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10X Capital Podcast
E114: Brockenbrough $4.3 Billion Investment Edge
Nov 22, 2024
Chris Dion, Co-Chief Investment Officer and Managing Partner at Brockenbrough, shares insights on the compelling world of small buyout funds. He discusses their unique resilience and ability to outperform larger private equity deals. The conversation highlights the importance of individual deal leaders over the firm itself, showcasing how these small investments adapt to changing markets. Dion also elaborates on the appeal of small buyouts for limited partners, emphasizing their strong risk-adjusted returns and operational improvement potential.
21:02
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Quick takeaways
- Small buyouts outperform larger private equity deals due to lower financial leverage and more stable, established entities driving long-term growth.
- The skill and experience of the deal leader are critical for success in buyout transactions, often overshadowing the importance of the firm itself.
Deep dives
Three Ways to Generate Returns in Buyouts
Making money in buyouts can be achieved through three primary strategies. The first involves growing the business by increasing revenues, EBITDA, and cash flow. The second strategy is expanding the business's multiple, which can occur either through external factors like decreasing interest rates or through internal efforts by general partners (GPs) to professionalize the business and improve growth rates. Lastly, leveraging debt can amplify returns, and while it plays a role, the focus tends to be more on consistent growth and enhancing business value.
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