintain their networks over time. Furthermore, about 38% of professionals said it’s “...hard to stay in touch” with their network. In industries as relationship-driven as private equity and M&A, this gap represents a significant missed opportunity. The challenge isn’t just building a network but turning it into a dynamic, long-term asset.

NETWORKING AS A CONTINUOUS PROCESS

Building and maintaining relationships is an ongoing commitment. The connections you make at conferences, industry summits, and client

meetings require consistent attention. Networking isn’t an isolated event; it’s a cycle of cultivating, nurturing, and leveraging relationships.

One effective approach is to schedule regular checkins with key contacts. This could be as simple as a LinkedIn message or an in-person meeting. Just be human about it. Personalization is key: reference specific details from past conversations, such as a deal they’re working on or industry trends they mentioned. These touches show genuine interest and foster trust.

Digital tools can streamline this process. CRM platforms like Hubspot or Salesforce allow you to log interactions and set reminders. LinkedIn also offers a natural way to maintain visibility, whether through commenting on posts or sharing relevant insights. Something out of my bag of tricks is to set a Google Alert for keywords including: “Firm Name” AND “Contact Name”. This way, any time this person from this firm does something notable and it becomes recognized in a press release; Google notifies me by e-mail and I immediately know about it and am prompted to connect in a human way.

CREATING VALUE IN YOUR NETWORK

Successful networking isn’t just about what you gain; it’s about what you offer. Relationships thrive when both parties benefit. In the M&A and private equity worlds, this often means facilitating introductions, sharing market info, or providing strategic advice.

You’re not too busy, nor too important, to be a connector. If you know two people who could benefit from each other’s expertise, facilitate an introduction. Similarly, sharing valuable insights— such as industry reports or regulatory updates— will position you as a resource. Hosting small gatherings or roundtables can also amplify your influence, bringing people together under your leadership. Make it fun, though. Call the regional sales head of your favorite high-end Tequila brand and ask if they can set up a tasting in your office while you invite ten people that you met at the industry conference last month. You’d be surprised at how eager they would be to send a sales rep with bottles and glasses to your networking event.

Professionals prefer collaborating with individuals who have provided them with value in the past.

YOUR PERSONAL BRAND

Your personal brand helps to amplify your networking efforts. In an industry where trust and reputation are paramount, being recognized as a thought leader will significantly enhance your credibility.

To strengthen your brand, consider public speaking engagements at conferences, such as the Independent Sponsor Summit. Publishing articles or white papers on industry topics and emerging trends also helps to establish you as an authority. Even consistent activity on LinkedIn—sharing insights or engaging with others’ posts—reinforces your expertise.

Branding is not just about visibility; it’s about consistency. Ensure that your messaging aligns across platforms, from your LinkedIn profile to your interactions at events. A strong, cohesive brand makes you memorable and positions you as a valuable connection, but keep up the cadence. Sponsor an event where your clients are going to be congregated at one place and time. The investment will save you multiples in time and resources down the road.

THE LONG GAME OF NETWORKING

Building a meaningful network takes time and patience. The most valuable relationships often develop over years, particularly in industries like M&A and private equity, where trust is everything. This is especially true in the lower-middle market where independent sponsor deals take place.

Staying present during both the peaks and valleys of a contact’s career is crucial. For instance, celebrating milestones such as a successful deal closure fosters goodwill, while offering support during downturns demonstrates loyalty. Maintaining detailed records of your interactions, including key milestones and interests, ensures that your follow-ups are

personalized and effective.

A McKinsey study2 found that a majority of deals in private equity originate from existing relationships during fundraising downturns. This underscores the importance of investing in quality over quantity. A well-maintained network of high-value connections can yield far greater returns than a sprawling, superficial one.

Networking is an evolving art. By treating it as a continuous process, focusing on mutual value, and investing in your personal brand, you can transform your network into a long-term asset Success lies not in how many people you know but in the strength and depth of those relationships.

Dale Carnegie said, “You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.” Embrace this

philosophy, and your network will not only grow but thrive.

About iGlobal Forum: Since 2013, iGlobal Forum has been at the forefront of fostering connections in the independent sponsor, private equity, and M&A communities. Our exclusive senior-level forums bring together leading practitioners for actionable insights, deal-making, and strategic networking. To learn more about our events, visit www.iglobalforum.com.

FOR 10% OFF OF YOUR REGISTRATION FOR THE INDEPENDENT SPONSORS SUMMIT, PLEASE USE CODE: ISS18EARN10 http://www.independentsponsorsummit.com/

1 https://news.linkedin.com/2017/6/eighty-percent-ofprofessionals-consider-networking-important-to-careersuccess

2 https://www.mckinsey.com/~/media/mckinsey/industries/ private equity and principal investors/our insights/mckinseys private markets annual review/2024/mckinsey-global-privatemarkets-review-2024.pdf

ROGER KOWALSKI

DIRECTOR

IGLOBAL FORUM roger@iglobalforum.com

iGlobal Forum

We are a global events and media organization connecting senior business executives and decision-makers for over 15 years. Our goal is simple: to help you tackle challenges by providing valuable connections.

THE ROAD TO EXIT