Episode #425: Good Growth Margins and Growth Curves | Uncovering Ideal Investments in Private Equity with Eric Epstein

Eric Epstein is a seasoned private equity professional with over 30 years of experience. He began his career at the prestigious Blackstone Group in New York City, where he honed his skills for a few years before moving on to work with various private credit funds. Afterward, Eric joined the private equity group at Cerberus Capital and spent a decade working in their New York and Los Angeles offices. Currently, he operates as an independent sponsor. Eric has built strong relationships with family offices and institutional capital partners who support him in pursuing transactions primarily within the HALO (Health, Active Lifestyle, Outdoor) sector, and he is well-known for his involvement in such endeavors. 

Eric shares his insights and experiences, emphasizing the benefits and professionalism of private equity. He highlights the complexities involved in the industry, including the relationships between landlords, franchisees, equity groups, and debt groups. He also discusses his own experience closing a deal just before COVID-19 hit and how it impacted the private equity sector. Eric's focus lies in consumer brands and rapidly growing franchises, emphasizing the importance of good gross margins and scalability. 

Regarding the importance of cultural fit in partnerships he states, "You're not just selling your company for the highest price and moving on, you're entering a partnership. And so understanding the terms of that, not just economically and structurally, but also culturally, is a big deal."

Eric provides valuable insights on managing expectations, choosing the right partner, and ensuring a strong capital structure to support growth plans. This is a must-listen for anyone interested in the critical role private equity continues to play in the HALO sector. 

Some key moments: 

[00:05:57] Entrepreneurs buy territory, borrow, open leases; private equity partnership benefits management team.

[00:07:49] Relationship-based, curated approach to securing transactions.

[00:10:42] Economics and culture key in partnership transactions.

[00:16:28] Benefits of private equity and franchise diligence.

[00:19:45] Agree on private equity model's deficiencies, long-term hold, growth plans, diverse shareholders, capital structure.

A few key takeaways: 

1. Private equity offers benefits and professionalism. This episode highlights the advantages of private equity in terms of providing expertise and resources to help businesses grow and thrive. 
   
   
2. Unit economics and trust are key considerations. Pete and Eric highlight the importance of analyzing the unit economics of a franchise or parent company partner to ensure long-term sustainability.
   
   
3. Eric shares his experience of closing a deal just before the pandemic hit, highlighting the initial excitement that quickly turned into challenges due to the unforeseen circumstances. However, they also mention that they and others in the industry have managed to bounce back well, indicating resilience in the face of adversity.

Click here to download transcript.