Maximizing exit value: How to create value through credible and accelerated plans

Creating value today is challenging. Inexpensive debt and ever-expanding multiples are no longer there to drive returns. Valuations are not increasing as rapidly as in the past decade and hence, financial engineering can no longer obscure the reality of untapped value.

Recent reports indicate increasing pressure on private equity firms to deliver returns, with the average holding period for portfolio companies extending to seven years. And despite improving financing conditions, exit values remain stagnant compared to five years ago.

The pursuit of maximizing value is a continuous endeavor for firms, whether at pre-acquisition, mid-cycle, or exit stages. Being well-prepared for divestment involves optimizing prior financial and operational performance and documenting future potential for the next owner.

To create a compelling and defensible value narrative, Deloitte collaborates with clients on a rapid diagnostic to identify value creation opportunities and develop detailed, data-driven, management-committed improvement plans. Whether planning an exit within 3 months or 2 years, the goal remains the same: embark on a journey to unlock value by crafting a credible and compelling narrative. This approach significantly enhances the likelihood of a successful and valuable exit, increasing the business’s appeal to potential buyers.

This publication offers strategic advice for private equity firms planning to exit portfolio companies, and emphasizes the importance of building credible value creation plans that look at the business from a buyer’s perspective. It stresses the need for accountability and clarity to enhance the business's appeal to potential buyers and showcases real-world case studies demonstrating significant EBITDA improvements and successful high-value divestitures.