Friday Letter Twas the night before Christmas

(at a Private Equity Firm With Founder Economics)

‘Twas the night before Christmas and all through the firm

The founder was selling a stake, it was learned


Associates grumbled: “How can it be?

The boss makes a mint, but what’s in it for me?”


Vice presidents murmured with worry and dread,

While visions of spin-outs spun round in their heads.


The founder, alas, had sold a minority

To an oil-rich country’s investment authority


And thereby be primed for a big IPO

Would ownership of this man’s firm expand? No.


“He’ll pocket the proceeds – the sum of all fears,”

Said a partner who’d worked there for seventeen years.


“This doesn’t surprise me,” a VP confided.

“This firm’s economics are friggin’ lopsided.”


And oh, what a payday this founder would see

With his huge AUM and diverse list of fees.


He’d been quite content – didn’t want for a thing

‘Till the wise guys of Blackstone went public last Spring


More rapid than eagles his envy did rise

So the founder set out to secure his own prize.


To Washington, Oregon, CalPERS, Nomura

Through China, and all of its nomenklatura.


Then out in the Emirates, his luck made him holler:

“Now dash away with all my fine petrodollars!”


But back at the firm, all the deal pros were stressin’

But no one dared mention the topic, “Succession.”


Then suddenly someone said: “This is so shady.”

They all turned in shock – ‘twas the firm’s cleaning lady!


She spoke not a word about underpaid taxes

But held in her hand some old, discarded faxes.


She said: “I can prove that your big LBO

Was won in cahoots with the old CEO.”


The deal guys were frightened. They cried, “This is scary!”

They shook like a silent-mode bowl of BlackBerries.


The founder walked in and became histrionic,

Begging: “What do you want?” And she said: “Economics.”


“I want a small piece of this thing you call carry.”

“How much do you want it?” the founder asked. “Very.”


The deal guys felt bolder, and they said: “So do we!

And we want to eventually own the GP!”


“Whether treated as income or capital gains,

We want an alignment of interests and pains!”


The founder agreed to share most of his loot,

The cleaner and deal guys shared hugs and a hoot.


The founder, now joyous, exclaimed through his tears:

“Carried interest to all, and to all a good year!”


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