Private equity has never been more misunderstood.

In this episode of The Deal Factory, Jeff Harkness sits down with longtime friend and Plexus Capital Partner Brad Pence for one of the most practical conversations yet on how institutional investors actually evaluate businesses. From defining the lower middle market to explaining fund structures, leadership, AI, operations, and value creation, Brad provides an inside look at what separates companies that attract premium valuations from those that struggle to transact.

The conversation goes well beyond deal multiples. Brad shares how great investors think about people, leadership, operational excellence, technology adoption, capital deployment, liquidity, continuation vehicles, and why the best private equity firms are focused on building stronger businesses—not simply buying EBITDA.

Whether you're a founder considering institutional capital, an executive leading a PE-backed company, or simply trying to understand how today's investment market works, this episode offers a masterclass on what creates long-term enterprise value.

Key Discussion Points

• Brad Pence's journey from college graduate to Partner at Plexus Capital

• Defining the lower middle market vs. the middle market

• What institutional investors actually evaluate before investing

• Why leadership is the single biggest investment decision

• Building trust between founders and private equity partners

• Current state of lower middle market deal activity

• Return expectations, fund structures and investor discipline

• Continuation vehicles explained simply

• How AI is improving business development and operational efficiency

• Why data systems and financial visibility drive enterprise value

• The operational playbook behind successful platform companies

• Organic growth vs. acquisition integration

• Debunking common myths about private equity

• Alternative capital options through structured debt and minority investments

• Balancing career, family and high performance

Chapters:

0:00 Intro

1:10 Meet Brad Pence & Plexus Capital

7:30 From Analyst to Private Equity Partner

17:30 What Is the Lower Middle Market?

20:15 Current State of Private Equity

24:30 Capital Deployment & Investor Expectations

30:00 Fund Life Cycles & Liquidity

33:00 Continuation Vehicles Explained

35:45 AI's Real Impact on Private Equity

41:20 Leadership Is Everything

48:40 The Plexus Operating Playbook

52:10 Building Companies That Scale

56:45 Private Equity Myths Debunked

1:00:30 Structured Capital Without Giving Up Control

1:04:30 Brad's Leadership Habits & Closing Thoughts