The Dancing Bear: Why High Margins Are a Red Flag

Heather introduces the “dancing bear,” a term from private equity for a business so dependent on its current owner that it cannot perform without them. She explains why suspiciously high margins can be a warning sign rather than a selling point, since they may reflect the seller’s personal magic rather than a transferable operation. Will notes that his firm flags unusually high margins the same way, as a hint of hidden structural weakness.