Mike Choe, CEO of Charlesbank Capital Partners, discusses the risk of private equity valuation multiples reverting to historical means.
0:00 / 0:13exact quote · 14.0s
720p mp4 · rendered on demand · StarZero watermark
“We do think there is a little bit of a floor or a cushion to valuation mean reversion risk because of the fact that there's just trillions of dollars of global capital that wants to get allocated to private equity that will create a bit of a technical floor to that.”
quote is from the automated transcript, cleaned for reading:
filler sounds and stutters are removed, nothing is rephrased. names can be misheard
(the analysis reads context, assessments check outside sources). how →
More from Mike Choe
AssertionNot checkable as stated
Choe: Management stability shows little correlation with private equity investment success
“Another one would be that we used to think that management stability would be very correlated with investment success, and we looked at changes in C-suite management, and there was really not a ton of correlation there, so I'd say that's been an insight that h…”
Mike ChoeFeb 17, 2025▶ 38:17Michael Choe - Atomization of Private Equity Decisions at Charlesbank (EP.432)
AssertionNot checkable as stated
Choe: Charlesbank found lower entry multiples correlate with weaker private equity returns
“And in our case, and we really had the data just to look at the hundred or so transactions in our history as a private equity firm, there was really no correlation. If there was one, it was a very weak negative correlation. So lower multiple investments tended…”
Mike ChoeFeb 17, 2025▶ 38:41Michael Choe - Atomization of Private Equity Decisions at Charlesbank (EP.432)
PredictionNot checkable as stated
Choe: 2021 leverage excesses will cause restructurings over coming years
“We think a lot of the leverage excesses of 21 are likely to result in first liability management exercises, LMEs, that will then involve some amount of restructuring over the next few years or so.”
Mike ChoeFeb 17, 2025▶ 52:23Michael Choe - Atomization of Private Equity Decisions at Charlesbank (EP.432)
Insight
Choe: Standard 5-Year LBO Models Promote Anchoring and Familiarity Biases
“We're using a highly flawed tool that actually promotes all kinds of predictable human biases. There's anchoring bias, there's familiarity bias, to make a decision that is inherently very difficult to make. Because what we're really doing is we are underwriter…”
Mike ChoeFeb 17, 2025▶ 22:34Michael Choe - Atomization of Private Equity Decisions at Charlesbank (EP.432)
Disclosure
Charlesbank Models Investments Using 10,000-Simulation 2-Year Monte Carlo Analysis
“We have, as a result, shifted all of our modeling to a homegrown proprietary tool that we call our two-year fan of outcomes. It's basically a fairly simplified Monte Carlo analysis. It runs 10,000 simulations of the two year forward future of any given investm…”
Mike ChoeFeb 17, 2025▶ 23:32Michael Choe - Atomization of Private Equity Decisions at Charlesbank (EP.432)
AssertionNot checkable as stated
Choe: Two-Year Pre-Tax Earnings Growth Strongly Predicts PE Investment Success
“When we ran our regression analysis, our ability to grow the pre-tax earnings of a company within the first two years of our ownership was highly correlated and very predictive of ultimate investment success, no matter how long the hold period was.”
Mike ChoeFeb 17, 2025▶ 24:25Michael Choe - Atomization of Private Equity Decisions at Charlesbank (EP.432)
Made with StarZero
Turn any episode into a week of clips.
This entire site, over 700 episodes transcribed, diarized, checked and made playable,
runs on the StarZero media pipeline. Drop in your own episode and the podcast clipper finds the
moments worth sharing, cuts them, captions them, and reframes them for every feed.
We use essential cookies to make the site work. With your permission we
also use analytics cookies (Google Analytics and Mixpanel) to understand
usage and improve StarZero. See our Cookie Policy.