Learnings from Private Equity - investment performance
First installment: Testing 4 common PE myths
In today’s short publication we attempt to prove or disprove some common myths and see whether Private Equity firms:
- Tend to buy at higher multiples than Corporates
- Typically target small to mid-sized companies
- Have gone on a buying spree during COVID-19
- Spot trends ahead of others
Deloitte Value Creation Services
Our typical value creation mandates, bringing a PE perspective
Early Upside Assessment
When: Prior to- or in parallel with diligence to test the initial equity thesis and challenge the upside potential
What: An outside-in assessment leveraging benchmarks, insights from comparators and testing initial value hypotheses
Why: Provides the investment committee with an initial litmus test of the initial valuation potentia
Commercial & Operational Due Diligence
When: As part of the diligence phase, in parallel or subsequent to the financial, tax, and other diligence work
What: Internal and external assessment to build confidence over growth outlook, forecast cost development and assess market & operational risks as well as opportunities
Why: To confirm the investment’s underlying equity thesis and obtain an objective opinion on risks and opportunities
Value-led Integration & Transformation
When: Post-deal but ideally pre-Day 1 to embed the right objectives into integration and transformation plans
What: Establish & execute a fully validated set of upside initiatives that form the basis of an integration programme or transformation
Why: Defines key focus areas and tangible levers for the program to ensure the assumed value and synergies are being created and realized
Private Equity Lens Review
When: When a business or unit underperforms or when a step change is required in competitiveness
What: An outside-in assessment of performance potential and opportunities, leveraging an ‘external investor’ perspective
Why: Takes an unconstrained view of improvement potential, relying on facts and experiences from outside the business to push the envelope
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