Becker Private Equity & Business Podcast: Detailed Summary

Episode Title: Private Equity Sentiment, Market Momentum & Access to Capital with Rick Kes of RSM
Host: Scott Becker
Guest: Rick Kess, Partner at RSM
Release Date: May 17, 2025

Introduction

In this insightful episode of the Becker Private Equity & Business Podcast, host Scott Becker engages in a meaningful conversation with regular guest Rick Kess of RSM. The discussion delves deep into the current landscape of private equity, examining market sentiment, momentum, and the critical issue of access to capital.

Guest Introduction: Rick Kess and RSM ([00:00] - [01:38])

Scott Becker opens the episode by welcoming Rick Kess, who provides a comprehensive overview of RSM and his role within the firm.

Rick Kess:
"For those of you who aren't familiar with RSM, we are the leading provider of services to the middle market. So we are the fifth largest professional service firm in the U.S., very focused on companies around $100 million to about $5 billion of revenue." ([00:29])

Rick emphasizes RSM's significant impact, highlighting that their client base represents a little over a third of the U.S. GDP. He underscores the firm's long-standing relationships with private equity companies and their portfolio holdings, attributing RSM's robust market reputation and differentiated relationship management to their sustained success. With two decades at RSM, Rick brings extensive experience in healthcare and private equity management to the table.

Current Market Sentiment and Trends ([01:38] - [05:18])

Scott transitions the conversation to the recent market dynamics, noting a six-week pause in private equity activity despite public markets nearing a flat year-to-date performance.

Rick Kess:
"The public market is obviously very easy to read... It's a lot harder in the private equity world as, you know, a lot of that stuff is just quite frankly private and so little harder to get to." ([01:56])

Rick discusses the impact of recent news, specifically a 90-day pause on certain tariffs with China, and its favorable reception in the markets. He contrasts the transparency of public markets, where data and sentiment are readily accessible, with the opaque nature of private equity markets. Rick conveys a cautiously optimistic outlook among private equity fund managers and portfolio companies, suggesting that positive momentum factors—such as interest rate cuts or a favorable deal environment—could catalyze increased deal flow.

Key Insights:

• Public vs. Private Markets: Public markets offer transparency and real-time sentiment analysis, whereas private equity relies on more discreet and less accessible information sources.
• Cautious Optimism: Despite uncertainties, there is a general sense of optimism that positive changes could reignite private equity activity.
• Momentum Factors: Interest rate adjustments and improved deal environments are seen as potential catalysts for market resurgence.

Challenges in Private Equity: Margins, Debt, and Access to Capital ([05:18] - [07:16])

Scott shifts the focus to fundamental challenges within private equity, particularly concerning company margins and debt costs.

Rick Kess:
"Even well-capitalized or highly valued companies are starting to have a sense that capital access is not quite what it was." ([04:29])

Rick elaborates on the difficulties companies face in affording high interest rates and maintaining sustainable margins amidst rising debt expenses. He highlights that access to capital has become more constrained compared to previous years, even for companies with strong financial positions. This tightening extends beyond private equity to the broader venture capital landscape, as Scott mentions anecdotal evidence from the TV show Landman, where investment opportunities are diminishing unless companies boast robust balance sheets.

Scott Becker:
"Access to capital is more challenging, particularly unless you have a great balance sheet." ([05:48])

The discussion underscores the ripple effects of constrained capital access across various sectors, emphasizing the importance of financial resilience for companies seeking investment or financing in the current economic climate.

Public Dialogue and Cultural References ([05:48] - [07:16])

The conversation takes a lighter turn as Scott and Rick discuss popular TV shows like Landman and Mobland, providing a brief respite from the heavy financial topics. Rick shares his appreciation for Landman and its star, Billy Bob Thornton, before mentioning his packed schedule with three children, which limits his time to explore new shows.

Scott Becker:
"Landman and Mobland are two remarkable shows." ([06:43])

While these segments are peripheral to the main discussion, they humanize the conversation and offer listeners a glimpse into the personal interests of the guests.

Conclusion and Final Remarks ([07:16])

Scott wraps up the episode by reiterating the value of Rick Kess's insights into the private equity landscape. He commends Rick and RSM for their exemplary work in the industry, leaving listeners with a sense of appreciation for the expertise shared.

Scott Becker:
"Fascinating to watch and always fantastic to visit with Rick Kess, brilliant partner from RSM. The best in the business and what they do. Rick, thank you so much for joining us today." ([07:16])

Notable Quotes

• Rick Kess on RSM's Impact: "We provide tons of services to private equity companies and their portfolio holdings... we think differentiates us from the competitors." ([00:29])

• Rick Kess on Market Transparency: "The public market is obviously very easy to read... It's a lot harder in the private equity world as, you know, a lot of that stuff is just quite frankly private and so little harder to get to." ([01:56])

• Rick Kess on Capital Access Challenges: "Even well-capitalized or highly valued companies are starting to have a sense that capital access is not quite what it was." ([04:29])

• Scott Becker on Access to Capital: "Access to capital is more challenging, particularly unless you have a great balance sheet." ([05:48])

Key Takeaways

1. RSM's Role in Private Equity: As a leading provider of middle-market services, RSM plays a crucial role in supporting private equity firms and their portfolio companies, contributing significantly to the U.S. GDP.

2. Market Sentiment: While public markets exhibit more transparency and respond quickly to news, private equity markets operate in a more opaque environment, with sentiment leaning towards cautious optimism amid potential positive momentum factors.

3. Challenges Ahead: Companies in the private equity space face significant challenges related to maintaining margins and managing debt costs, compounded by tighter access to capital compared to previous years.

4. Importance of Financial Resilience: In an environment of constrained capital access, having a strong balance sheet is increasingly vital for companies seeking investment or financing.

5. Human Element: The conversation highlights the importance of balancing professional insights with personal interests, illustrating the multifaceted lives of industry professionals.

This episode offers a thorough exploration of the current state of private equity, enriched by Rick Kess's expertise and thoughtful analysis. Listeners gain valuable perspectives on market dynamics, the critical issues of capital access, and the broader economic factors influencing private equity today.