Latest / Best of LinkedIn: Strategy, M&A & Investments / Best of LinkedIn: Private Equity Insights CW 04/ 05

Transcript

Best of LinkedIn: Private Equity Insights CW 04/ 05 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 0: Provided by Thomas Hall-Geyer and Frenes.
• 0:02
  Speaker 0: Based on the most relevant LinkedIn posts about private equity in CWO four and O five.
• 0:08
  Speaker 0: Frenes specializes in B to B market research for private equity teams to drive portfolio performance and value creation.
• 0:15
  Speaker 0: This edition is brought to you by our partner Informa.
• 0:18
  Speaker 0: Don't miss out on their upcoming conference, Super Return Secondaries Europe.
• 0:21
  Speaker 0: Find the link of the conference in the description.
• 0:24
  Speaker 1: Welcome back.
• 0:25
  Speaker 1: We have got, well, a massive stack of updates for calendar weeks four and five of twenty-twenty-six.
• 0:31
  Speaker 1: And I have to say that whole survive till twenty-five mantra we saw everywhere last year, it already feels completely obsolete.
• 0:38
  Speaker 0: It really does.
• 0:38
  Speaker 0: That slogan, it always implied we just had to hold our breath, wait for rates to drop, and then, you know, the party would restart.
• 0:44
  Speaker 0: Exactly.
• 0:45
  Speaker 1: Like it was twenty-twenty-one all over again.
• 0:47
  Speaker 0: But the sources we're digging into today, they suggest that's not happening.
• 0:51
  Speaker 0: We're not just going back to business as usual.
• 0:53
  Speaker 0: This feels more like a structural reset.
• 0:56
  Speaker 0: The era of, let's say, cheap money and financial engineering is in the rearview mirror.
• 1:00
  Speaker 0: And the new road, well, it seems to be paved with operational grit, a really brutal war for talent, and a credit landscape that looks nothing like it did five years ago.
• 1:10
  Speaker 0: That
• 1:11
  Speaker 1: is the perfect way to frame it.
• 1:12
  Speaker 1: So our mission today is to really unpack what this market reset twenty twenty six actually looks like on the ground.
• 1:20
  Speaker 1: Right.
• 1:21
  Speaker 1: We're not just going to look at the headlines.
• 1:22
  Speaker 1: We need to get into the granular details, the value creation playbooks that are actually working right now.
• 1:28
  Speaker 0: Because if you're still running the old playbook in twenty twenty six, you're
• 1:32
  Speaker 1: going to get run over.
• 1:33
  Speaker 1: Simple as that.
• 1:34
  Speaker 0: OK, so let's start at the top.
• 1:35
  Speaker 0: The macro outlook.
• 1:36
  Speaker 0: There's this palpable sense in the post from these weeks that we've hit an inflection point.
• 1:41
  Speaker 0: What are the hard numbers telling us?
• 1:42
  Speaker 1: Well, the headline number comes from Gavin G. Minder at KPMG, and it's a big one.
• 1:47
  Speaker 1: Global PE investment hit two point one trillion dollars in twenty twenty five.
• 1:51
  Speaker 0: Two point one trillion.
• 1:52
  Speaker 0: That's a four year high.
• 1:53
  Speaker 1: It is.
• 1:54
  Speaker 1: But here's the nuance, the part you have to catch.
• 1:56
  Speaker 1: Deal volume.
• 1:57
  Speaker 1: So the actual count of transactions that went down.
• 2:00
  Speaker 0: Wait, that's counterintuitive.
• 2:02
  Speaker 0: So more money's moving around.
• 2:04
  Speaker 0: but for fewer deals.
• 2:05
  Speaker 1: Exactly.
• 2:06
  Speaker 1: It's a classic flight to quality.
• 2:08
  Speaker 1: Investors are writing much, much bigger checks, but only for the absolute best assets.
• 2:13
  Speaker 0: So all that mid-market chop.
• 2:15
  Speaker 0: the sort of mediocre deals that got funded easily a few years back.
• 2:19
  Speaker 0: That's
• 2:19
  Speaker 1: just not happening.
• 2:20
  Speaker 1: We're seeing this consolidation into fewer, larger transactions.
• 2:24
  Speaker 0: And that lines up perfectly with what Eddie Donvez was pointing out about Blackstone.
• 2:28
  Speaker 0: He mentioned they're lining up one of the largest IPO pipelines in their entire history.
• 2:32
  Speaker 1: Right.
• 2:33
  Speaker 1: And their president, John Gray, he used a phrase that really stuck with me.
• 2:36
  Speaker 1: He said, the deal environment has hit escape velocity.
• 2:40
  Speaker 0: Skate velocity.
• 2:41
  Speaker 0: I like that.
• 2:42
  Speaker 0: It implies we were stuck in that gravity well of high rates and low liquidity, and now we finally broken free.
• 2:48
  Speaker 1: It's a very, very bullish signal.
• 2:51
  Speaker 1: And Donmez points to the Medline IPO as the proof of concept.
• 2:54
  Speaker 1: It was
• 2:54
  Speaker 0: a huge exit.
• 2:55
  Speaker 1: A massive exit.
• 2:56
  Speaker 1: And it signals to the rest of the market that the IPO window isn't just, you know, open a crack.
• 3:01
  Speaker 1: It's wide open for the right companies.
• 3:03
  Speaker 0: But I want to push on that escape velocity idea a little.
• 3:06
  Speaker 0: Because it's not just about selling companies, right?
• 3:09
  Speaker 0: It's about where the buying power is coming from.
• 3:12
  Speaker 0: Mitch Berlin flagged a regulatory change that I think is still under discussed.
• 3:17
  Speaker 0: The executive order allowing private equity in for one case.
• 3:21
  Speaker 1: This is a huge structural shift.
• 3:23
  Speaker 1: Berlin estimates this could unlock after six hundred billion dollars.
• 3:27
  Speaker 0: Six hundred billion.
• 3:28
  Speaker 0: That is just a massive injection of retail capital into what has always been a purely institutional game.
• 3:35
  Speaker 1: It changes the entire liquidity profile, but, you know, it also changes the responsibility.
• 3:39
  Speaker 1: Managing pension money for Main Street is very different from managing it for a sovereign wealth fund.
• 3:44
  Speaker 1: Sure.
• 3:45
  Speaker 0: And speaking of massive numbers, Scott Voss is predicting we're going to see the rise of the five T club.
• 3:50
  Speaker 1: Five trillion dollar asset managers.
• 3:52
  Speaker 0: I mean, five trillion is basically the GDP of Japan.
• 3:54
  Speaker 0: That is an absurd amount of concentration.
• 3:56
  Speaker 0: It
• 3:57
  Speaker 1: is.
• 3:57
  Speaker 1: And Voss points out.
• 3:58
  Speaker 1: that to get there, these firms are relying heavily on NAV lending.
• 4:01
  Speaker 0: We should probably define that quickly.
• 4:03
  Speaker 0: for anyone not deep in the finance weeds.
• 4:05
  Speaker 0: NAV is net asset value lending.
• 4:07
  Speaker 0: Think
• 4:08
  Speaker 1: of it like taking a second mortgage out on your house to pay for renovations instead of selling the house.
• 4:14
  Speaker 1: In PE, the fund takes a loan against its whole portfolio of companies.
• 4:19
  Speaker 0: To do what?
• 4:19
  Speaker 0: Pay a dividend?
• 4:20
  Speaker 0: Buy more time.
• 4:21
  Speaker 1: both to generate liquidity.
• 4:23
  Speaker 1: Voss calls it private equity gold for twenty twenty six.
• 4:27
  Speaker 0: But is that safe?
• 4:28
  Speaker 0: I mean, it sounds a lot like leverage on top of leverage.
• 4:31
  Speaker 1: And that is the risk.
• 4:32
  Speaker 1: But, you know, looking at the synthesis of all these sources, there is a lot of caution baked in.
• 4:38
  Speaker 1: Ben Snyder projects, what, a twelve percent return for the S&P five hundred,
• 4:42
  Speaker 0: which is healthy.
• 4:43
  Speaker 1: It's healthy.
• 4:43
  Speaker 1: But he specifically notes that speculative trading is way below past peaks.
• 4:48
  Speaker 0: So it's a rally, but it's not a bubble.
• 4:50
  Speaker 0: People aren't buying mean stocks.
• 4:51
  Speaker 0: They're buying actual earnings.
• 4:53
  Speaker 1: That's the hope.
• 4:53
  Speaker 1: And Dr.
• 4:54
  Speaker 1: Andreas Voff put it really well.
• 4:55
  Speaker 1: He argues this reset is really about mature.
• 4:58
  Speaker 1: The market's shifting away from fireworks, you know, aggressive structuring, quick flips.
• 5:03
  Speaker 1: Oh, the
• 5:04
  Speaker 0: financial engineering.
• 5:05
  Speaker 1: Right.
• 5:05
  Speaker 1: And it's moving toward robust governance.
• 5:07
  Speaker 1: It's less flashy, maybe, but it's way more sustainable.
• 5:10
  Speaker 0: Which is the perfect transition to our second theme.
• 5:13
  Speaker 0: Because if the fireworks of financial engineering are gone, if you can't just slap debt on a company and hope for the best.
• 5:20
  Speaker 1: You actually have to fix the business.
• 5:21
  Speaker 0: Exactly.
• 5:22
  Speaker 0: Operational excellence is suddenly the only game in town.
• 5:25
  Speaker 1: And the math completely confirms that.
• 5:27
  Speaker 1: Martin Hecker shared a statistic that really grounds this whole discussion.
• 5:31
  Speaker 1: Since two thousand ten, forty-seven percent of PE value creation has come from operational improvement.
• 5:37
  Speaker 0: Forty-seven percent?
• 5:38
  Speaker 0: That
• 5:39
  Speaker 1: is way up from previous decades.
• 5:41
  Speaker 1: And meanwhile, the leverage component, the old debt arbitrage play, has dropped to just twenty-five percent.
• 5:47
  Speaker 1: That's
• 5:47
  Speaker 0: a complete flip of the traditional PE model.
• 5:50
  Speaker 0: Used to be buy, lever, sell.
• 5:52
  Speaker 0: Now it's buy, fix, build, then sell.
• 5:54
  Speaker 1: Precisely.
• 5:55
  Speaker 1: And Sam Silverman gave this fascinating breakdown of what that looks like in practice.
• 5:59
  Speaker 1: He calls it manufactured value.
• 6:01
  Speaker 1: And he uses the Blackstone Hilton Playbook as the gold standard.
• 6:05
  Speaker 0: A Hilton deal is legendary, of course.
• 6:07
  Speaker 0: But Silverman's whole point was that you don't need to be Hilton to do this.
• 6:11
  Speaker 1: No, not at all.
• 6:12
  Speaker 1: You can run that exact same play on a paving company.
• 6:16
  Speaker 1: or an accounting firm.
• 6:17
  Speaker 1: You buy a small, inefficient business.
• 6:19
  Speaker 1: You put in a professional ERP system.
• 6:22
  Speaker 1: You centralize procurement.
• 6:24
  Speaker 0: So you're buying Asphalt or software at a twenty percent discount because of scale.
• 6:28
  Speaker 1: You professionalize the sales team and suddenly that little paving company isn't trading at four times EBITDA anymore.
• 6:35
  Speaker 1: It's part of a platform that's trading at ten times.
• 6:38
  Speaker 0: That's the manufactured value.
• 6:40
  Speaker 0: It's the arbitrage between the bi-multiple and the cell-multiple created purely through operations.
• 6:45
  Speaker 1: And this is a big.
• 6:46
  Speaker 1: but just saying you're going to do it doesn't mean it happens.
• 6:49
  Speaker 0: Right.
• 6:49
  Speaker 0: Everyone says they add value.
• 6:51
  Speaker 0: Lee McCabe had this.
• 6:53
  Speaker 0: this stinging quote on this.
• 6:54
  Speaker 0: He said, a lot of firms are buying the job title and forgetting the operating system.
• 6:59
  Speaker 1: I loved that post.
• 7:00
  Speaker 1: He's saying firms hire a head of value creation, pay them a nice salary and just think the job is done.
• 7:05
  Speaker 0: And it's not
• 7:06
  Speaker 1: not even close.
• 7:07
  Speaker 1: If that person doesn't have a system, a weekly rhythm, a scorecard, actual authority, McCabe says it's just polite head nodding in board meetings,
• 7:16
  Speaker 0: polite head nodding.
• 7:17
  Speaker 0: I think we've all sat in those meetings.
• 7:18
  Speaker 0: How do you avoid that?
• 7:20
  Speaker 0: Ahmad Shahini offered a philosophy I really liked.
• 7:23
  Speaker 0: Nose in, hands off.
• 7:25
  Speaker 1: This is a great mental model for investors.
• 7:27
  Speaker 1: Nose in means you have to know the top three bottlenecks in the business.
• 7:31
  Speaker 1: You can't be ignorant.
• 7:33
  Speaker 0: So if the supply chain is breaking, you need to know.
• 7:35
  Speaker 1: But hands off means you let the CEO drive the bus, you clear the wreckage, you provide lease sources, but you do not grab the steering wheel.
• 7:43
  Speaker 0: But then there's a debate in the sources about Who helps the CEO?
• 7:47
  Speaker 0: Is it generalists or specialists?
• 7:49
  Speaker 1: Richard Majewick argues it really depends on your portfolio.
• 7:52
  Speaker 1: If it's homogeneous, say you own ten software companies, you need specialists.
• 7:57
  Speaker 0: You need a pricing guru or a soft sales expert because the problems are basically identical across all ten.
• 8:03
  Speaker 1: But if your portfolio is heterogeneous, a mix of retail, manufacturing, tech specialists just won't work.
• 8:10
  Speaker 0: So in that case, what do you need?
• 8:11
  Speaker 1: In that case, Madrick says you need generalists, people who can drop in, diagnose that the inventory management is broken, and then go hire the right consultant to fix it.
• 8:20
  Speaker 0: And Romain Begramian threw a bit of a curveball into this whole debate.
• 8:25
  Speaker 0: He pointed out that sometimes outsiders, like consultants, are actually better than industry veterans.
• 8:30
  Speaker 1: It's the curiosity versus experience argument.
• 8:34
  Speaker 1: An industry veteran might look at a problem and say, well, this is how we've always done it in the chemical industry.
• 8:38
  Speaker 0: Whereas an outsider just looks at the data and asks,
• 8:41
  Speaker 1: Why?
• 8:41
  Speaker 1: Exactly.
• 8:42
  Speaker 1: Bagramian argues that humility often outperforms experience when you're trying to actually transform a business.
• 8:49
  Speaker 0: But whether you use a generalist, a specialist, or a consultant, you still need someone at the company to execute.
• 8:56
  Speaker 0: Which brings us to what I think is maybe the most alarming theme of the week.
• 9:01
  Speaker 0: The war for talent.
• 9:02
  Speaker 1: It sounds dramatic, but the data is just brutal.
• 9:05
  Speaker 1: Maxwell Salazar reads a massive red flag.
• 9:08
  Speaker 1: He's seeing experienced CXOs, the people who've successfully run PE-backed companies before.
• 9:14
  Speaker 1: They're opting out of the market.
• 9:15
  Speaker 1: They're quitting the game.
• 9:16
  Speaker 0: They're just declining the rolls.
• 9:18
  Speaker 0: What?
• 9:18
  Speaker 1: Think about it.
• 9:19
  Speaker 1: Hold periods are getting longer, sometimes seven years.
• 9:22
  Speaker 1: The pressure is immense.
• 9:24
  Speaker 1: Salazar says these operators are looking at the deal and just saying, the PE juice isn't worth the squeeze.
• 9:29
  Speaker 0: Wow, that is a serious problem.
• 9:32
  Speaker 0: The whole PE model relies on taking A players and putting them into these companies.
• 9:37
  Speaker 0: If the A players go on strike... the model breaks.
• 9:39
  Speaker 1: And it gets worse.
• 9:41
  Speaker 1: Jack Seierd provided a really grim stat.
• 9:44
  Speaker 1: Over seventy percent of CEOs in PE-backed businesses are replaced during the whole period.
• 9:49
  Speaker 0: Seventy percent.
• 9:50
  Speaker 0: That means if you take a CEO job in private equity, you are statistically more likely to be fired than to see it through to the exit.
• 9:57
  Speaker 1: Yes.
• 9:57
  Speaker 1: And Seierd's point is that it's usually not a sudden explosion.
• 10:00
  Speaker 1: It's a slow drift.
• 10:01
  Speaker 1: The board has one expectation, the CEO has another, and they just drift apart until the bond breaks.
• 10:06
  Speaker 1: It's a failure of alignment.
• 10:07
  Speaker 0: So, if I'm listening to this and I'm an executive, maybe a CFO, how do I survive that seventy percent churn rate?
• 10:14
  Speaker 0: Yeah.
• 10:14
  Speaker 0: Catherine Wilcox listed the competencies for a PECFO and it's a terrifyingly high bar.
• 10:20
  Speaker 1: It really is.
• 10:21
  Speaker 1: She says you have to speak ____.
• 10:25
  Speaker 1: It's not enough to just be a good accountant anymore.
• 10:27
  Speaker 1: You have to handle supply chain conversations, manage investor dynamics,
• 10:32
  Speaker 0: be the co-pilot to the CEO.
• 10:33
  Speaker 1: Essentially.
• 10:34
  Speaker 1: And Scott Engler took it even a step further.
• 10:36
  Speaker 1: He says the CFO has moved to enterprise leadership, because if the CEO is getting fired, seventy percent of the time.
• 10:44
  Speaker 0: The CFO is often the stabilizer, the one holding the ship together during that transition.
• 10:49
  Speaker 1: which puts incredible pressure on that role.
• 10:51
  Speaker 1: And Paul Press notes that a lot of this pain could just be avoided if the alignment started earlier.
• 10:57
  Speaker 1: He points out that the hundred-day plan...
• 10:59
  Speaker 0: Critical first three months.
• 11:00
  Speaker 0: Right.
• 11:01
  Speaker 1: It so often fails because the operations team wasn't even in the room during due diligence.
• 11:05
  Speaker 0: So they inherit the deal after the check has already been written.
• 11:08
  Speaker 1: Exactly.
• 11:09
  Speaker 1: The deal team writes this thesis, will grow twenty percent by expanding into Asia.
• 11:15
  Speaker 1: Then the ops team comes in on day one and realizes, Ah, we don't have a product that works in Asia.
• 11:20
  Speaker 0: So they have to pressure test the thesis before the deal closes.
• 11:23
  Speaker 1: Or you spend the first six months just figuring out the plan is impossible.
• 11:27
  Speaker 0: Okay, let's shift gears from the people to the plumbing.
• 11:30
  Speaker 0: We talked about capital, but the structure of that capital is changing so fast, private credit is absolutely eating
• 11:38
  Speaker 1: the world.
• 11:39
  Speaker 1: It's the story of the decade.
• 11:41
  Speaker 1: Nicola Evmeyer points out that for giants like Apollo and Blackstone, their credit business has actually surpassed their equity business in scale.
• 11:50
  Speaker 0: Wait, hold on.
• 11:50
  Speaker 0: So the private equity giants are actually now private credit giants.
• 11:55
  Speaker 1: In terms of assets under management, yes.
• 11:57
  Speaker 1: Evmeyer lists the reasons.
• 11:59
  Speaker 1: Speed, regulatory arbitrage.
• 12:01
  Speaker 1: Banks have pulled back because of capital requirements.
• 12:04
  Speaker 1: Private credit funds just don't have those same restrictions.
• 12:06
  Speaker 0: They stepped into the vacuum.
• 12:07
  Speaker 1: And firms like Apollo are using insurance balance sheets and newity money to fund it all.
• 12:12
  Speaker 1: It's a permanent capital base.
• 12:14
  Speaker 0: And Andrea Cranelli-Dompey notes there's an evolution there too.
• 12:17
  Speaker 0: Private credit used to be so simple you lend money you get paid back.
• 12:21
  Speaker 1: And now it's getting complex.
• 12:22
  Speaker 1: He highlights the rise of continuation vehicles or CDs in the credit space.
• 12:27
  Speaker 0: We should probably unpack that term continuation vehicle.
• 12:30
  Speaker 1: Sure.
• 12:31
  Speaker 1: Traditionally, a fund has a lifespan say... Ten years.
• 12:35
  Speaker 1: At the end, you have to sell everything.
• 12:37
  Speaker 1: But what if you have a great loan or a great asset that just needs more time?
• 12:41
  Speaker 0: You don't want to sell it.
• 12:42
  Speaker 0: So
• 12:42
  Speaker 1: you create a new fund, a continuation vehicle, and you sell the asset from your old fund to your new fund.
• 12:49
  Speaker 0: So you're basically buying it from yourself to reset the clock.
• 12:52
  Speaker 1: Essentially, it lets you hold assets longer.
• 12:55
  Speaker 1: And Dompe's point is that credit funds are now using these actively.
• 12:58
  Speaker 1: It means credit is becoming much more like private equity, active management, long hold periods.
• 13:04
  Speaker 0: Which brings us right to liquidity.
• 13:07
  Speaker 0: If everyone is holding assets for ten years or moving them into CVs, how do the original investors get their cash out?
• 13:13
  Speaker 0: Okay, Chaohan calls secondaries a structural
• 13:16
  Speaker 1: reset.
• 13:17
  Speaker 1: Yeah, secondaries are the solution to that liquidity trap.
• 13:20
  Speaker 1: The secondary market is where you buy and sell existing interests in private equity funds.
• 13:24
  Speaker 1: Chaohan says this isn't just a trend, it's a permanent part of the ecosystem now.
• 13:28
  Speaker 0: Because the limited partners, the pension funds, they can't wait ten years for their money back.
• 13:33
  Speaker 0: They
• 13:33
  Speaker 1: need a release valve.
• 13:34
  Speaker 1: This is it.
• 13:35
  Speaker 0: But Jack Huckstable throws a bit of cold water on this whole liquidity party.
• 13:39
  Speaker 0: We hear a lot about democratization, you know, getting retail investors into these funds.
• 13:44
  Speaker 0: But Huckstable notes that over seventy percent of games in Evergreenfront since twenty twenty one remain unrealized.
• 13:51
  Speaker 1: That's the paper gains problem.
• 13:52
  Speaker 1: It's easy to say my portfolio is up twenty percent, but that value is based on a spreadsheet model, not a sale and
• 13:59
  Speaker 0: realizing those games, turning that paper wealth into actual cash in the bank.
• 14:05
  Speaker 0: That's the hard part.
• 14:06
  Speaker 0: And that's really the tension in twenty twenty six.
• 14:08
  Speaker 0: Can these funds actually distribute the cash?
• 14:11
  Speaker 1: It's a big question.
• 14:12
  Speaker 0: OK, let's close out with where all this capital is actually going.
• 14:15
  Speaker 0: We saw some fascinating sector spotlights this week.
• 14:18
  Speaker 0: Specifically, this collision of private equity, legal and AI.
• 14:22
  Speaker 1: This was one of the most interesting developments for me.
• 14:25
  Speaker 1: Ryan McKean flagged a major shift.
• 14:27
  Speaker 1: Private equity bought a large personal injury law firm.
• 14:29
  Speaker 0: A personal injury firm?
• 14:31
  Speaker 0: That seems messy.
• 14:32
  Speaker 1: It is, but McKean says they're running the exact same playbook they used on dentists and veterinarians.
• 14:38
  Speaker 1: Roll them up, standardize the back office, squeeze out every bit of efficiency.
• 14:43
  Speaker 1: He thinks the legal profession is at a huge inflection point.
• 14:46
  Speaker 0: And Jordan Furlong had a very cynical, but probably very accurate take on this related to AI and law.
• 14:54
  Speaker 1: He did.
• 14:54
  Speaker 1: He argued that traditional law firm partners, well, they hate AI and why?
• 14:59
  Speaker 1: Because their whole business model is the billable hour.
• 15:02
  Speaker 0: So efficiency literally costs them money.
• 15:04
  Speaker 1: Exactly.
• 15:05
  Speaker 1: If AI does a ten hour job in ten minutes, they just lost nine hours and fifty minutes of billing.
• 15:09
  Speaker 1: So they are incentivized to resist technology.
• 15:11
  Speaker 0: But a PE owner.
• 15:12
  Speaker 1: A PE owner doesn't care about the billable hour tradition.
• 15:16
  Speaker 1: They care about margin.
• 15:18
  Speaker 1: Furlong's point is, if PE takes over legal, they will force AI adoption to cut costs and boost profits.
• 15:25
  Speaker 1: It's the unstoppable force meeting the immovable object.
• 15:28
  Speaker 0: And in capitalism, PE usually wins.
• 15:31
  Speaker 0: Speaking of AI, Zorian Rotenberg quoted the anthropic CEO comparing AI to fifty million Nobel Prize winners.
• 15:37
  Speaker 0: He thinks it's going to commoditize financial modeling and due diligence.
• 15:40
  Speaker 1: And it probably will reduce the grunt work for junior analysts.
• 15:44
  Speaker 1: But, you know, we have to balance that high-level tech optimism with the on-the-ground reality.
• 15:51
  Speaker 1: Elizabeth C. made a crucial counterpoint about the manufacturing sector.
• 15:55
  Speaker 1: What
• 15:55
  Speaker 0: was her reality check?
• 15:56
  Speaker 1: She notes that while we have all these brilliant AI frameworks in manufacturing, execution is stalling.
• 16:04
  Speaker 1: There are five hundred and fifty thousand unfilled jobs in manufacturing right now.
• 16:09
  Speaker 1: Wow.
• 16:09
  Speaker 1: You can have the smartest AI strategy in the world, but you can't prompt engineer a factory floor.
• 16:15
  Speaker 1: You still need people to bolt things together.
• 16:17
  Speaker 1: Execution is lagging strategy.
• 16:19
  Speaker 0: That is a great reminder.
• 16:20
  Speaker 0: You can't just software your way out of every physical problem.
• 16:22
  Speaker 0: Yeah.
• 16:23
  Speaker 0: Okay, finally, a quick nod to PropTech.
• 16:25
  Speaker 0: Brad Hargreaves discussed a company called Proper.
• 16:28
  Speaker 1: This is a really smart niche play.
• 16:30
  Speaker 1: It's a PE roll-up of property managers, you know, the people who fix your sink and collect the rent.
• 16:36
  Speaker 1: Right.
• 16:36
  Speaker 1: But usually when you do a roll-up, you kill the local brand and slap a national logo
• 16:40
  Speaker 0: on it.
• 16:40
  Speaker 0: Which people hate because they trust their local person.
• 16:43
  Speaker 0: Exactly.
• 16:44
  Speaker 1: Proper keeps the local brands.
• 16:46
  Speaker 1: The tenant still calls Bob's property management.
• 16:50
  Speaker 1: But behind the scenes, proper centralizes all the accounting, the legal, the software, using AI.
• 16:57
  Speaker 1: It's a hybrid model.
• 16:58
  Speaker 0: So local face, centralized brain.
• 17:01
  Speaker 1: That's it.
• 17:02
  Speaker 1: It sounds just like that theme of operational excellence we started with.
• 17:05
  Speaker 1: It's not just about cutting costs.
• 17:07
  Speaker 1: It's using tech to scale what works while keeping the human touch where it really matters.
• 17:12
  Speaker 0: That really is the theme of the week.
• 17:14
  Speaker 0: If you look at the big picture from weeks four and five, the message is so consistent.
• 17:18
  Speaker 0: The easy money is gone.
• 17:20
  Speaker 0: The reset is here.
• 17:22
  Speaker 1: And success in twenty twenty six isn't about financial engineering.
• 17:25
  Speaker 1: It's about operational rigor, retaining that burnt out talent and navigating a much more complex capital structure.
• 17:31
  Speaker 0: And that seems like the perfect place to leave it.
• 17:33
  Speaker 0: If you enjoyed this episode, new episodes drop every two weeks.
• 17:36
  Speaker 0: Also check out our other editions on venture capital, M&A and strategy and consulting.
• 17:40
  Speaker 1: Thanks for listening.
• 17:41
  Speaker 0: Don't forget to subscribe.
• 17:43
  Speaker 0: See you next time.