August 21, 2025 • 35 mins
In this episode of the Private Equity Experience Podcast, we dive into the critical role of operating partners in private equity funding and their impact on the dilution of investment value. Hosts Emily Sander, Rory Liebhart, and Ed Barton break down how operating partners bridge the gap between PE firms and portfolio companies, offering tactical expertise, strategic oversight, and operational efficiencies. From CFOs and CTOs to turnaround specialists, discover why these professionals are a game-changer for PE returns and how they help mitigate risks in high-stakes investments.
Key Topics Covered:
- What are operating partners? Learn how they act as "connective tissue" between private equity funds and their portfolio companies.
- Private equity funding strategies: Explore how operating partners enhance IRR (internal rate of return) and create value through operational expertise.
- Dilution in PE investments: Understand how their role can reduce dilution risks by streamlining deal execution and improving scalability.
- Case studies: Real-world examples of operating partners in action—CFOs, CTOs, and turnaround specialists.
- Future trends: How tech-savvy operating partners (e.g., CTOs, AI experts) are reshaping PE strategies in a rapidly evolving market.
Why This Episode Matters:
- For investors: Insight into how operating partners boost private equity funding efficiency and reduce dilution of returns.
- For entrepreneurs: Learn how PE-backed companies leverage operating partners for scaling, cost-cutting, and strategic growth.
- For professionals: Discover how to transition into a private equity operating partner role and the skills needed to succeed.
Notable Takeaways:
- 70% of PE firms under $1B use operating partners to fill operational gaps.
- Operating partners bring playbooks for turning around distressed businesses or scaling growth-stage companies.
- Their expertise in private equity funding strategies, like technology integration and financial restructuring, contributes to a 3–5% IRR lift.
- The future of PE: More technology-focused operating partners (CTOs, AI specialists) to capitalize on innovation-driven value creation.
#PrivateEquityFunding #OperatingPartners #DilutionInPE #IRRStrategy #CFORole #PrivateEquityTrends #ManagementConsulting #PEIndustryInsights
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Three insiders. One mic. All things private equity — explained. Hi 👋 We’re Ed, Rory, and Emily — a CEO, a CFO, and a Chief of Staff — here to demystify the world of private equity. Between us, we’ve sat in the founder’s chair, run PE‑backed companies, and worked on the deal side, so we know the wins, the pitfalls, and the jargon (and we’ll explain it).
Through the Private Equity Experience Podcast, our book On‑Ramp to Exit, and a library of free tools and templates, we share real‑world stories, practical strategies, and insider insights to help you navigate every stage of the PE journey — whether you’re leading a portfolio company, joining a deal team, considering PE, or just PE‑curious.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
emily-sander_1_07-22-2025 (00:34):
quick stat, 70% of PE firms with less
than$1 billion of assets undermanagement employ operating
partners.
So we've talked about a wholebunch of that is so surprised.
We've talked about a lot ofpartners on this podcast, so
deal partners and financialpartners.
Opening question for you two,if.
(00:55):
Private equity is a band.
What instrument does theoperating partner play?
rory-liebhart_1_07-22-2025 (01:02):
What a question that is.
ed--yes-_1_07-22-2025_14 (01:04):
where, where the hell did you come up
with that?
rory-liebhart_1_07-22-2025_ (01:10):
You know, I'm gonna say rhythm
guitarist, I think.
emily-sander_1_07-22-2025 (01:13):
Okay,
ed--yes-_1_07-22-2025_145945 (01:14):
I was either gonna say rhythm
guitars or vocals,
emily-sander_1_07-22-20 (01:18):
vocals.
ed--yes-_1_07-22-2025_1 (01:19):
they're the ones that the operating
partner is, is gonna be more theone that, well, I don't know.
really depends on the role ofthe operating partner, so it
could be anywhere from
rory-liebhart_1_07-22-2025 (01:30):
old, it depends.
ed--yes-_1_07-22-2025_145945 (01:31):
It could be anywhere from vocals to
the bass
rory-liebhart_1_07-22-202 (01:35):
Yeah.
emily-sander_1_07-22-20 (01:36):
Keeping the beat.
Yeah.
ed--yes-_1_07-22-2025_1 (01:38):
They're driving the driving the beat, or
they could be, depending ontheir role, could be parachuted
in and they're driving the,driving the entire band,
rory-liebhart_1_07-22-202 (01:47):
Yeah.
Well,
ed--yes-_1_07-22-2025_145945 (01:49):
at least on that.
rory-liebhart_1_07-22-2025 (01:50):
here is it's a hell of a gig to get,
whether you're in a band or youknow, working for PE as an
operating
emily-sander_1_07-22-2025 (01:56):
Yeah.
rory-liebhart_1_07-22-202 (01:57):
great gig to get for sure.
emily-sander_1_07-22-2025_1 (01:58):
All right.
So.
rory-liebhart_1_07-22-202 (01:59):
about it here.
emily-sander_1_07-22-2025_145 (02:00):
A whole bunch of PE firms are
using operating partners.
There's a whole bunch ofdifferent kinds of operating
partners.
It like is a entry into this forour listeners.
They're kind of like consultantsthat you would bring on.
They're people you would deployfor pieces of the operation of
your business.
Um,
ed--yes-_1_07-22-2025_14594 (02:18):
the above.
rory-liebhart_1_07-22-202 (02:19):
Yeah, a hundred percent.
ed--yes-_1_07-22-2025_145945 (02:21):
A typical operating partner
scenario, what, where thecommonality is, is the operating
partner's expertise is in theday-to-day.
Tactical operation of abusiness.
So where your pe you know, we'vetalked a lot about how the PE
team is, is formed andstructured and how the deal team
(02:43):
looks.
Those guys, that is theirexpertise is how do I
financially structure a deal?
How do I financially structure abusiness?
How do I, how do I kind of getthe deal to close and
negotiated?
And then you've got, and then onthe other side, the sell side,
you know, how do I get thiscompany sold in position?
The operating partner is the onethat kind of sits in there and
goes, okay, let me make surethat this thing is operating the
(03:05):
way it's supposed to.
And, and so their expertise isthe tactical operation of a
business, and they could servein any type of role from, again,
I've kind of been in a bunch ofthese types of roles.
This is, this has been my kindof, my jam is I could be sitting
at the fund level assisting.
The, the operating businesses.
(03:26):
And so it could be, I was, youknow, maybe a shadow CFO and so
there was a CFO at the businessand I was consulting to them to
help
emily-sander_1_07-22-202 (03:33):
Sounds so ominous.
A shadow C-S-O-C-F-O.
rory-liebhart_1_07-22-202 (03:37):
Yeah.
ed--yes-_1_07-22-2025_14594 (03:38):
or, or it could be you are an
operating partner and you areconsulting with a group of.
CEOs, CFOs, whatever, onoperational components, and we
had that at Primus.
They had a, they had anoperating partner who really
assisted all of us, like at theCXO level to kind of pull things
together, best practice sharing,those kind of things.
(03:59):
Or it could be you're anoperating partner and we need
you this particular investmentbecause we're short A CXO, and
therefore you go in there andyou're the CFO.
The COO that.
the CEO, whatever, and,
emily-sander_1_07-22-2025_14 (04:14):
he usually has a bench of those
folks they can pull from.
ed--yes-_1_07-22-2025_145 (04:18):
well, it, the, the difference is the
operating partner is going to besitting, they're basically, as
opposed to being like they're inthe Rolodex.
And so you've got the, theRolodex, you go, Hey, I need a
CFO.
Okay, I'm gonna go call Rory.
'cause Rory's been a CFO, one ofmy portfolio companies in the
past and we successfully exitedan operating partner is
normally.
On the, on the bench.
(04:39):
In the, in the private equityfirm.
So they're on payroll, they're,they're part of the private
equity firm, but their expertiseis in one of those operational
elements or tactical elements,and they're deployed by the
private equity firm, kind of ona, on a routine basis either.
And again, their expertise is atactical, so where it's not
(05:00):
like, okay, they're on the,there, there's a Rolodex of
these folks.
They have those.
partners are there day in, dayout, they may even be part of
the diligence process
rory-liebhart_1_07- (05:10):
definitely.
ed--yes-_1_07-22-2025_14594 (05:11):
the operationalization of that
strategy,
emily-sander_1_07-22-20 (05:14):
They're like, they're entrenched in in
the business.
rory-liebhart_1_07-22-202 (05:17):
Well,
ed--yes-_1_07-22-2025_145945 (05:17):
At the, at the pe.
At the pe, at the PE fund, at
emily-sander_1_07-22-2025 (05:22):
Yeah.
rory-liebhart_1_07-22 (05:22):
generally true for operating partners.
One, they're not schlubs.
These are generally highlysuccessful people that have had
exits.
You know, in a lot of ways it'salmost like a second career for
folks, at least.
The, you know, a lot of themthat I've dealt with, they've,
they've run businesses and soldthem and.
You know, they've moved frombeing on the operating company
(05:44):
side to the PE side, butthere's, because of the success
they've had as operators, thisis where it kind of segues into
the PE strategy is, you know,each PE has its own niche.
It has its own, um, kind ofsectors that it focuses on and
things like that.
And so a lot of times operatingpartners are the folks that have
(06:05):
been really successful in thatparticular.
segment in that particularoperating business, um, kind of
template.
And so, you know, a PE companyand a PE group is an investment
company.
They were investmentprofessionals.
So you matched that with a powerof a strong operator.
That's a really, really, uh,impressive thing.
(06:26):
I read a stat recently, I, Idon't know, it's a McKinsey
stat, you know, something likethree to 5% IRR lift.
On investments that PEs makewhen they employ operating
partners, and
emily-sander_1_07-22- (06:40):
operating partner.
Wow.
rory-liebhart_1_07-22-2025 (06:42):
that aren't just like.
Making a meager salary.
These are, you know, they'reoperating partners implied in
the name, they're part of thegp, they're part of the part of
the PE group.
They just are a differentfunctional role than somebody
that's an investmentprofessional per se.
it's super, super important andcan be a major asset to PE group
and to an operating company.
(07:02):
A lot of times they bridge thegap between, you know, a
management that's now owned byPE.
And the PE group and vice versa,as Ed said, you know, assisting
with the diligence, but alsohelping hire the right CEO, uh,
for the operating business, itcan be.
It's just a, it's just anotherway of saying we've got a lot of
(07:23):
firepower the bench in terms ofbrains and, and experience.
emily-sander_1_07-22-2025 (07:28):
Yeah.
Well, I mean, my closestexperience is seeing chiefs of
staff be deployed as operatingpartners.
And when I like the word thatyou used, was it, they're not
shrubs.
Uh, they're not shrubs.
Um, it's basically like this,this, I see.
I've seen chiefs of staff bedeployed and they're like this
force multiplier where they addthis layer where they, they.
(07:51):
Lift the leadership teamexponentially.
So leadership team and goingalong, making progress.
Making progress, incrementalprogress, steady progress.
And then you just likeexponentially multiply it.
And I think that's, those aresome of the game changers that
you could have as operatingpartners when it goes well.
rory-liebhart_1_07-22-2025_1 (08:08):
No question about it.
And a lot of times the genesisof the relationships start when
maybe a, you know, the PE groupacquires a company.
maybe the, that operatingpartner at the time is an
executive with that operatingcompany.
successful, they sell thatbusiness operating partner, you
know.
Maybe, uh, looking for the nextthing and they're like, Hey,
(08:28):
well let me, you know, hop onthe other side of the fence and
work from PE side and, andreally as you say, like help
them their uh, portfolio in theright way.
And, you know, kind of that'swhere the expertise around like
being able to spot and with Ed'spoint, you know, you have the
Rolodex and the connections inthe industry to find.
(08:51):
up opportunities, which wetalked about in the last
podcast.
Um, there's a whole litany ofreasons why a CEO type of person
on the roster at a PE group issuper valuable.
Just as valuable as it is tohave'em run the operating
company in some cases.
emily-sander_1_07-22-2025_ (09:09):
What are some other examples just for
folks to get their head around?
So we've mentioned chief ofstaff, we've mentioned, you
know, if you're in an industryand someone's run the playbook
at an operational level before,maybe if they're trying to build
a new channel and it's like,Hey, you were at this type of
company before and built thisnew channel for them, here's a
like company, a similar company,can you do it again?
(09:32):
Is it cutting costs?
You're really good at that.
What, what types of things arethey brought in for?
ed--yes-_1_07-22-2025_1459 (09:36):
The, the one I've seen Mo, there's
two roles I've seen that arecommon outside of the CEO.
So you've got a, someone who'sbeen a successful CEO and like
Rory said, they're brought in areally mentor, the founder or
the the new private equity.
Kind of enmeshed, CEO on how totransition most effectively into
that fund environment.
(09:57):
But the other two roles thatI've tended to see heavily, um,
populated on the, on the, uh,the operating partner side have
been chief financial officersand chief technologists.
rory-liebhart_1_07-22-2025 (10:11):
Yes,
ed--yes-_1_07-22-2025_14594 (10:11):
And again, a lot of, a lot of the
challenges that when you thinkabout a, a private equity
investment.
A lot of times they're lookingfor increased multiple.
They're looking for, you know,how do I, how do I get this
business to scale?
How do I get leverage into it?
How do I, and one of the keycomponents to that is how do
(10:32):
they utilize her technology andhow do they integrate that
technology into the operations?
And how do you think abouttechnology as a.
Strategic as a strategic forceand a scalable one and a
replicatable one rather thanjust a, well, we do technology
or we're a technology companyand those, those technologists
that are business oriented aretough to, they're tough to find.
(10:55):
That's a tough bridge.
normally have technologists whodunno, technology or you've got.
Technologists who don't knowbusiness, and where I've seen
the operating partners, whereprivate equity is brought in
operating partners are thetechnologists that really are
skilled at bridging both, youknow, business,
emily-sander_1_07-22-2025_14 (11:12):
We had one, we, we had one better.
ed--yes-_1_07-22-2025_14594 (11:15):
and I, and I will tell you that
they, you know,
rory-liebhart_1_07-22-2025_1 (11:17):
of
ed--yes-_1_07-22-2025_145 (11:17):
calls routinely from our old PE firm.
Are you ready yet?
Are you ready yet?
Are you ready yet?
emily-sander_1_07-22-2025 (11:23):
Well, it's funny because you mentioned
due due diligence.
So our, so the person Ed and Iare referring to was our COO and
CTO.
He held both roles, um, atvarious points in the company
and he was so good at bridgingthe technology and the business
and he was just a, nor he could,he was just normal, cool dude
you could hang out with.
And, um, he could explain thingsto you and he would help with.
(11:45):
Due diligence for otherpotential investments because
they trusted him so much andthey knew his work product, um,
and his and his.
rory-liebhart_1_07-22-2025_14 (11:54):
A lot of times these operating
partners, depending on thefunctional role, know, like
A-C-C-F-O or a CTO as I wastalking about, those are.
Almost like a shared service ina way from the PE group to the
portfolio of operatingcompanies.
And, and one of the things thatis always talked about is you
try to create, synergies andconsistency across operating,
(12:15):
uh, portfolio.
If you're looking to kind ofhave them represent a, a
strategy that's kind of uniform.
Another way of saying that isthey, they, they're the
connective tissue in some ways.
To make sure that, hey, if we'regoing to buy software for these
companies, it's gonna beconsistent.
It's gonna be plug and play.
It's not gonna be a mishmash or,or whatever architecture we,
(12:37):
maybe we have a unified visionof moving to the cloud, whatever
that may be.
And the same thing goes for theCFO role.
I, I look at that similarly, is.
You know, um, you know, a goodCFO can probably come in and be
effective for any type ofcompany at that point, you know.
Um, and so they do is kind ofhelp operating companies the
(12:59):
demands of an, you know, of, ofthe PE fund.
As an ownership group, becauseultimately they do work for the
PE fund, but they're reallythat, you know, connective
tissue between management and PEin a lot of ways.
And then ultimately, you know,they sit on the board of these
operating companies too.
So yes, they're, they're,they're a part of the PE group.
(13:19):
But as we've talked about in ourbook, and we've talked about on
this podcast a couple times, youknow, you're, you've got other
folks at the table, the boardtable, so to speak, uh, beyond
just the management.
You know, you have the reps fromthe PE group, um, and a lot of
times the operating partners arethose folks that are, you know,
uh, sitting along the, aroundthe table helping you think
through the problems you have.
And one of the things, again,that, um, is attractive.
(13:45):
Two PE groups for in operatingpartners is they come with
generally a playbook.
They've been there, done that,and all businesses are unique,
but you know, most people at acertain point in their career,
if they've been successfulrunning businesses have kind of
seen it all.
so if it's matched up with theright strategy.
Uh, that the PE group is makinginvestments in, then they can
(14:06):
just come in and say, here's howwe get it done, folks.
You know, we're going to stripthis out, we're going to roll
this up, we're gonna tuck thisin, and then we're gonna
synergize and we're gonna flipand we're gonna x multiply and
know it sounds really cool, butpeople are highly effective of
that, and they just rinse andrepeat and they make a lot of
money for a lot of people,including themselves.
emily-sander_1_07-22-2025_1 (14:26):
And I mean, you both have
specialized at some point inyour career in turnarounds.
Is that a, Hey, I have anoperating partner who knows the
playbook for turning around thistype of business or this type of
distressed business?
ed--yes-_1_07-22-2025_14594 (14:41):
and a turnaround.
And a turnaround approach there.
It is a skillset that'sdifferent from a growth
oriented, like I am not a growthguy.
I am more of a turnaround guy.
Growth.
Growth is not my expertise andI.
Tend to be able to go, okay, Ican get you stable.
I'll get you kind of a pointwhere you can start to grow and
then you need to find someoneelse.
(15:01):
'cause I'm, I panic when I startspending money on marketing and
stuff.
That's just, I get
rory-liebhart_1_07-22-2025_ (15:07):
and I share that trait.
Oh my God.
know what it is about marketing,but that's the one that just
gives me the most freaking angst
ed--yes-_1_07-22-2025_145945 (15:14):
Oh yeah, no, it, I don't see the
ROI in it, but
rory-liebhart_1_07-22-2025_ (15:17):
ROI negative on
ed--yes-_1_07-22-2025_1459 (15:18):
Yep.
rory-liebhart_1_07-22-202 (15:19):
like, you
ed--yes-_1_07-22-2025_14594 (15:19):
but the skillset, so like when you
said turnaround.
A lot of times turnaround islike, from my seat, I've been
called on to turnaroundeverything from financial
services companies to techcompanies to, you know, it
doesn't, the, the playbook islargely, is largely the same.
There you have to learn thebusiness, but the playbook on a
turnaround is similar.
(15:40):
Then on the growth side, it's alittle bit different animal That
tends to be a lot more industryspecific because you really need
to leverage your expertise ofthe market, your expertise of
your competitors and, and thoseelements.
So it's easier for me to get acompany to, to a positive net
operating income.
Than it is for me to get fromthat positive net operating
income to a 30% growth rate.
(16:02):
And other people, other folkswho are in that industry have
problems going, how do I get toa, to a zero, to a, you know, a
a zero at the bottom of thefinancial statement or positive.
But once you're there andthey've got resources, they can
grow that thing at a 20%compounded annual growth rate.
rory-liebhart_1_07-22-20 (16:19):
Right.
maybe think about somethingthere.
I think turnaround I think CFOscan often be great turnaround
CEOs.
Based on the qualities theybring to the table.
Right.
It's, a lot of rationalization.
It's a lot of undoing wrongs andthings like that to getting it
(16:41):
to a point of, you know, beingprime for growth again.
And so, yeah.
That's interesting.
I dunno, that was a good.
emily-sander_1_07-22-2025_1 (16:46):
And you had mentioned.
Board members or board seatsearlier.
And I remember, um, I've had, Imean, you, you guys have
probably had some too, butindependent directors, so folks
who are like.
rory-liebhart_1_07-22-2025 (16:58):
seen them all.
emily-sander_1_07-22-2025 (16:59):
Yeah, but I've had some phenomenal,
um, independent directors whowere just like grounded, good
people wanted to help out.
They were certainly like part ofthe board and kind of, you know,
tucked in with the PE firm.
But they came on site, theytried to help, they connected
with, with folks who could helpus with stuff, and they were
some of the best resources wehad.
So, um,
rory-liebhart_1_07-22-202 (17:20):
ones.
Then.
emily-sander_1_07-22-2025 (17:21):
yeah.
rory-liebhart_1_07-22-202 (17:22):
would say I've, I've never, I've never
seen some mind blowingly goodones.
I've seen some neutral
emily-sander_1_07-22-2025_ (17:27):
Huh.
rory-liebhart_1_07-22-2025_ (17:28):
but I've never seen some game
changers, but I know they're outthere
emily-sander_1_07-22-2025 (17:31):
Okay.
rory-liebhart_1_07-22-2025_ (17:32):
out there.
Um, but that, but that's whereit comes into like what's
sometimes the criticism of.
These operating partners, maybe,maybe they become too meddlesome
on the board for, for, for, youknow, for the purposes of what
that particular operatingcompany is trying to achieve.
And maybe they've become more ofa distraction or, kind of chase
things down based on their ownperceived playbook.
(17:53):
That just isn't the rightplaybook for that
emily-sander_1_07-22-2025 (17:54):
Yeah.
rory-liebhart_1_07-22-202 (17:55):
Maybe they thought it was, but it's
not.
You know,
emily-sander_1_07-22-2025 (17:57):
Where do you come.
rory-liebhart_1_07-22-2025 (17:57):
I've certainly seen that
emily-sander_1_07-22-2025 (17:59):
Where do you come down on the like
outsider piece?
Because I was just talking tolike a chief communications
officer and he does
rory-liebhart_1_07-22-2 (18:04):
wisely.
emily-sander_1_07-22-202 (18:05):
these, like, these like workshops where
they, they need someone from theoutside to come in and like
facilitate this discussion.
And then I have other caseswhere it's like we don't wanna
outsider out, outsiderconsultant coming in and telling
us how to do our thing, youknow?
So I'm wondering like where youguys come down on that.
rory-liebhart_1_07-22-2025_ (18:22):
the board board construction chapter
in our book's, one of the moreinsightful ones, and I think we
could do a whole and should on,you know, board dynamics.
But, um, you know.
Each company, again, I'll say itagain, is, is is unique.
It has its own dynamics, itsculture, its challenges.
So when you bring in a a, anexternal board person, you know,
(18:47):
what is it you're trying tosolve for?
Are you trying to babysit theCEO?
Are you trying to, you know, aproduct strategy, implement a go
to market?
I mean, there's a whole litanyof things that you could be
trying to achieve.
So it's really matching what youreally need.
To the, you know, individualsthat can actually help push that
forward rather than justliterally up a board seat and,
(19:10):
you know, add no value in aquarterly board meeting that
lasts six hours.
You know, like I've seen that alot.
Um, but you know, I know thatthere's folks out there that
have made.
Businesses way better, um, onbehalf of ownership by what they
bring to the table.
And, and what that, what doesthat really mean?
If you really break it down, itmeans you willing to put in some
(19:32):
work to help this companysucceed?
Which means opening up yourRolodex, forging connections,
um, drawing back on the thingsthat made you successful,
bringing them to the bear here,you know, um, you know, coaching
and mentoring in a authenticway.
Um, you know, being, know, a, atrue, um, liaison between
(19:55):
management and pe, uh, there's awhole things that that can
actually happen.
But then there's stuff that, youknow, theoretically should
happen but doesn't, which is,you know, adding value.
So, uh, and a lot of, you know,these people, you, you know, the
company is paying these folks,right?
You know, there's oftentimescompensation attached to those
roles, not just paid by.
(20:17):
Uh, the PE group to that group,but like also paid by the
company to a board member, cash,comp, equity, all that stuff.
So, you know, there's onlylimited amount of that resource
to give away.
Make sure you're giving it awayto the right person or people.
emily-sander_1_07-22-2025_14 (20:31):
Do operating partners always have a
board seat or can you?
You can be, I know you can be anindependent director by
themselves.
You can be an operating partnerand or you could be both.
There's just differentcombinations.
rory-liebhart_1_07-22-202 (20:43):
Yeah, I'd say nothing's absolute.
I'd say, you know, a lot oftimes you have board seat taken
up by one of the, you know,managing directors on the deal
from P group, and then maybeindependent director that may or
may not be a, you know.
operating partner in the PEgroup might just be an
independent, that's notaffiliated, but it also could be
(21:04):
an operating partner that's partof that group.
I know a lot of folks at PEgroups that are on boards that
are operating partners, for
ed--yes-_1_07-22-2025_145 (21:11):
Yeah, your, your operating partner
from the PE group is not anindependent director in any
sense.
rory-liebhart_1_07-22-20 (21:17):
right?
ed--yes-_1_07-22-2025_ (21:17):
They're, they're a, they're a gonna be a
board member from, as arepresentative of the private
equity team.
rory-liebhart_1_07-22-2 (21:25):
Mm-hmm.
ed--yes-_1_07-22-2025_14594 (21:26):
So, you know, it was funny when Rory
had mentioned about, you know,independent directors and you
guys are talking, I was kind ofthinking back to the first
private equity backed companythat I was with.
is, is where, where we hiredRory, um, to do bank recs, um, a
couple years ago.
Yeah.
We actually had an incredible,
rory-liebhart_1_07-2 (21:46):
sometimes.
ed--yes-_1_07-22-2025_145945 (21:47):
we actually had an incredibly high
powered set of, of set of boardmembers.
Like we had, we had boardmembers that were like former
chairman of Goldman Sachs and wehad board member who was, uh, on
a federal reserve.
And we had, I mean, it was likethese were some powerful,
powerful, powerful dudes.
emily-sander_1_07-22-2025 (22:06):
Yeah.
ed--yes-_1_07-22-2025_14594 (22:07):
you know, the, the CEO was, was
tough to work for, but you gottagive him credit.
And that he had a board that hadsome really both local, um,
powerhouses, like HermanSarkowski and then some national
powerhouses on that board thatwere just, holy cow.
You know, you get on a boardcall and you listen to what
(22:29):
these guys had to say.
emily-sander_1_07-22-2025_1 (22:32):
If, if someone is.
rory-liebhart_1_07-22-2025_ (22:34):
You just hit on something though,
ed.
I am sorry to interrupt youthere, Emily, like.
Engagement is so important inthese things.
It's, it's one thing to assemblethe, like, roster of all stars
on the board, but it's anotherthing to get the actual
engagement from the board inthat business.
'cause these are folkstypically, uh, we're, we're now
moving more towards board, butlike, you know, this may not be
(22:57):
the only thing they have goingeither.
So it's like, you know, gettingthe engagement level at the
level that you want to see, itcan sometimes in its own right,
be a challenge,
ed--yes-_1_07-22-2025_145 (23:05):
Yeah, and that's, and that's actually
where the operating partner isof benefit.
'cause they are paid to befocused on that portfolio of
companies.
Where your outside board membersor independent board members may
or may not be getting paid cash.
They normally will have someskin in the game, you may or may
not, if they don't feel likeit's worth their time.
(23:27):
Or that, you know, the return isgonna be worth the investment in
time or money, you will not, youknow, when you've got a, when
you've got a, and we had forinstance, Chris Flowers, who is
with Goldman, powerful dude onour board you have a Chris
Flowers and he's like, I'm not,this is a waste of my time.
You're not gonna get engagement.
He's got, he's got banks to buy.
(23:48):
He's, he ain't gonna, he ain'tgonna worry about, you know, his
little investment in this smallcompany in Seattle.
rory-liebhart_1_07-22-202 (23:53):
Yeah.
ed--yes-_1_07-22-2025_14594 (23:53):
And you know it, but when there is
something to do, he wouldengage.
And so that was, or when he feltlike there was something
worthwhile.
So I think that's where theoperating partner is.
A real advantage for the privateequity team is you, you get the,
in theory, you get the expertiseof that independent board
member, but you also get theirfocus where an independent board
member, outside board member,you may or may not get that
(24:16):
focus, that that is really gonnahelp the management team.
rory-liebhart_1_07-22-202 (24:20):
Yeah.
emily-sander_1_07-22-2025_1 (24:21):
And you said companies plural.
In, in, in what you just saidthere.
So just to clarify, canoperating partner, are they
typically with one company orare they working many.
ed--yes-_1_07-22-2025_1 (24:31):
they're actually a cross portfolio and
it is, it's going to becircumstances that will cause
them to become embedded in acompany.
rory-liebhart_1_07-22-20 (24:41):
Right.
Uh, IE we're sacking the CEO andyou need to come in and actually
ed--yes-_1_07-22-2025_145 (24:47):
Yeah.
rory-liebhart_1_07-22-20 (24:47):
again.
Sorry.
Yeah, yeah.
That's that.
But, but I think that's part ofthe point, Emily, is, um, you
know, these folks, especially ifyou're have somewhat of a
unified.
You know, roadmap with the, theportfolio companies that the PE
group owns.
Like you want that kind ofconsistency across those
(25:07):
businesses.
And they, like, as I said,they're kind of that connective
tissue.
It can kind of steer things alittle bit.
Um, and they're usually prettyinfluential individuals and can
actually make things happen.
emily-sander_1_07-22-2025 (25:18):
Well, you gave that example where I
think, I think one or both ofyou have been CFO for all of the
Port cos in a fund.
rory-liebhart_1_07-22-2025_ (25:27):
Uh, I think Ed has done a little bit
more globe trotting than me.
Uh, I've done, I've done that.
I've, I've, journey I guess islike, I've been within the same
family of companies, but I'veboth had CFO and president role,
so I like, I've jumped around,but Yeah.
to different roles.
But yeah.
Point is, yeah, like, you know,typically there, there's a
(25:50):
desire to have unificationacross businesses within the
umbrella of the PE group.
Or ownership group for thatmatter, because I've done that
also for, you know, uh, let'scall it corporate owner group,
where we are basically operatingsubsidiaries, but, you know,
different businesses.
But trying to march to the samesheet of music within the same,
you know, uh, vertical in thecompany.
(26:10):
So,
ed--yes-_1_07-22-2025_145 (26:11):
Yeah.
And in, in my case it was, therewas a, they would have operating
partners, of which I kindaserved in the CFO type role for
the fund.
each fund, so I was like in fundfive, fund five had a set of
shadows.
Fund six had a separate set ofshadows and fund seven had a
separate set of shadows thatthey plucked out either off the,
(26:34):
you know, kind of brought in orplucked off their Rolodexes.
And that'cause their concern.
The concern there, and this goesback to kind of how private
equity is structured, is they,you know, the fund is basically
paying our salary at that point.
So now the private equity GPisn't paying the salary.
The, the fund companies arepaying our salaries.
(26:56):
And what they didn't wanna dowas go, well, this fund and this
fund, so fund five and fund sixin my case, had different LP
structure, so different lp,different LP ownership.
so they're like, look, you, you,you know, we can kind of charge
off to these, to these companiesin kind of proportional amount.
And it's the same investors overhere.
(27:17):
It's a different set ofinvestors or at least different
percentages.
And so we can't have you crossover.
So they actually really, nowthese funds were in the, the.
Big, big, big, like 10 figures,so it was not, or almost 11.
So it was not like we weresmall, tiny little funds.
These were big funds
rory-liebhart_1_07-22-2025_ (27:36):
No.
ed--yes-_1_07-22-2025_14594 (27:36):
and we were, you know, kind of, but
they, they would firewall usoff, but I would, I had a
portfolio of companies to lookat that included specialty
finance, restaurants, mortgagecompanies.
Uh, REO company.
You know, it was a bunch of, abunch of different stuff in
there that we had to, that wehad to over.
(27:56):
We had to over
rory-liebhart_1_07-22-2025 (27:58):
That was, that was your own form of,
uh, performance punishment.
I think, uh, you know, you'rejust, just, you know, bumping
along, running a business andthey're like, they're like,
you're like, uh, sorry buddy.
You're plucked out.
You're gonna have to untangle usfrom a web of shit, basically.
Uh, which you did.
So, you know, uh, sellingairplanes and, you know, uh,
yeah, all the good stuff, windstuff down, bankruptcy,
(28:19):
packaging, all that good stuffgood times.
emily-sander_1_07-22-2025_14 (28:24):
If operating partners are kind of a
second stage career or eventhird stage career type of move,
how does, if someone'slistening, it's like, you know
what?
I could, I could be moving intothat.
I have the background for that.
How do you become an operatingpartner?
ed--yes-_1_07-22-2025_1459 (28:37):
You, you better have.
was about to say, you betterhave gotten blocked by you
either.
You're either coming out of apublicly traded company or a
high profile unicorn typeprivate company.
or you've got a really strongrelationship with the private
equity firm, and there's anexpectation, and Rory kind of
(28:58):
hit on it.
There's an expectation with theoperating partners that you're
gonna be investing.
As a general partner does.
emily-sander_1_07-22-2025_1 (29:05):
Ah,
ed--yes-_1_07-22-2025_1459 (29:05):
it's
emily-sander_1_07-22-2025 (29:06):
okay.
ed--yes-_1_07-22-2025_14594 (29:06):
not just a, you are also gonna write
a check for the privilege andyou're gonna be co-investing
alongside the gp.
emily-sander_1_07-22-2025_1 (29:13):
You got skin in the game.
ed--yes-_1_07-22-2 (29:14):
co-investing alongside the LPs in many cases,
in, in that portfolio.
So that's part of, part of yourwin.
rory-liebhart_1_07-22-2 (29:22):
Mm-hmm.
ed--yes-_1_07-22-2025_14594 (29:23):
you participate in the GP return,
rory-liebhart_1_07-22-2025 (29:25):
Yep.
ed--yes-_1_07-22-2025_145945 (29:26):
of your risk is you generally write
a check for the privilege.
And so, you know, they, you may,you may get hired as an
operating partner with a salaryof$300,000 a year.
You're gonna be expected towrite a check for a minimum of a
million dollars the GP andbecome a partner and.
(29:47):
You've got the upside of acertain percentage of the GPS
portfolio
rory-liebhart_1_07-22-202 (29:52):
Yeah.
emily-sander_1_07-22-2025_1 (29:53):
And you're working your butt off.
ed--yes-_1_07-22-2025_14 (29:55):
you're normally working.
They, I wouldn't say they'reworking as hard generally as
the, uh, as the operators are.
rory-liebhart_1_07-22-20 (30:02):
Right.
ed--yes-_1_07-22-2025_14594 (30:03):
you are, you are definitely not
retired
emily-sander_1_07-22-2025 (30:05):
Yeah.
Yeah.
Yeah.
ed--yes-_1_07-22-2025_14 (30:06):
paying for the, you're paying for the
privilege.
Um, now again, as Rory noted,you will do if, if you're with a
good private equity firm andthey've got a good set of
investment thesis and you aredoing your, are doing your job
well, it's an incrediblylucrative business, and you are
not working a hundred hours aweek or 75 hours a week.
(30:27):
You're normally at a 40 to 50hour a week job.
You're more in a consulting typerole unless you get parachuted
in.
which case, then you've got a, ashit show on your hands and
you're gonna be, you're reallygonna be
rory-liebhart_1_07-22-202 (30:38):
Yeah.
emily-sander_1_07-22-2025_14 (30:39):
So you just have that option
looming over you at any time.
rory-liebhart_1_07-22-202 (30:42):
Yeah,
emily-sander_1_07-22-2025_ (30:43):
Para
rory-liebhart_1_07-22-2025 (30:43):
then it's
ed--yes-_1_07-22-2025_1459 (30:43):
that
rory-liebhart_1_07-22-2025 (30:44):
you, you'd be hard pressed to say no
because your, your, yourinvestment capital's at risk on
that deal, you
ed--yes-_1_07-22-2025_14 (30:49):
right.
rory-liebhart_1_07-22-2025_ (30:51):
So,
emily-sander_1_07-22-2025 (30:52):
okay.
rory-liebhart_1_07-22-2025_ (30:52):
but yeah, it is one of those things
that seems to me like one ofthe, one of the roles in life
that's more of a meritocracy.
'cause you, like I said, youdon't just, you don't just like
apply for that on like Indeed,you know, like you're recruited
heavily based on your levels ofsuccess that you've
emily-sander_1_07-22-2025_ (31:06):
who, who, uh, who's on that interview
loop?
Are the LPs interviewingoperating partners?
How does that work?
rory-liebhart_1_07-22-2025 (31:12):
Hmm.
That's a good question.
ed--yes-_1_07-22-2025_1459 (31:14):
I've never seen the, I've never seen
an LP as part of that process.
Part of that is because they arelimited partners,
emily-sander_1_07-22-2025 (31:21):
Yeah.
ed--yes-_1_07-22-2025_14594 (31:21):
not their role.
It generally is,
rory-liebhart_1_07-22-2025 (31:24):
the, in the PE group.
ed--yes-_1_07-22-2025_145 (31:25):
yeah.
rory-liebhart_1_07-22-202 (31:26):
yeah.
ed--yes-_1_07-22-2025_14594 (31:26):
The managing, the managing, managing
directors and
rory-liebhart_1_07-22-202 (31:29):
yeah.
ed--yes-_1_07-22-2025_1459 (31:30):
the, and the senior managing partner
at the, at the PE is generallygonna be your decision.
rory-liebhart_1_07-22-202 (31:35):
Yeah.
emily-sander_1_07-22-2025 (31:36):
Yeah.
Do you think this trend is goingto increase, stay about the same
as what it is now or decrease?
ed--yes-_1_07-22-2025_145 (31:43):
Well, I've certainly seen an increase
significantly from, you know, 20years ago when I was first in
pri 25 years ago.
When I was first in privateequity world, operating partner
concept was not as common.
And I mean, we, like I said, Iwas at a nine figure, 10 figure
fund and we had, we hadoperating partners, but that was
(32:04):
not.
You know that when we went, wereacquired.
Um, before that we had beenacquired by a smaller private
equity firm, no operatingpartners.
Um,
rory-liebhart_1_07-22-202 (32:14):
Yeah.
ed--yes-_1_07-22-2025_1459 (32:15):
now, I mean, the last, the last PE
firm we came out of them, theyhad operating partners and they
were, they're relatively smallin
emily-sander_1_07-22-2025 (32:23):
Yeah.
ed--yes-_1_07-22-2025_14594 (32:23):
so, you know, I think it's, I think
they recognize, and Rory had hadkind of cited the McKinsey study
where.
There's a r there's a tangibleROI to having a good solid
operating partner or operatingpartner strategy.
And so these guys don't leavemoney on the table.
That's, that's not, that's nottheir normal vo.
when they see that, that's, youknow, something that can
(32:44):
increase their at a relativelylow risk, increase their return,
um, you know, that brings a riskpremium down on that investment
and allows it to, to kind ofaccelerate the growth you're
gonna do that.
rory-liebhart_1_07-22-202 (32:57):
Yeah, I do think that the, maybe the
dynamic could change is the typeof personnel like so.
I feel personally like we're inthe midst of a really rapidly
changing technology landscape.
I mean faster than maybe we'veeven been used to in recent
times.
you're gonna start to see manymore CTO or just more like even
(33:19):
chief architect types, know,sitting as operating partners in
pe.
You know, folks that reallyunderstand how to.
Make ai, uh, utilized in, youknow, everyday business,
whatever, however you wanna putit.
I'm not a technologist, so I'mprobably not saying it the right
way.
All I'm saying is where youmight have seen.
(33:39):
CEOs and CFOs and so forth on isthe types of operating partners.
Now, it's gonna be much moretechnology, product people to
help their operating companiestake advantage of the zeitgeist
of ai, which we find ourselvesin.
If you can somehow attach.ai tothe.
Domain that you're on, likesomehow that increases
(33:59):
enterprise value.
So, you know, I mean, I justthink there's something to that
and so, you know, it'll continueto evolve as, as these things
do.
But yeah, certainly a lot moretechnology orientation, I think
product as well.
emily-sander_1_07-22-2025_1 (34:14):
All right, so a little bit of info
on operating partners andprobably a potential future pod
on board dynamics.
'cause that was.
ed--yes-_1_07-22-2025_145945 (34:21):
Oh boy.
emily-sander_1_07-2 (34:22):
Interesting that that might be a multi-part
series,
rory-liebhart_1_07-22-202 (34:26):
Yeah.
emily-sander_1_07-22-2025_1 (34:26):
for that.
But yeah,
rory-liebhart_1_07-22-2025 (34:28):
hits episode for us
emily-sander_1_07-22-2025 (34:30):
we'll close it out here.
We need like a catchphrase as weoutro.
What should our outro phase be?
Just like, I don't wanna justlike scream PS'cause that could
be packed,
rory-liebhart_1_07-22 (34:41):
hashtags.
emily-sander_1_07-22-2025_ (34:42):
that could be taken out of context.
Um.
rory-liebhart_1_07-22-2025 (34:45):
Hmm.
emily-sander_1_07-22-2025_14 (34:48):
We think about it.
ed--yes-_1_07-22-2025_1459 (34:49):
you.
emily-sander_1_07-22-2025_14 (34:49):
If listener, if you have a
suggestion, drop it in thecomments, let us know.
ed--yes-_1_07-22-2025_1459 (34:53):
That would be
emily-sander_1_07-22-2025_1 (34:54):
Let these bad boys out otherwise,
thanks, ed.
Thanks Rory.
ed--yes-_1_07-22-2025_145945 (34:58):
I.
rory-liebhart_1_07-22-202 (34:59):
Thank you.
Enjoy your alpha.
quick stat, 70% of PE firms with less
than$1 billion of assets undermanagement employ operating
partners.
So we've talked about a wholebunch of that is so surprised.
We've talked about a lot ofpartners on this podcast, so
deal partners and financialpartners.
Opening question for you two,if.
(00:55):
Private equity is a band.
What instrument does theoperating partner play?
rory-liebhart_1_07-22-2025 (01:02):
What a question that is.
ed--yes-_1_07-22-2025_14 (01:04):
where, where the hell did you come up
with that?
rory-liebhart_1_07-22-2025_ (01:10):
You know, I'm gonna say rhythm
guitarist, I think.
emily-sander_1_07-22-2025 (01:13):
Okay,
ed--yes-_1_07-22-2025_145945 (01:14):
I was either gonna say rhythm
guitars or vocals,
emily-sander_1_07-22-20 (01:18):
vocals.
ed--yes-_1_07-22-2025_1 (01:19):
they're the ones that the operating
partner is, is gonna be more theone that, well, I don't know.
really depends on the role ofthe operating partner, so it
could be anywhere from
rory-liebhart_1_07-22-2025 (01:30):
old, it depends.
ed--yes-_1_07-22-2025_145945 (01:31):
It could be anywhere from vocals to
the bass
rory-liebhart_1_07-22-202 (01:35):
Yeah.
emily-sander_1_07-22-20 (01:36):
Keeping the beat.
Yeah.
ed--yes-_1_07-22-2025_1 (01:38):
They're driving the driving the beat, or
they could be, depending ontheir role, could be parachuted
in and they're driving the,driving the entire band,
rory-liebhart_1_07-22-202 (01:47):
Yeah.
Well,
ed--yes-_1_07-22-2025_145945 (01:49):
at least on that.
rory-liebhart_1_07-22-2025 (01:50):
here is it's a hell of a gig to get,
whether you're in a band or youknow, working for PE as an
operating
emily-sander_1_07-22-2025 (01:56):
Yeah.
rory-liebhart_1_07-22-202 (01:57):
great gig to get for sure.
emily-sander_1_07-22-2025_1 (01:58):
All right.
So.
rory-liebhart_1_07-22-202 (01:59):
about it here.
emily-sander_1_07-22-2025_145 (02:00):
A whole bunch of PE firms are
using operating partners.
There's a whole bunch ofdifferent kinds of operating
partners.
It like is a entry into this forour listeners.
They're kind of like consultantsthat you would bring on.
They're people you would deployfor pieces of the operation of
your business.
Um,
ed--yes-_1_07-22-2025_14594 (02:18):
the above.
rory-liebhart_1_07-22-202 (02:19):
Yeah, a hundred percent.
ed--yes-_1_07-22-2025_145945 (02:21):
A typical operating partner
scenario, what, where thecommonality is, is the operating
partner's expertise is in theday-to-day.
Tactical operation of abusiness.
So where your pe you know, we'vetalked a lot about how the PE
team is, is formed andstructured and how the deal team
(02:43):
looks.
Those guys, that is theirexpertise is how do I
financially structure a deal?
How do I financially structure abusiness?
How do I, how do I kind of getthe deal to close and
negotiated?
And then you've got, and then onthe other side, the sell side,
you know, how do I get thiscompany sold in position?
The operating partner is the onethat kind of sits in there and
goes, okay, let me make surethat this thing is operating the
(03:05):
way it's supposed to.
And, and so their expertise isthe tactical operation of a
business, and they could servein any type of role from, again,
I've kind of been in a bunch ofthese types of roles.
This is, this has been my kindof, my jam is I could be sitting
at the fund level assisting.
The, the operating businesses.
(03:26):
And so it could be, I was, youknow, maybe a shadow CFO and so
there was a CFO at the businessand I was consulting to them to
help
emily-sander_1_07-22-202 (03:33):
Sounds so ominous.
A shadow C-S-O-C-F-O.
rory-liebhart_1_07-22-202 (03:37):
Yeah.
ed--yes-_1_07-22-2025_14594 (03:38):
or, or it could be you are an
operating partner and you areconsulting with a group of.
CEOs, CFOs, whatever, onoperational components, and we
had that at Primus.
They had a, they had anoperating partner who really
assisted all of us, like at theCXO level to kind of pull things
together, best practice sharing,those kind of things.
(03:59):
Or it could be you're anoperating partner and we need
you this particular investmentbecause we're short A CXO, and
therefore you go in there andyou're the CFO.
The COO that.
the CEO, whatever, and,
emily-sander_1_07-22-2025_14 (04:14):
he usually has a bench of those
folks they can pull from.
ed--yes-_1_07-22-2025_145 (04:18):
well, it, the, the difference is the
operating partner is going to besitting, they're basically, as
opposed to being like they're inthe Rolodex.
And so you've got the, theRolodex, you go, Hey, I need a
CFO.
Okay, I'm gonna go call Rory.
'cause Rory's been a CFO, one ofmy portfolio companies in the
past and we successfully exitedan operating partner is
normally.
On the, on the bench.
(04:39):
In the, in the private equityfirm.
So they're on payroll, they're,they're part of the private
equity firm, but their expertiseis in one of those operational
elements or tactical elements,and they're deployed by the
private equity firm, kind of ona, on a routine basis either.
And again, their expertise is atactical, so where it's not
(05:00):
like, okay, they're on the,there, there's a Rolodex of
these folks.
They have those.
partners are there day in, dayout, they may even be part of
the diligence process
rory-liebhart_1_07- (05:10):
definitely.
ed--yes-_1_07-22-2025_14594 (05:11):
the operationalization of that
strategy,
emily-sander_1_07-22-20 (05:14):
They're like, they're entrenched in in
the business.
rory-liebhart_1_07-22-202 (05:17):
Well,
ed--yes-_1_07-22-2025_145945 (05:17):
At the, at the pe.
At the pe, at the PE fund, at
emily-sander_1_07-22-2025 (05:22):
Yeah.
rory-liebhart_1_07-22 (05:22):
generally true for operating partners.
One, they're not schlubs.
These are generally highlysuccessful people that have had
exits.
You know, in a lot of ways it'salmost like a second career for
folks, at least.
The, you know, a lot of themthat I've dealt with, they've,
they've run businesses and soldthem and.
You know, they've moved frombeing on the operating company
(05:44):
side to the PE side, butthere's, because of the success
they've had as operators, thisis where it kind of segues into
the PE strategy is, you know,each PE has its own niche.
It has its own, um, kind ofsectors that it focuses on and
things like that.
And so a lot of times operatingpartners are the folks that have
(06:05):
been really successful in thatparticular.
segment in that particularoperating business, um, kind of
template.
And so, you know, a PE companyand a PE group is an investment
company.
They were investmentprofessionals.
So you matched that with a powerof a strong operator.
That's a really, really, uh,impressive thing.
(06:26):
I read a stat recently, I, Idon't know, it's a McKinsey
stat, you know, something likethree to 5% IRR lift.
On investments that PEs makewhen they employ operating
partners, and
emily-sander_1_07-22- (06:40):
operating partner.
Wow.
rory-liebhart_1_07-22-2025 (06:42):
that aren't just like.
Making a meager salary.
These are, you know, they'reoperating partners implied in
the name, they're part of thegp, they're part of the part of
the PE group.
They just are a differentfunctional role than somebody
that's an investmentprofessional per se.
it's super, super important andcan be a major asset to PE group
and to an operating company.
(07:02):
A lot of times they bridge thegap between, you know, a
management that's now owned byPE.
And the PE group and vice versa,as Ed said, you know, assisting
with the diligence, but alsohelping hire the right CEO, uh,
for the operating business, itcan be.
It's just a, it's just anotherway of saying we've got a lot of
(07:23):
firepower the bench in terms ofbrains and, and experience.
emily-sander_1_07-22-2025 (07:28):
Yeah.
Well, I mean, my closestexperience is seeing chiefs of
staff be deployed as operatingpartners.
And when I like the word thatyou used, was it, they're not
shrubs.
Uh, they're not shrubs.
Um, it's basically like this,this, I see.
I've seen chiefs of staff bedeployed and they're like this
force multiplier where they addthis layer where they, they.
(07:51):
Lift the leadership teamexponentially.
So leadership team and goingalong, making progress.
Making progress, incrementalprogress, steady progress.
And then you just likeexponentially multiply it.
And I think that's, those aresome of the game changers that
you could have as operatingpartners when it goes well.
rory-liebhart_1_07-22-2025_1 (08:08):
No question about it.
And a lot of times the genesisof the relationships start when
maybe a, you know, the PE groupacquires a company.
maybe the, that operatingpartner at the time is an
executive with that operatingcompany.
successful, they sell thatbusiness operating partner, you
know.
Maybe, uh, looking for the nextthing and they're like, Hey,
(08:28):
well let me, you know, hop onthe other side of the fence and
work from PE side and, andreally as you say, like help
them their uh, portfolio in theright way.
And, you know, kind of that'swhere the expertise around like
being able to spot and with Ed'spoint, you know, you have the
Rolodex and the connections inthe industry to find.
(08:51):
up opportunities, which wetalked about in the last
podcast.
Um, there's a whole litany ofreasons why a CEO type of person
on the roster at a PE group issuper valuable.
Just as valuable as it is tohave'em run the operating
company in some cases.
emily-sander_1_07-22-2025_ (09:09):
What are some other examples just for
folks to get their head around?
So we've mentioned chief ofstaff, we've mentioned, you
know, if you're in an industryand someone's run the playbook
at an operational level before,maybe if they're trying to build
a new channel and it's like,Hey, you were at this type of
company before and built thisnew channel for them, here's a
like company, a similar company,can you do it again?
(09:32):
Is it cutting costs?
You're really good at that.
What, what types of things arethey brought in for?
ed--yes-_1_07-22-2025_1459 (09:36):
The, the one I've seen Mo, there's
two roles I've seen that arecommon outside of the CEO.
So you've got a, someone who'sbeen a successful CEO and like
Rory said, they're brought in areally mentor, the founder or
the the new private equity.
Kind of enmeshed, CEO on how totransition most effectively into
that fund environment.
(09:57):
But the other two roles thatI've tended to see heavily, um,
populated on the, on the, uh,the operating partner side have
been chief financial officersand chief technologists.
rory-liebhart_1_07-22-2025 (10:11):
Yes,
ed--yes-_1_07-22-2025_14594 (10:11):
And again, a lot of, a lot of the
challenges that when you thinkabout a, a private equity
investment.
A lot of times they're lookingfor increased multiple.
They're looking for, you know,how do I, how do I get this
business to scale?
How do I get leverage into it?
How do I, and one of the keycomponents to that is how do
(10:32):
they utilize her technology andhow do they integrate that
technology into the operations?
And how do you think abouttechnology as a.
Strategic as a strategic forceand a scalable one and a
replicatable one rather thanjust a, well, we do technology
or we're a technology companyand those, those technologists
that are business oriented aretough to, they're tough to find.
(10:55):
That's a tough bridge.
normally have technologists whodunno, technology or you've got.
Technologists who don't knowbusiness, and where I've seen
the operating partners, whereprivate equity is brought in
operating partners are thetechnologists that really are
skilled at bridging both, youknow, business,
emily-sander_1_07-22-2025_14 (11:12):
We had one, we, we had one better.
ed--yes-_1_07-22-2025_14594 (11:15):
and I, and I will tell you that
they, you know,
rory-liebhart_1_07-22-2025_1 (11:17):
of
ed--yes-_1_07-22-2025_145 (11:17):
calls routinely from our old PE firm.
Are you ready yet?
Are you ready yet?
Are you ready yet?
emily-sander_1_07-22-2025 (11:23):
Well, it's funny because you mentioned
due due diligence.
So our, so the person Ed and Iare referring to was our COO and
CTO.
He held both roles, um, atvarious points in the company
and he was so good at bridgingthe technology and the business
and he was just a, nor he could,he was just normal, cool dude
you could hang out with.
And, um, he could explain thingsto you and he would help with.
(11:45):
Due diligence for otherpotential investments because
they trusted him so much andthey knew his work product, um,
and his and his.
rory-liebhart_1_07-22-2025_14 (11:54):
A lot of times these operating
partners, depending on thefunctional role, know, like
A-C-C-F-O or a CTO as I wastalking about, those are.
Almost like a shared service ina way from the PE group to the
portfolio of operatingcompanies.
And, and one of the things thatis always talked about is you
try to create, synergies andconsistency across operating,
(12:15):
uh, portfolio.
If you're looking to kind ofhave them represent a, a
strategy that's kind of uniform.
Another way of saying that isthey, they, they're the
connective tissue in some ways.
To make sure that, hey, if we'regoing to buy software for these
companies, it's gonna beconsistent.
It's gonna be plug and play.
It's not gonna be a mishmash or,or whatever architecture we,
(12:37):
maybe we have a unified visionof moving to the cloud, whatever
that may be.
And the same thing goes for theCFO role.
I, I look at that similarly, is.
You know, um, you know, a goodCFO can probably come in and be
effective for any type ofcompany at that point, you know.
Um, and so they do is kind ofhelp operating companies the
(12:59):
demands of an, you know, of, ofthe PE fund.
As an ownership group, becauseultimately they do work for the
PE fund, but they're reallythat, you know, connective
tissue between management and PEin a lot of ways.
And then ultimately, you know,they sit on the board of these
operating companies too.
So yes, they're, they're,they're a part of the PE group.
(13:19):
But as we've talked about in ourbook, and we've talked about on
this podcast a couple times, youknow, you're, you've got other
folks at the table, the boardtable, so to speak, uh, beyond
just the management.
You know, you have the reps fromthe PE group, um, and a lot of
times the operating partners arethose folks that are, you know,
uh, sitting along the, aroundthe table helping you think
through the problems you have.
And one of the things, again,that, um, is attractive.
(13:45):
Two PE groups for in operatingpartners is they come with
generally a playbook.
They've been there, done that,and all businesses are unique,
but you know, most people at acertain point in their career,
if they've been successfulrunning businesses have kind of
seen it all.
so if it's matched up with theright strategy.
Uh, that the PE group is makinginvestments in, then they can
(14:06):
just come in and say, here's howwe get it done, folks.
You know, we're going to stripthis out, we're going to roll
this up, we're gonna tuck thisin, and then we're gonna
synergize and we're gonna flipand we're gonna x multiply and
know it sounds really cool, butpeople are highly effective of
that, and they just rinse andrepeat and they make a lot of
money for a lot of people,including themselves.
emily-sander_1_07-22-2025_1 (14:26):
And I mean, you both have
specialized at some point inyour career in turnarounds.
Is that a, Hey, I have anoperating partner who knows the
playbook for turning around thistype of business or this type of
distressed business?
ed--yes-_1_07-22-2025_14594 (14:41):
and a turnaround.
And a turnaround approach there.
It is a skillset that'sdifferent from a growth
oriented, like I am not a growthguy.
I am more of a turnaround guy.
Growth.
Growth is not my expertise andI.
Tend to be able to go, okay, Ican get you stable.
I'll get you kind of a pointwhere you can start to grow and
then you need to find someoneelse.
(15:01):
'cause I'm, I panic when I startspending money on marketing and
stuff.
That's just, I get
rory-liebhart_1_07-22-2025_ (15:07):
and I share that trait.
Oh my God.
know what it is about marketing,but that's the one that just
gives me the most freaking angst
ed--yes-_1_07-22-2025_145945 (15:14):
Oh yeah, no, it, I don't see the
ROI in it, but
rory-liebhart_1_07-22-2025_ (15:17):
ROI negative on
ed--yes-_1_07-22-2025_1459 (15:18):
Yep.
rory-liebhart_1_07-22-202 (15:19):
like, you
ed--yes-_1_07-22-2025_14594 (15:19):
but the skillset, so like when you
said turnaround.
A lot of times turnaround islike, from my seat, I've been
called on to turnaroundeverything from financial
services companies to techcompanies to, you know, it
doesn't, the, the playbook islargely, is largely the same.
There you have to learn thebusiness, but the playbook on a
turnaround is similar.
(15:40):
Then on the growth side, it's alittle bit different animal That
tends to be a lot more industryspecific because you really need
to leverage your expertise ofthe market, your expertise of
your competitors and, and thoseelements.
So it's easier for me to get acompany to, to a positive net
operating income.
Than it is for me to get fromthat positive net operating
income to a 30% growth rate.
(16:02):
And other people, other folkswho are in that industry have
problems going, how do I get toa, to a zero, to a, you know, a
a zero at the bottom of thefinancial statement or positive.
But once you're there andthey've got resources, they can
grow that thing at a 20%compounded annual growth rate.
rory-liebhart_1_07-22-20 (16:19):
Right.
maybe think about somethingthere.
I think turnaround I think CFOscan often be great turnaround
CEOs.
Based on the qualities theybring to the table.
Right.
It's, a lot of rationalization.
It's a lot of undoing wrongs andthings like that to getting it
(16:41):
to a point of, you know, beingprime for growth again.
And so, yeah.
That's interesting.
I dunno, that was a good.
emily-sander_1_07-22-2025_1 (16:46):
And you had mentioned.
Board members or board seatsearlier.
And I remember, um, I've had, Imean, you, you guys have
probably had some too, butindependent directors, so folks
who are like.
rory-liebhart_1_07-22-2025 (16:58):
seen them all.
emily-sander_1_07-22-2025 (16:59):
Yeah, but I've had some phenomenal,
um, independent directors whowere just like grounded, good
people wanted to help out.
They were certainly like part ofthe board and kind of, you know,
tucked in with the PE firm.
But they came on site, theytried to help, they connected
with, with folks who could helpus with stuff, and they were
some of the best resources wehad.
So, um,
rory-liebhart_1_07-22-202 (17:20):
ones.
Then.
emily-sander_1_07-22-2025 (17:21):
yeah.
rory-liebhart_1_07-22-202 (17:22):
would say I've, I've never, I've never
seen some mind blowingly goodones.
I've seen some neutral
emily-sander_1_07-22-2025_ (17:27):
Huh.
rory-liebhart_1_07-22-2025_ (17:28):
but I've never seen some game
changers, but I know they're outthere
emily-sander_1_07-22-2025 (17:31):
Okay.
rory-liebhart_1_07-22-2025_ (17:32):
out there.
Um, but that, but that's whereit comes into like what's
sometimes the criticism of.
These operating partners, maybe,maybe they become too meddlesome
on the board for, for, for, youknow, for the purposes of what
that particular operatingcompany is trying to achieve.
And maybe they've become more ofa distraction or, kind of chase
things down based on their ownperceived playbook.
(17:53):
That just isn't the rightplaybook for that
emily-sander_1_07-22-2025 (17:54):
Yeah.
rory-liebhart_1_07-22-202 (17:55):
Maybe they thought it was, but it's
not.
You know,
emily-sander_1_07-22-2025 (17:57):
Where do you come.
rory-liebhart_1_07-22-2025 (17:57):
I've certainly seen that
emily-sander_1_07-22-2025 (17:59):
Where do you come down on the like
outsider piece?
Because I was just talking tolike a chief communications
officer and he does
rory-liebhart_1_07-22-2 (18:04):
wisely.
emily-sander_1_07-22-202 (18:05):
these, like, these like workshops where
they, they need someone from theoutside to come in and like
facilitate this discussion.
And then I have other caseswhere it's like we don't wanna
outsider out, outsiderconsultant coming in and telling
us how to do our thing, youknow?
So I'm wondering like where youguys come down on that.
rory-liebhart_1_07-22-2025_ (18:22):
the board board construction chapter
in our book's, one of the moreinsightful ones, and I think we
could do a whole and should on,you know, board dynamics.
But, um, you know.
Each company, again, I'll say itagain, is, is is unique.
It has its own dynamics, itsculture, its challenges.
So when you bring in a a, anexternal board person, you know,
(18:47):
what is it you're trying tosolve for?
Are you trying to babysit theCEO?
Are you trying to, you know, aproduct strategy, implement a go
to market?
I mean, there's a whole litanyof things that you could be
trying to achieve.
So it's really matching what youreally need.
To the, you know, individualsthat can actually help push that
forward rather than justliterally up a board seat and,
(19:10):
you know, add no value in aquarterly board meeting that
lasts six hours.
You know, like I've seen that alot.
Um, but you know, I know thatthere's folks out there that
have made.
Businesses way better, um, onbehalf of ownership by what they
bring to the table.
And, and what that, what doesthat really mean?
If you really break it down, itmeans you willing to put in some
(19:32):
work to help this companysucceed?
Which means opening up yourRolodex, forging connections,
um, drawing back on the thingsthat made you successful,
bringing them to the bear here,you know, um, you know, coaching
and mentoring in a authenticway.
Um, you know, being, know, a, atrue, um, liaison between
(19:55):
management and pe, uh, there's awhole things that that can
actually happen.
But then there's stuff that, youknow, theoretically should
happen but doesn't, which is,you know, adding value.
So, uh, and a lot of, you know,these people, you, you know, the
company is paying these folks,right?
You know, there's oftentimescompensation attached to those
roles, not just paid by.
(20:17):
Uh, the PE group to that group,but like also paid by the
company to a board member, cash,comp, equity, all that stuff.
So, you know, there's onlylimited amount of that resource
to give away.
Make sure you're giving it awayto the right person or people.
emily-sander_1_07-22-2025_14 (20:31):
Do operating partners always have a
board seat or can you?
You can be, I know you can be anindependent director by
themselves.
You can be an operating partnerand or you could be both.
There's just differentcombinations.
rory-liebhart_1_07-22-202 (20:43):
Yeah, I'd say nothing's absolute.
I'd say, you know, a lot oftimes you have board seat taken
up by one of the, you know,managing directors on the deal
from P group, and then maybeindependent director that may or
may not be a, you know.
operating partner in the PEgroup might just be an
independent, that's notaffiliated, but it also could be
(21:04):
an operating partner that's partof that group.
I know a lot of folks at PEgroups that are on boards that
are operating partners, for
ed--yes-_1_07-22-2025_145 (21:11):
Yeah, your, your operating partner
from the PE group is not anindependent director in any
sense.
rory-liebhart_1_07-22-20 (21:17):
right?
ed--yes-_1_07-22-2025_ (21:17):
They're, they're a, they're a gonna be a
board member from, as arepresentative of the private
equity team.
rory-liebhart_1_07-22-2 (21:25):
Mm-hmm.
ed--yes-_1_07-22-2025_14594 (21:26):
So, you know, it was funny when Rory
had mentioned about, you know,independent directors and you
guys are talking, I was kind ofthinking back to the first
private equity backed companythat I was with.
is, is where, where we hiredRory, um, to do bank recs, um, a
couple years ago.
Yeah.
We actually had an incredible,
rory-liebhart_1_07-2 (21:46):
sometimes.
ed--yes-_1_07-22-2025_145945 (21:47):
we actually had an incredibly high
powered set of, of set of boardmembers.
Like we had, we had boardmembers that were like former
chairman of Goldman Sachs and wehad board member who was, uh, on
a federal reserve.
And we had, I mean, it was likethese were some powerful,
powerful, powerful dudes.
emily-sander_1_07-22-2025 (22:06):
Yeah.
ed--yes-_1_07-22-2025_14594 (22:07):
you know, the, the CEO was, was
tough to work for, but you gottagive him credit.
And that he had a board that hadsome really both local, um,
powerhouses, like HermanSarkowski and then some national
powerhouses on that board thatwere just, holy cow.
You know, you get on a boardcall and you listen to what
(22:29):
these guys had to say.
emily-sander_1_07-22-2025_1 (22:32):
If, if someone is.
rory-liebhart_1_07-22-2025_ (22:34):
You just hit on something though,
ed.
I am sorry to interrupt youthere, Emily, like.
Engagement is so important inthese things.
It's, it's one thing to assemblethe, like, roster of all stars
on the board, but it's anotherthing to get the actual
engagement from the board inthat business.
'cause these are folkstypically, uh, we're, we're now
moving more towards board, butlike, you know, this may not be
(22:57):
the only thing they have goingeither.
So it's like, you know, gettingthe engagement level at the
level that you want to see, itcan sometimes in its own right,
be a challenge,
ed--yes-_1_07-22-2025_145 (23:05):
Yeah, and that's, and that's actually
where the operating partner isof benefit.
'cause they are paid to befocused on that portfolio of
companies.
Where your outside board membersor independent board members may
or may not be getting paid cash.
They normally will have someskin in the game, you may or may
not, if they don't feel likeit's worth their time.
(23:27):
Or that, you know, the return isgonna be worth the investment in
time or money, you will not, youknow, when you've got a, when
you've got a, and we had forinstance, Chris Flowers, who is
with Goldman, powerful dude onour board you have a Chris
Flowers and he's like, I'm not,this is a waste of my time.
You're not gonna get engagement.
He's got, he's got banks to buy.
(23:48):
He's, he ain't gonna, he ain'tgonna worry about, you know, his
little investment in this smallcompany in Seattle.
rory-liebhart_1_07-22-202 (23:53):
Yeah.
ed--yes-_1_07-22-2025_14594 (23:53):
And you know it, but when there is
something to do, he wouldengage.
And so that was, or when he feltlike there was something
worthwhile.
So I think that's where theoperating partner is.
A real advantage for the privateequity team is you, you get the,
in theory, you get the expertiseof that independent board
member, but you also get theirfocus where an independent board
member, outside board member,you may or may not get that
(24:16):
focus, that that is really gonnahelp the management team.
rory-liebhart_1_07-22-202 (24:20):
Yeah.
emily-sander_1_07-22-2025_1 (24:21):
And you said companies plural.
In, in, in what you just saidthere.
So just to clarify, canoperating partner, are they
typically with one company orare they working many.
ed--yes-_1_07-22-2025_1 (24:31):
they're actually a cross portfolio and
it is, it's going to becircumstances that will cause
them to become embedded in acompany.
rory-liebhart_1_07-22-20 (24:41):
Right.
Uh, IE we're sacking the CEO andyou need to come in and actually
ed--yes-_1_07-22-2025_145 (24:47):
Yeah.
rory-liebhart_1_07-22-20 (24:47):
again.
Sorry.
Yeah, yeah.
That's that.
But, but I think that's part ofthe point, Emily, is, um, you
know, these folks, especially ifyou're have somewhat of a
unified.
You know, roadmap with the, theportfolio companies that the PE
group owns.
Like you want that kind ofconsistency across those
(25:07):
businesses.
And they, like, as I said,they're kind of that connective
tissue.
It can kind of steer things alittle bit.
Um, and they're usually prettyinfluential individuals and can
actually make things happen.
emily-sander_1_07-22-2025 (25:18):
Well, you gave that example where I
think, I think one or both ofyou have been CFO for all of the
Port cos in a fund.
rory-liebhart_1_07-22-2025_ (25:27):
Uh, I think Ed has done a little bit
more globe trotting than me.
Uh, I've done, I've done that.
I've, I've, journey I guess islike, I've been within the same
family of companies, but I'veboth had CFO and president role,
so I like, I've jumped around,but Yeah.
to different roles.
But yeah.
Point is, yeah, like, you know,typically there, there's a
(25:50):
desire to have unificationacross businesses within the
umbrella of the PE group.
Or ownership group for thatmatter, because I've done that
also for, you know, uh, let'scall it corporate owner group,
where we are basically operatingsubsidiaries, but, you know,
different businesses.
But trying to march to the samesheet of music within the same,
you know, uh, vertical in thecompany.
(26:10):
So,
ed--yes-_1_07-22-2025_145 (26:11):
Yeah.
And in, in my case it was, therewas a, they would have operating
partners, of which I kindaserved in the CFO type role for
the fund.
each fund, so I was like in fundfive, fund five had a set of
shadows.
Fund six had a separate set ofshadows and fund seven had a
separate set of shadows thatthey plucked out either off the,
(26:34):
you know, kind of brought in orplucked off their Rolodexes.
And that'cause their concern.
The concern there, and this goesback to kind of how private
equity is structured, is they,you know, the fund is basically
paying our salary at that point.
So now the private equity GPisn't paying the salary.
The, the fund companies arepaying our salaries.
(26:56):
And what they didn't wanna dowas go, well, this fund and this
fund, so fund five and fund sixin my case, had different LP
structure, so different lp,different LP ownership.
so they're like, look, you, you,you know, we can kind of charge
off to these, to these companiesin kind of proportional amount.
And it's the same investors overhere.
(27:17):
It's a different set ofinvestors or at least different
percentages.
And so we can't have you crossover.
So they actually really, nowthese funds were in the, the.
Big, big, big, like 10 figures,so it was not, or almost 11.
So it was not like we weresmall, tiny little funds.
These were big funds
rory-liebhart_1_07-22-2025_ (27:36):
No.
ed--yes-_1_07-22-2025_14594 (27:36):
and we were, you know, kind of, but
they, they would firewall usoff, but I would, I had a
portfolio of companies to lookat that included specialty
finance, restaurants, mortgagecompanies.
Uh, REO company.
You know, it was a bunch of, abunch of different stuff in
there that we had to, that wehad to over.
(27:56):
We had to over
rory-liebhart_1_07-22-2025 (27:58):
That was, that was your own form of,
uh, performance punishment.
I think, uh, you know, you'rejust, just, you know, bumping
along, running a business andthey're like, they're like,
you're like, uh, sorry buddy.
You're plucked out.
You're gonna have to untangle usfrom a web of shit, basically.
Uh, which you did.
So, you know, uh, sellingairplanes and, you know, uh,
yeah, all the good stuff, windstuff down, bankruptcy,
(28:19):
packaging, all that good stuffgood times.
emily-sander_1_07-22-2025_14 (28:24):
If operating partners are kind of a
second stage career or eventhird stage career type of move,
how does, if someone'slistening, it's like, you know
what?
I could, I could be moving intothat.
I have the background for that.
How do you become an operatingpartner?
ed--yes-_1_07-22-2025_1459 (28:37):
You, you better have.
was about to say, you betterhave gotten blocked by you
either.
You're either coming out of apublicly traded company or a
high profile unicorn typeprivate company.
or you've got a really strongrelationship with the private
equity firm, and there's anexpectation, and Rory kind of
(28:58):
hit on it.
There's an expectation with theoperating partners that you're
gonna be investing.
As a general partner does.
emily-sander_1_07-22-2025_1 (29:05):
Ah,
ed--yes-_1_07-22-2025_1459 (29:05):
it's
emily-sander_1_07-22-2025 (29:06):
okay.
ed--yes-_1_07-22-2025_14594 (29:06):
not just a, you are also gonna write
a check for the privilege andyou're gonna be co-investing
alongside the gp.
emily-sander_1_07-22-2025_1 (29:13):
You got skin in the game.
ed--yes-_1_07-22-2 (29:14):
co-investing alongside the LPs in many cases,
in, in that portfolio.
So that's part of, part of yourwin.
rory-liebhart_1_07-22-2 (29:22):
Mm-hmm.
ed--yes-_1_07-22-2025_14594 (29:23):
you participate in the GP return,
rory-liebhart_1_07-22-2025 (29:25):
Yep.
ed--yes-_1_07-22-2025_145945 (29:26):
of your risk is you generally write
a check for the privilege.
And so, you know, they, you may,you may get hired as an
operating partner with a salaryof$300,000 a year.
You're gonna be expected towrite a check for a minimum of a
million dollars the GP andbecome a partner and.
(29:47):
You've got the upside of acertain percentage of the GPS
portfolio
rory-liebhart_1_07-22-202 (29:52):
Yeah.
emily-sander_1_07-22-2025_1 (29:53):
And you're working your butt off.
ed--yes-_1_07-22-2025_14 (29:55):
you're normally working.
They, I wouldn't say they'reworking as hard generally as
the, uh, as the operators are.
rory-liebhart_1_07-22-20 (30:02):
Right.
ed--yes-_1_07-22-2025_14594 (30:03):
you are, you are definitely not
retired
emily-sander_1_07-22-2025 (30:05):
Yeah.
Yeah.
Yeah.
ed--yes-_1_07-22-2025_14 (30:06):
paying for the, you're paying for the
privilege.
Um, now again, as Rory noted,you will do if, if you're with a
good private equity firm andthey've got a good set of
investment thesis and you aredoing your, are doing your job
well, it's an incrediblylucrative business, and you are
not working a hundred hours aweek or 75 hours a week.
(30:27):
You're normally at a 40 to 50hour a week job.
You're more in a consulting typerole unless you get parachuted
in.
which case, then you've got a, ashit show on your hands and
you're gonna be, you're reallygonna be
rory-liebhart_1_07-22-202 (30:38):
Yeah.
emily-sander_1_07-22-2025_14 (30:39):
So you just have that option
looming over you at any time.
rory-liebhart_1_07-22-202 (30:42):
Yeah,
emily-sander_1_07-22-2025_ (30:43):
Para
rory-liebhart_1_07-22-2025 (30:43):
then it's
ed--yes-_1_07-22-2025_1459 (30:43):
that
rory-liebhart_1_07-22-2025 (30:44):
you, you'd be hard pressed to say no
because your, your, yourinvestment capital's at risk on
that deal, you
ed--yes-_1_07-22-2025_14 (30:49):
right.
rory-liebhart_1_07-22-2025_ (30:51):
So,
emily-sander_1_07-22-2025 (30:52):
okay.
rory-liebhart_1_07-22-2025_ (30:52):
but yeah, it is one of those things
that seems to me like one ofthe, one of the roles in life
that's more of a meritocracy.
'cause you, like I said, youdon't just, you don't just like
apply for that on like Indeed,you know, like you're recruited
heavily based on your levels ofsuccess that you've
emily-sander_1_07-22-2025_ (31:06):
who, who, uh, who's on that interview
loop?
Are the LPs interviewingoperating partners?
How does that work?
rory-liebhart_1_07-22-2025 (31:12):
Hmm.
That's a good question.
ed--yes-_1_07-22-2025_1459 (31:14):
I've never seen the, I've never seen
an LP as part of that process.
Part of that is because they arelimited partners,
emily-sander_1_07-22-2025 (31:21):
Yeah.
ed--yes-_1_07-22-2025_14594 (31:21):
not their role.
It generally is,
rory-liebhart_1_07-22-2025 (31:24):
the, in the PE group.
ed--yes-_1_07-22-2025_145 (31:25):
yeah.
rory-liebhart_1_07-22-202 (31:26):
yeah.
ed--yes-_1_07-22-2025_14594 (31:26):
The managing, the managing, managing
directors and
rory-liebhart_1_07-22-202 (31:29):
yeah.
ed--yes-_1_07-22-2025_1459 (31:30):
the, and the senior managing partner
at the, at the PE is generallygonna be your decision.
rory-liebhart_1_07-22-202 (31:35):
Yeah.
emily-sander_1_07-22-2025 (31:36):
Yeah.
Do you think this trend is goingto increase, stay about the same
as what it is now or decrease?
ed--yes-_1_07-22-2025_145 (31:43):
Well, I've certainly seen an increase
significantly from, you know, 20years ago when I was first in
pri 25 years ago.
When I was first in privateequity world, operating partner
concept was not as common.
And I mean, we, like I said, Iwas at a nine figure, 10 figure
fund and we had, we hadoperating partners, but that was
(32:04):
not.
You know that when we went, wereacquired.
Um, before that we had beenacquired by a smaller private
equity firm, no operatingpartners.
Um,
rory-liebhart_1_07-22-202 (32:14):
Yeah.
ed--yes-_1_07-22-2025_1459 (32:15):
now, I mean, the last, the last PE
firm we came out of them, theyhad operating partners and they
were, they're relatively smallin
emily-sander_1_07-22-2025 (32:23):
Yeah.
ed--yes-_1_07-22-2025_14594 (32:23):
so, you know, I think it's, I think
they recognize, and Rory had hadkind of cited the McKinsey study
where.
There's a r there's a tangibleROI to having a good solid
operating partner or operatingpartner strategy.
And so these guys don't leavemoney on the table.
That's, that's not, that's nottheir normal vo.
when they see that, that's, youknow, something that can
(32:44):
increase their at a relativelylow risk, increase their return,
um, you know, that brings a riskpremium down on that investment
and allows it to, to kind ofaccelerate the growth you're
gonna do that.
rory-liebhart_1_07-22-202 (32:57):
Yeah, I do think that the, maybe the
dynamic could change is the typeof personnel like so.
I feel personally like we're inthe midst of a really rapidly
changing technology landscape.
I mean faster than maybe we'veeven been used to in recent
times.
you're gonna start to see manymore CTO or just more like even
(33:19):
chief architect types, know,sitting as operating partners in
pe.
You know, folks that reallyunderstand how to.
Make ai, uh, utilized in, youknow, everyday business,
whatever, however you wanna putit.
I'm not a technologist, so I'mprobably not saying it the right
way.
All I'm saying is where youmight have seen.
(33:39):
CEOs and CFOs and so forth on isthe types of operating partners.
Now, it's gonna be much moretechnology, product people to
help their operating companiestake advantage of the zeitgeist
of ai, which we find ourselvesin.
If you can somehow attach.ai tothe.
Domain that you're on, likesomehow that increases
(33:59):
enterprise value.
So, you know, I mean, I justthink there's something to that
and so, you know, it'll continueto evolve as, as these things
do.
But yeah, certainly a lot moretechnology orientation, I think
product as well.
emily-sander_1_07-22-2025_1 (34:14):
All right, so a little bit of info
on operating partners andprobably a potential future pod
on board dynamics.
'cause that was.
ed--yes-_1_07-22-2025_145945 (34:21):
Oh boy.
emily-sander_1_07-2 (34:22):
Interesting that that might be a multi-part
series,
rory-liebhart_1_07-22-202 (34:26):
Yeah.
emily-sander_1_07-22-2025_1 (34:26):
for that.
But yeah,
rory-liebhart_1_07-22-2025 (34:28):
hits episode for us
emily-sander_1_07-22-2025 (34:30):
we'll close it out here.
We need like a catchphrase as weoutro.
What should our outro phase be?
Just like, I don't wanna justlike scream PS'cause that could
be packed,
rory-liebhart_1_07-22 (34:41):
hashtags.
emily-sander_1_07-22-2025_ (34:42):
that could be taken out of context.
Um.
rory-liebhart_1_07-22-2025 (34:45):
Hmm.
emily-sander_1_07-22-2025_14 (34:48):
We think about it.
ed--yes-_1_07-22-2025_1459 (34:49):
you.
emily-sander_1_07-22-2025_14 (34:49):
If listener, if you have a
suggestion, drop it in thecomments, let us know.
ed--yes-_1_07-22-2025_1459 (34:53):
That would be
emily-sander_1_07-22-2025_1 (34:54):
Let these bad boys out otherwise,
thanks, ed.
Thanks Rory.
ed--yes-_1_07-22-2025_145945 (34:58):
I.
rory-liebhart_1_07-22-202 (34:59):
Thank you.
Enjoy your alpha.
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