14 Apr 2026 6 min read

“I refuse to call us an AI company.” The Falfurrias line every PE-backed CEO should steal

Hello there!

The warm weather is here in the mid-Atlantic, another signal of how fast the year is going by. And time definitely flies when you're having fun, and I had a lot of fun this week.

First, a great episode of the podcast with Holli Moeni, one of my favorite guests ever, who speaks from the other side of the deal table, supporting founders as they enter into private equity acquisitions to help them avoid the most common 'crimes'.

Then I attended a fascinating event put on by Falfurrias Capital Partners. It was great to hear from the deal team on both sides, as well as hearing the different perspectives on the process from both a founder CEO and a PE-inserted CEO.

More on both of those and much more below. Enjoy the rest of this week's memo.

Graeme

Three Things I Learned This Week

AI as infrastructure, not identity

Last Thursday, I sat in on a Falfurrias Capital Partners panel in Tysons, VA. Three people on stage, two of them PE-backed CEOs in the federal contracting space. The line that stuck with me came from Phil Murphy, who runs Synergy ECP. They hold the largest data transport contract at Fort Meade, and they have mandated AI integration across their back office. ChatGPT for reports. Copilot for drafting. Real deployment, not theater.

Then Phil said this. “I refuse to call us an AI company or a cloud company. These are underpinning technologies that we will find ways to leverage to achieve the mission.”

Think about what that means. The company is using AI everywhere. The customer is skeptical of anything that sounds like a tech trend. So the positioning stays on outcomes, and the AI stays under the floorboards. That is the right answer. Your customers do not buy your AI. They buy the thing the AI makes possible. The portfolio companies that will win over the next three years are the ones that deploy AI aggressively and talk about it quietly.

If your board deck has more slides about your AI strategy than about your AI results, you are doing it backward.

Almost half of the top 30 US CPA firms now have PE investment

Capstone’s 2026 M&A outlook noted that the CPA sector has crossed a threshold. Nearly half of the top 30 US accounting firms now have PE investment or alternative practice structures. The advisory and accounting space is consolidating under PE sponsorship at a pace nobody was talking about this time last year.

This matters for two reasons. First, your diligence provider might be a portfolio company. The QoE team sitting across the table from you probably reports to a sponsor whose thesis you are about to bump into. Second, the professionalization wave that hits accounting firms post-PE investment is exactly the same wave that hits any services business post-PE investment. Standardize the workpapers. Lock down the data model. Consolidate the tech stack. The firms going through it are going to show up at your diligence with sharper processes and tighter timelines. That is the upside. The downside is that every one of those firms is also selling you their technology bundle as part of the engagement. Know what you are buying.

I recorded a new episode of PE Data Guy, this week with Holli Moeini. Holli is a CPA who spent 30 years as a CFO, scaling companies from $30M to $200M through acquisitions. She now works almost exclusively with founders and sellers going up against PE buyers. Her book, Finding the Missing Millions in M&A, came out a few months ago.

Her framing is that every deal has five crime scenes where money quietly disappears. The financial story. Working capital. Diligence. Earnouts. Integration. Miss any one of them, and you are handing money to the other side of the table.

Holli told me this super story. It was the night before closing on an eight-figure deal. She was on the sell-side. Her seller mentioned they had a million dollars' worth of work done but not yet billed. Holli told them they had to get it on the closing balance sheet. They jumped on Zoom with the buyer. The buyer said, "No, you do not get that." Holli said we will bill all night. Then she dropped the magic word. We will delay closing. The buyer called back twenty minutes later and said, "Fine, you can have it." Her seller said afterward, I would not have even known they were screwing me over.

The advice she gave on the episode is the kind of thing every operating partner should tape to their monitor. Your compliance-based accountant is not designed to help you maximize value. They are designed to keep the IRS off your back. Those are different jobs. If you want the balance sheet to support the exit, you need someone who reads the numbers for a story, not for compliance. Watch the full conversation here.

Two News Stories From This Week in Mid-Market PE and Data

Anthropic is putting $200M into a venture with PE firms to sell AI directly to portfolio companies

Sources: Axios | CLA 2026 Predictions | FTI 2026 PE AI Radar

What happened. Anthropic committed $200M to build a new venture with PE firms focused on selling AI tools directly into portfolio companies. This follows the OpenAI discussions with TPG, Advent, Bain, and Brookfield reported in March. Every major foundation-model company has now reached the same conclusion. Enterprise AI does not sell itself. Portfolio companies need a deployment layer, and PE firms are where that layer gets built.

Why you should care. When companies building AI spend their own capital to build deployment arms, that tells you two things. First, the technology is ready. Second, the customers are not. The $200M is not flowing in because portfolio companies have figured out AI. It is flowing in because they have not, and that gap is big enough to justify a standalone business. The practical implication is that every operating partner is about to get pitched on an AI deployment partnership in the next 90 days. The good ones will ask which of the 15 portfolio companies is ready to actually receive it. The honest answer is almost always fewer than you think, because the readiness gate is not the AI. It is the data underneath.

61 middle-market borrowers got CCC credit ratings in 2025. Highest on record.

Sources: Capstone M&A Outlook 2026 | Bain 2026 Global PE Report

What happened. Capstone Partners’ 2026 outlook flagged a statistic that has not gotten enough airtime. 61 middle-market borrowers received CCC ratings in 2025, the highest number on record. CCC is the credit rating at which the default risk starts getting seriously priced. Combined with a $1.8 trillion private credit market under stress (BlackRock capped redemptions on its $26B HPS fund last month) and 52% of buyout-backed companies held for four or more years, the picture is mixed. PE confidence is at 86%, an all-time high. And mid-market distress indicators are climbing at the same time.

Why you should care. The mega-fund headline numbers do not tell you what is happening in the mid-market. If your portfolio company is carrying floating-rate debt and sitting in the extended-hold category, you are not in the confidence story. You are in the stress story. The playbook here is not optimistic. Buyers are doing full commercial diligence and taking their time. Sellers need defensible numbers and a clean data room before they even start the process. The firms that move first on data readiness in the next two quarters will be the ones trading when the window opens. Those who wait for market timing will find that buyers are timing data quality, not the cycle.

Preview - Something We’re Building

Quick heads-up for regular readers. We are piloting a new fixed-fee diagnostic called the Data Flow Audit. One calendar week. Three to five leader interviews. A one-page document that names the two or three data constraints most likely to drag on margins, slow a quarter close, or surface during diligence. It sits between the free VCP Data Score and the full Data Readiness Assessment.

Not on the website yet. If you are an operating partner triaging a few portcos, or a CFO 18 months from exit, wondering where the data potholes are, reply to this email, and I will send you the one-pager.

Sign-off

If this resonates and there is something you think we can help with, just reply to this email. We read everything that comes through.

As always, please forward this on to your favorite PE-backed friend.

Cheers,

Graeme