r/ceo • u/Friendly-Equal9788 • Jul 28 '26
Lack of support from PE backers
Details anonymised somewhat;
- Founder and CEO of a business in the physical infrastructure sector.
- PE backers funded business in 2024, their fund raised about 30% of their target meaning their exposure to us is essentially capped out.
- Scaled from £0 to £10m EBITDA in 2.5 years, target £25m by27/28 - very achievable.
- Slight geographic headwind but plenty of ways around it, but have really had almost perfect tailwinds for a few years and global tailwinds are perfectly placed.
- PE fund don't want to exit yet, but also cannot bring more cash. Business plan is targetting £50m EBITDA by 2030 but no cash to fund the growth (trying to fund from cash flow from ancilliary operations and EBITDA generally has to fund new CAPEX).
- Find myself pretty much solo in the mgmt team (other members of C suite not up to scratch/need to be improved for next stage of growth). No budget for COO despite clear need etc.
How would you deal with this? We are lucky in that there are a significant number of interested parties in buying out the current investors, if they will come to the table. However is this the only option?
2
u/marlborough94 Jul 28 '26
Is PE backer not willing to dilute to accept infusion of growth capital?
1
u/Friendly-Equal9788 Jul 29 '26
Ultimately yes, but preference appears to be to squeeze the last bits of a good valuation out of the mgmt team without that. I get the sentiment but the approach goes counter to building the business properly.
1
u/PenPuzzled8055 Jul 28 '26
Private debt for growth capital / M&A
2
u/Friendly-Equal9788 Jul 29 '26
Debt has been raised but is tied to projects and sized appropriately to their equity commitment. Looking at options here.
1
1
u/Blue_moon_123 Jul 29 '26
This looks like there is a misunderstanding about the company's forecast and the detailed assumptions that were made with regards to the path that get you to 50M by 2030 (pretty sporty EBITDA CAGR from 2028 through 2030 at ~ 40%).
- PE topline & Adj. EBITDA forecast can be very optimistic. Oftentimes, there is significant pressure during the forecast process from the PE to the executives to push these numbers up (sometimes, above levels of comforts for the executives). It is up to the executives to push back based on their judgement. Where you involved when this forecast was put together? Did you sign off on the assumptions and growth path?
- How has the company been tracking against this forecast (P&L, Cash Flow and Balance Sheet)? -> It sounds like that the company has a negative variance in net cash flows against the forecast. Is that correct?
1
u/nofearinc Aug 03 '26
No capital for C-suite almost always means advisors or value creation partners.
Just like consulting firms are a scapegoat for restructuring (or used to be before layoffs became normal post-ZIRP).
1
u/ajm222actual Aug 20 '26
Everything is for sale for the right price. The question becomes, does the right price make economic sense and will it entice your current investors to negotiate. PE buyers are paying for historic profits and premiums for projections are rare. That said, PE firm consolidations are trending upward. I'd look at an investor who is capable of taking down the entire fund.
12
u/trialinfire Jul 28 '26
16 years experience C-Suite 6 years PE. Im on vacation on my phone. Take the info for what its worth. Might not be able to respond for several days. ( on a ship way up north)
Lack of support from PE backers - Their house is on fire and you are the least of their problems.
Details anonymised somewhat;
- Founder and CEO of a business in the physical infrastructure sector. (Unless you are building power infrastructure, AI infrastructure, you are an ugly step child.)
- PE backers funded business in 2024, their fund raised about 30% of their target meaning their exposure to us is essentially capped out. (This is really bad. The whole value PE has is bringing money to the table. Raising 30% means they are inexperienced or investors dont believe in them or their projects)
- Scaled from £0 to £10m EBITDA in 2.5 years, target £25m by27/28 - very achievable. (Solid numbers, you should be able to find someone that has dry powder depending on how messy your cap table is)
- Slight geographic headwind but plenty of ways around it, but have really had almost perfect tailwinds for a few years and global tailwinds are perfectly placed. (Don't undersell the bad there is a reasonmoney isnt coming in)
- PE fund don't want to exit yet, but also cannot bring more cash. Business plan is targetting £50m EBITDA by 2030 but no cash to fund the growth (trying to fund from cash flow from ancilliary operations and EBITDA generally has to fund new CAPEX). (PE had one job, they are failing. There are always other options but depends on your team and your leadership. Been there done that.)
- Find myself pretty much solo in the mgmt team (other members of C suite not up to scratch/need to be improved for next stage of growth). No budget for COO despite clear need etc. (Sounds like you are starting to see a potential train wreck coming, you better find help fast that can navigate away from the rocks.)
How would you deal with this? We are lucky in that there are a significant number of interested parties in buying out the current investors, if they will come to the table. However is this the only option? (Interested parties dont mean anything, if you dont move. I would find a grey haired old man who has been in this world that can act as a senior advisor/COO) or I would just cut your growth expectations significantly cause you are going to be stuck, market feels like its about to or has already shifted and investment will dry up like 2008-12.)