SCP Introduction 2025

Question 1

What are 3 examples of LPs?

Answer 1

University endowments, pension funds, wealthy individuals

Question 2

What are the three common ways of making money on exit? In which does Shore focus?

Answer 2

IPOs, Sale of Company, Recapitalization

Shore specializes in company sale

Question 3

What are the 4 most popular kinds of private equity investments? In which does Shore focus?

Answer 3

VC, Buyout, Special Situations, Mezzanine

Shore focuses on buyout

Question 4

What is Shore’s general investment development strategy?

Answer 4

1. Growth oriented (vs. cost cutting or just stabilizing)
2. Operationally oriented (management, infrastructure, board of directors, etc.)

Question 5

What are the 4 main financing sources in PE? Rank them from less risky to most risky.

Answer 5

Less Risky

Senior-Debt
High-Yield Debt
Mezzanine Debt
Equity

Most Risky

Question 6

Tell me some general features regarding senior debt.

Answer 6

• Provided by commercial banks (i.e. Bank of America) as a loan
• Need to repay loan using operational cash flow within set period
• Has covenants
• Interest rates in 4-10% range

Question 7

Tell me some general features about high yield debt.

Answer 7

• Issued in public markets to institutional investors (i.e. Fidelity)
• High yield bond holders get paid second to senior debt holders in the event of bankruptcy

Question 8

What is the typical interest rate of high-yield debt?

Answer 8

10-17%

Question 9

Tell me some general features about mezzanine debt

Answer 9

• Represents a claim on the company’s assets that is only senior to equity (senior and high yield debt holders will be paid first in the even of bankruptcy)
• Generally a loan with options on equity (called warrants)

Question 10

What is the typical implied annual cost of mezzanine debt?

Answer 10

17-25%

Question 11

Who would the sources of equity funding be in a buyout?

Answer 11

PE Firm and Management Team

Question 12

When was Shore’s first platform investment?

Answer 12

2010

Question 13

What fund is Shore currently fundraising for?

Answer 13

Food & Beverage III

Question 14

What are the only two circumstances that Shore will grow?

Answer 14

1. If the growth helps our core business - microcap funds
2. If we have an unfair advantage

Question 15

Where does Shore’s seach fund feed into?

Answer 15

Feeds into Microcap Companies

Question 15

Go through the life cycle of “Idea Generation” through to “Sale” (6 steps)1

Answer 15

1. Idea/Sector Generation
2. Post-LOI Execution
3. Post-Platform Acquisition
4. Intra-Hold Activity
5. One-Off Value-Add Projects
6. Sale Process

Question 15

Where do the Best of the Best Companies feed into?

Answer 15

Advantage Fund

Question 16

What is an LOI?

Answer 16

A Letter of Intent (LOI) is a short non-binding contract that precedes a binding agreement, such as a share purchase agreement or asset purchase agreement (definitive agreements)

Question 17

What is Shore’s framework (process) for Idea / Sector Generation?

Answer 17

9 Innings Process → sector approval

Question 18

What is Shore’s framework (process) for Post-LOI Execution?

Answer 18

4 Quarters → post-LOI deal execution and closing

Question 19

What is Shore’s framework (process) for Post-Platform Acquisition?

Answer 19

100 Day Play → implement standard operating procedures

Question 20

What is Shore’s framework (process) for Intra-Hold Activity?

Answer 20

Planning, Growing, Harvesting → series of processes for each stage of growth

Question 21

What is Shore’s framework (process) for One-Off Value-Add Projects?

Answer 21

Operational Initiatives → customized ad hoc SRT / COE projects

Question 22

What is Shore’s framework (process) for Sale Process?

Answer 22

3 Periods → exit process execution - when to evaluate an exit, how to select the right banker, how to proceed with an “above plan” deal, who to sell to

Question 23

What does ad hoc mean?

Answer 23

When necessary or needed

Question 24

What is Shore's Portfolio Performance Group?

Answer 24

Four distinct groups of operating professionals within SCP. The PPG provides access to high-caliber resources and is available to work at or with a company over the life its partnership.

Question 25

What are the 4 PPG groups?

Answer 25

1. Centers of Excellence 2. Shore Resource Team 3. Partnership Development Managers (PDM) 4. Investment Services Group (ISG)

Question 26

Explain Centers of Excellence

Answer 26

The COE is a transformation team that helps new partners scale during the partnership. These highly experienced and accomplished executives have functional expertise in IT, HR, M&A, sales, marketing, data, RCM, lean manufacturing, and payor strategy.

Question 27

Explain the Shore Resource Team

Answer 27

The SRT members are operations and finance professionals who help new partners prepare for growth by implementing Shore’s ‘100 Day Plan,’ and providing flexible interim management or consulting project support throughout the hold period.

Question 28

Explain Partnership Development Managers

Answer 28

The PDT is composed of highly trained business development professionals that use a comprehensive tech stack to identify and engage potential sellers (both platform and add-on).

Question 29

Explain Investment Services Group

Answer 29

The ISG allows for experts to lead initiatives for our portfolio companies that are less frequent for the business but routine for Shore, including Talent Acquisition, the CXO Program, Capital Markets, and Strategy & Talent Development.

Question 30

What is a barbell sector? Why does Shore like them?

Answer 30

A barbell sector is an industry structure where there are: 1. A few large firms with substantial market share (e.g. $500M+ in revenue), 2. A small middle market, and 3. A large number of small, fragmented companies making up the rest (e.g. <$100M in revenue). In Shore's case, they love barbell sectors because that bottom-heavy distribution creates tons of micro-cap acquisition targets. These small firms are often owner-operated, under-optimized, and ripe for consolidation — perfect for Shore’s roll-up strategy. The idea is to buy and integrate many of these small firms to eventually build a mid-sized, high-value platform.

Question 31

What is a net asset value loan?

Answer 31

A Net Asset Value (NAV) loan is a type of credit facility provided to a private equity fund, secured by the value of its portfolio companies rather than uncalled capital. These loans help funds manage liquidity late in the fund's life, for things like follow-on investments, management fees, or investor distributions. For example, a fund nearing maturity might take out a $50M NAV loan against its $500M in portfolio holdings to finance a bolt-on acquisition for one of its companies.

Question 32

What is uncalled capital?

Answer 32

Uncalled capital is the portion of a private equity fund’s committed capital that investors have pledged but the fund has not yet requested. Fund managers "call" this capital over time as they identify investment opportunities or need to cover expenses. For example, if an investor commits $10 million to a fund but has only contributed $6 million so far, the remaining $4 million is uncalled capital.

Question 33

What is dry powder?

Answer 33

Dry powder in private equity refers to the committed but uninvested capital that a PE firm has available to deploy. It represents the cash that limited partners have pledged but the general partner hasn’t yet called for deals. For example, if a fund has raised $1 billion and only invested $600 million so far, the remaining $400 million is its dry powder.