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Need to Meet: Bill Stoffel, U.S. private equity leader, EY

Bill Stoffel reckons he’s worked with all but one or two of the largest private equity firms in the past 20 years. The leader of Ernst & Young’s U.S. PE practice, Stoffel now spends three-quarters of his time with a single very large client.

“It’s a pretty multipronged beast,” Stoffel said of private equity, though transactions are its “heart and soul.”

To survive, “you have to be OK with a lot of change and uncertainty,” he says. “Most of the work that we get involved with are two-to-three week sprints,” and in that brief span “you’re asked to understand a business and help our clients understand whether they should buy the business or not. If you’re not someone who can think on their feet, and is not OK dealing with a lot of uncertainty, then this is not going to be a great practice for you.”

Stoffel was part of EY’s assurance practice in 1996, when he was asked to work on some deals. “At that time our transaction practice was, especially in New York, probably 90 percent private equity, and I came in and worked on a few transactions and I think it’s kind of either in your blood or not in your blood,” he said. “It was in my blood.”

Back then, “everybody was a generalist,” Stoffel recalled, or “almost everybody. And you had a lot of satellite investing. People would fly from New York around the country, or around the globe. I did projects in Korea, France, Germany, Russia. …” Now, firms “are very disciplined in terms of having real sector experience, as well as local people with boots on the street.”

The reason is competition. “You’re looking at record dry powder,” Stoffel explained. “It’s something like half a trillion dollars that’s out there, which is kind of 2007 levels. So it’s pretty sizable dollars that are at play. There’s a lot of people chasing after a few deals.”

Despite recent uncertainty in the debt market, and the question mark that is Brexit, Stoffel says deals will continue to get done in the U.S. Those include both carve-outs — “probably the No. 1 area where private equity historically has made a lot of money” — and add-ons. “Building large, sustainable, scalable models: That’s ultimately what our clients want to do to maximize their returns.”

Those clients are good at compartmentalizing, Stoffel said, knowing what needs to get done on very tight deadlines. But then someone has to do it, from pre-auction due diligence to IPO preparation. (And in between: “Once the business is in-house, we also do the audits, we do tax advisory work, whether it’s helping them on their control or other aspects of their operation.”)

“If you don’t have a different way to come at an investment, whether it’s a valuation creation opportunity or some type of managerial input to improve the business or open up different avenues for it, then I think you’re hard-pressed to pay the multiples that are paid and still earn a good return,” Stoffel said. “There’s no easy money, I think, within private equity.”