Firing on All Cylinders
We haven't closed a deal in more than a year.
The last time that happened was 2020, during the COVID-19 pandemic, when the market was the most distorted I’ve ever seen it. Now, we have uncertainty, sure (though our Managing Director Emily is tired of everyone talking about that), but not like back then. So that fact might make you think the team here at Permanent Equity is anxious, frustrated, or even downhearted. After all, isn’t the fun of private equity in buying things?
Yet, at a recent team event, our CEO Brent pulled me aside and said, “I really feel like the team is firing on all cylinders right now.” Perhaps surprisingly, I agreed. Despite not doing deals, it doesn’t feel like we’re somber or tense. Instead it feels engaged, energetic. How?
I think the reason is that while doing deals gets all the headlines in private equity, the real rewards of investing don’t come from buying things, but from seeing enterprises you partnered with grow and improve over time. In other words, what makes Permanent Equity go is less about transactions and more about transformations.
Sure, we need to buy stuff, and I hope we get back to doing that soon (though we also plan to stay disciplined!), but there’s a reason that our fund’s duration is three times longer than its investment period. That’s because while you can get returns from sound underwriting, that’s a one-off. The compounding returns that create generational (f-word?) wealth only come about with sustained, incremental improvements in the operations, culture, and strategy of a business with a durable value proposition that serves its stakeholders well.
So despite not doing a deal in more than a year, the team at Permanent Equity has kept doing that important work in our portfolio. And that’s been pretty rewarding, too.
– Tim
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