Since 2010, the U.S. market has experienced an unprecedented bull market. All this economic well being has led to significant investment activity, and with it, an increased number of investment portfolios. The global cash reserves for private equity funds has been on an aggressive growth spur since 2012 and has tripled in that period. See the chart below extracted from CNBC, source: Preqin.

The repercussion of such large amounts of cash waiting to be invested is that it brings fierce competition. As new or existing funds compete for deals. This could mean increased valuations due to bid wars which results in overpaying.

In this market, the pressure for closing deals is obviously high. This urgency could lead to glancing over key details of the target acquisition. The results of which, are unanticipated costs of integration, inheriting liabilities, and not fully understanding the risks or potential of the business.

For private equity funds to remain competitive in this kind of market, there many things that need to go well. Some are beyond their control, and others are not. Here is a list of essential elements that would help:

  • Create a strong due diligence process – Create a robust process that includes quantitative and qualitative analysis for a clear understanding of the business’s upside, risks, and opportunities to gain efficiencies.
  • Having a strategy for each acquisition – Whether you are industry-specific or industry-agnostic, there should be an entrance, growth and exit strategy for each of your portfolio companies.
  • Improve the business – For acquired companies, there should be several opportunities to gain efficiencies, as uncovered during your due diligence process. Create an implementation plan to leverage those opportunities.
  • Partner with the leadership team – The leadership team should be considered partners in the transaction. They are the ones that set the strategic direction for the business and manage the day-to-day execution. Ensure you have a strong and cohesive leadership team.

We will expand on each of these points further on future posts. Stay tuned for a series of upcoming blogs detailing actionable insights.

Share our Post:

Read more related Blogs…

5 Ways to Mitigate the Effects of Employee Turnover.

5 Ways to Mitigate the Effects of Employee Turnover.

In the current economic environment, there is plenty of opportunities for employees to find good job offers. As an employee, this is a dream come true; having employers seek you out is an amazing feeling. Along with the positive, and with a current U.S. unemployment...

read more

Give Us a Call

If you are a business leader that recognizes the need for cultural change, we should talk. Call us at +1 (817) 705 -1313, let Alphanova Consulting facilitate the transformation of your people, processes, and culture.

Alphanova Consulting is a business transformation firm that specializes in cultural transformations and increasing performance. We differentiate ourselves due to our approach. We help companies adopt behaviors to continuously improve their performance and engage their people.

Start Improving Your Bottom-Line with Alphanova

Our approach is hands-on as we work with all levels throughout your organization during our engagement. We focus on middle market businesses in the manufacturing, service, construction, distribution, and aerospace industries.

We are committed to going above and beyond our tour of duty. Your service experience with our company should reflect our bias towards adding value at all times.

Contact Us

817-705-1313

 

info@alphanovaconsulting.com

 

More Info

Fort Worth, TX | © 2018 Alphanova Consulting All Rights Reserved | Powered & Designed by Citryn, LLC

We are committed to going above and beyond our tour of duty. Your service experience with our company should reflect our bias towards adding value at all times.

Contact Us

817-705-1313

 

info@alphanovaconsulting.com

 

More Info

Fort Worth, TX

© 2018 Alphanova Consulting All Rights Reserved.

Powered & Designed by Citryn, LLC