Last week I had the opportunity to give a talk to the Kellogg Alumni Club of Chicago on the topic of Private Equity (PE). It was also great to spend time with the club’s leadership — what a fun, engaged group! 🙂

We had a great discussion on the history of PE, how it works, and the different ways PE partnerships operate. The participants were very interested in what makes PE investments in many cases more successful than investments by publicly traded companies. I summarized the differences in five key areas:

  1. Significant focus on CASH FLOW rather than accounting earnings.
  2. Prudent use of leverage (debt)
  3. Speed to decision making
  4. Alignment of management incentives
  5. Board of Directors involvement

You can watch a clip from the session above or by clicking this link to hear the relevance of each of these.