📬 Deal Structuring: Seeking a Silver Bullet

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I asked. And - as ever - you didn’t let me down. I’ve got a great new batch of questions to work through. But I’m always looking for more. Submit your questions here, and I’ll do my best to get to them in the coming weeks.

We’ve got some great topics today. Here’s what’s on tap:

Now, let’s get into it.

Tommy T. from New York, NY asked:

Hi, Secret CFO. Really enjoying your series on capital structure design. Your latest installment mentioned the distinction between "patient equity" and private equity, which caught my eye as a long-hold private business investor (no intention of selling). What considerations should someone like me factor into capital structure design that don't fall within the more traditional PE playbook?

Tommy, I’m glad the series on capital structure design has been helpful. This is an interesting question.

There’s a short answer and a longer one.

The short answer: if you’re playing the long game, you’ll likely carry more equity and less debt than a traditional PE-backed structure, and be OK with lower headline returns in years 0–3. But what you get in exchange is time, and time is compounding’s best friend.

The longer answer: Private equity is about maximizing IRR. Patient equity is about maximizing absolute value over a time horizon measured in decades.

That changes everything about how you think about capital structure:

1. You’re not trying to exit fast, so you can design for resilience, not optics.

2. You should expect to pay a premium for good businesses, and that’s fine.

3. Inflation suddenly matters. A lot.

4. Your governance and incentives need a different shape.

5. Finally: survivability is underrated.

It’s a privilege to have patient equity to invest, and it affords you options that don’t work for traditional PE structures.

Thanks for the question.

EJ from Columbus, Ohio asked:

I’m leading what’s long been a lifestyle, family-run business that's always been under-capitalized. Now, as we're trying to professionalize, performance has ebbed and flowed - some strong periods, some weak. Our goal is a strategic transition: eventually cede control, take a small portion of upside, and stay on in an advisory/founder capacity.

But we’re stuck in the “too small for PE, too large for brokers” gap. Plus, results don’t yet fully reflect our upside. How do we bridge that credibility gap? Specifically:

How can a founder-led business use deal structuring to demonstrate upside without sacrificing control or requiring full PE terms upfront?

What ways have CFOs used capital allocation or partial deal mechanics to signal stability and capability amid volatility?

Are there frameworks or examples—maybe around M&A value capture via “last-mile” negotiations—that apply to our size of deal and goal to stay engaged post-transition?

Any frameworks or mini-case examples from your work on working capital peg, capital allocation, or founder transitions would be hugely appreciated. Thank you!

Thanks for the question, EJ.

I think you are looking for a silver bullet that doesn’t exist. This isn’t really a deal-structuring problem. Structuring can finesse things at the margin, but the credibility gap you describe is about fundamentals: scale and stability. If you’re too small for PE and too volatile for debt, no clever term sheet solves that.

Here’s how buyers will look at your business:

If the answers today are “not yet,” then most of the upside you see will be priced as their work to capture, not yours.

So what are your options?

Option 1: Sell now (realism play).

Option 2: Fix first, then sell (value creation play).

Even before a full exit, you can signal professionalism by:

Those small shifts don’t change the numbers overnight, but they change how a buyer perceives you: less “family lifestyle business,” more “investable platform.”

So yes, deal mechanics like earn-outs and rollovers exist, but they work best once you have the right platform.

Hamish from the United States asked:

I am running the finance function for a manufacturing site that hired almost a whole new leadership team (including me) 5 years ago. We were losing money in my first two years in the role. For the last 3 years, we have been seeing 2x industry average revenue growth, and our margins have pulled 2-3% above industry average. Things are looking up.

What advice do you have for scaling the business operating model? My perception is that the leadership team (myself included) is struggling to let go of what got us here. Any heuristics or reference material would be appreciated.

We also don't have a long-term strategy for the business. What advice do you have for pushing the business to realize the lack of a strategy as a key issue and take action?

Hamish, congratulations on the turnaround.

Crushing the competition on both growth and margin is no small feat. Most businesses would kill for that combination.

Now, let me give you two sides of the coin.

First side: Are you sure there’s a problem to solve here? Managers often don’t know when to get out of their own way. The best business I’ve ever been part of had the same simple strategy for 15 years. The job was just to execute it brilliantly. That was enough. And in manufacturing, where execution is inherently hard, doing it consistently well can be a strategy in itself.

Sometimes after a high-octane turnaround, teams start chasing the next dopamine hit. Looking for the next big “fix” when actually the job is to stabilize and deliver.

I’m wired this way, too. If there isn’t anything to fix, I’ll happily break something so I’ve got a new problem to solve.

Other side: You’re right not to just sit back. Most businesses do need to adapt to survive. And the brutal truth is this: The team that gets a business from 2 out of 10 to an 8 is often not the team that gets it from 8 to 10. Turnaround leaders are not always growth leaders. It’s a different skillset. So, it’s also that the team you are part of is a specialist in turning around factories, and it’s time to move on and find another broken one to sort out. Together.

That doesn’t mean you aren’t the right team for the next stage at your current gig, but it does mean you should test yourselves honestly.

So here’s the practical part. Gather the management team and force the question:

On the strategy gap, you do need a simple long-term view that links growth, capital spend, and capacity. Think 3–5 years out: What volumes are we targeting? What investments are needed in plant, people, and systems? What’s the financing model to support it? That’s the strategy conversation.

So either you keep executing brilliantly against a simple model, or you evolve into the next chapter with a clear roadmap and maybe some new blood on the team. 

A few of the biggest stories that every CFO is paying close attention to. This is the section you might not want to see your name in.

Define “F*ck Around and Find Out”: Overstate your earnings by £30M (~$40M), watch your shares sink 30%.

WH Smith operate general retail stores in travel hubs. Think those places in airports where you buy a travel adaptor, a neck pillow and (if you are me) a catering-size bag of Skittles.

Turns out an accounting error booked ‘supplier income’ in WH Smith’s North American income too early. They aren’t the first retailer to be found out like this.

The correction massively cut the profit outlook of its second-largest division, and wiped £600M (~$800M) off their market cap.

Now Deloitte’s on the case for an independent review…

Have you seen the new Target CEO Michael Fiddelke’s CV?

Talk about climbing the corporate ladder…

From finance intern to CEO. A brilliant advert for building a finance career in industry. I’ve known a few people who have climbed from finance graduate scheme to the C-Suite inside one company, but none as spectacularly as this.

Congratulation to Michael, he’s got his work cut out, but I’ll be rooting for him.

After a 2-year stint as CFO of Zaxby’s, Donny Lau is coming back to DG as CFO.

“After I leave, they’ll be begging me to come back. With a promotion.” - everyone who has ever left their job.

A great reminder to never burn your bridges. The world is smaller than you think…

ICYMI, here are some of my favorite finance/business social media posts from this week. In the words of Kendall Roy, “all bangers, all the time.”:

Real estate history is being made…

Well well well … it looks like the SPAC is back:

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

On Saturday, we discussed all things equity and the role it plays in your capital structure design. Equity is not just “ownership,” it’s a contract with real consequences. It dictates who gets paid, who makes decisions, and who controls the outcome when things go right… or wrong.

Check it out now

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.