50% Carry on 50x MOIC

Jim Tapp started his career at Mobil Oil, with a mortgage that kept him in the rat race. Then he met a blue-collar business owner with a giant yacht in his Newport Beach backyard. Shortly after, Jim Tapp moved his family with 5 kids back to Atlanta and got into the lower-middle market M&A game. After decades with funds and deal-by-deals, he now partners with two of his sons as an independent sponsor.

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Jim learned early that W-2 didn't build wealth. A business owner casually hosted a party on his yacht, and that contrast stuck. He left soon after, moved to Atlanta, and started in business brokerage. It was hands-on. It taught him how deals actually get done. From there, the move into private equity was a natural step, but with a clear preference to stay close to operators and outcomes.

The 50x MOIC deal was a software deal in the early 2010s. $2m of EBITDA, acquired for $2m (!). The cheap entry allowed Jim to negotiate a 50% carry with his investors, which were mainly people in his close network. Growth came through better sales discipline, improved pricing, and gradual product evolution. It eventually exited to Thoma Bravo for roughly $100m.

While always in the money, the business had its wrinkles too. It went through 4 CEOs before finding the right fit. Jim details the story with each of them. For example, one CEO insisted on a strategy that didn't match the original investment thesis. The situation dragged on longer than it should have, partly due to investor veto rights that slowed decision-making. Jim saw the issue early, but didn't act decisively enough. The fourth CEO was a winner: he is a sales-focused operator who was aligned with the original thesis.

Today, Jim is building a new independent sponsor shop with his sons. Working with family members, especially sons, has its elements. Communication is more direct, which can cut both ways. On LP relationships, Jim is adamant that independent should avoid giving up control on key decisions. Pay attention to where your capital partners are in their (fund) lifecycle. Misaligned incentives show up at the worst time, when you need capital for add-ons or time to achieve the growth plan.

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