HoldCo Builders How Smart Buyers Create Alpha Without Cheap Debt
Dec 23, 2025
The classic private equity playbook is dead as rising rates and pricier debt make old strategies obsolete. A new mindset prioritizing operational capabilities over mere financial engineering is emerging. Specialization is key, as it builds credibility with founders and enhances sector focus. Founders are urged to ask crucial questions to vet potential buyers. Opportunities in the lower middle market abound, driven by speed, niche expertise, and effective execution. It's a transformative era for those eager to adapt.
AI Snips
Chapters
Transcript
Episode notes
Leverage-Driven Returns Are Broken
- The old PE playbook relied on cheap debt plus multiple expansion to deliver returns.
- That formula worked for decades but is now structurally weakened by higher rates and tighter leverage.
Debt Isn't The Safety Net Anymore
- Rising interest rates and lender scrutiny have reduced leverage and increased equity needs.
- Debt no longer cushions risk the way it used to, so financial engineering is a weaker edge.
Capability Deployment Replaces Capital Focus
- Winning firms will shift from capital deployment to capability deployment.
- Repeatable value-creation skills, not cheaper debt, will drive outperformance.