PE Value Drivers Series: An Interview with a Private Equity Operating Partner Experienced in Value Creation
Apr 14, 2020 12:00:00 PM — As GPs guide their portfolios through the current COVID-19 crisis, they should ensure that the marketing teams at all their investments can still function remotely, according to Chief Outsiders’ Aurora Toth, who has some tips for PE firms on how to do just that. Private equity as an asset class is now mature enough to have weathered several downturns, and even the financial crisis of 2008, with some firms emerging only stronger for it. Slowdowns can even prove friendly, lowering asset prices, sparking the sale of non-core units and creating turnaround opportunities. But COVID-19 might rattle the most veteran dealmakers. A public health crisis of this magnitude will create unique problems that will be hard for anyone to predict, or easily solve.
Mar 16, 2020 1:08:48 PM — Winning the Brand Game Can Supercharge Your M&A Results For acquirers of businesses, either Corporate or Private Equity (PE), it’s not exactly a great time to be buying businesses and placing bets on new frontiers. A recent Price Waterhouse Coopers report found that the uptick in mega-mergers and acquisitions seen in 2019 will continue into the new decade. This means high purchase prices will remain in their stratosphere for the foreseeable future. As a result of high purchase-price multiples and overly ambitious revenue growth plans, the landscape is littered with the remains of deals gone south or sour. In fact, more than half of intended acquisitions fail, and 80 percent fall short of expectations. To protect themselves against failed deals, Corporations and PE have responded to inflated purchase price multiples by doubling down on pre-acquisition and pre-merger due diligence.
Feb 17, 2020 10:59:00 AM — Solid due diligence on ALL aspects of the business and a fast start on value creation are needed to reach the end-point of a strong ROI for the investors at exit Recently, I was visiting with a colleague from my days at Waste Management Inc. (WM) reminiscing about a major industry roll-up of which we were a part. Waste Management had decided to create value for shareholders by acquiring and consolidating companies in the very fragmented pest control and lawn care business, creating new national players in the industry. We were part of the acquisition team – several of us having been owners of acquired companies, plus a long-time WM executive. In two years, our team directed the acquisition and consolidation of over 150 companies, resulting in a roll-up of about $200 million in annual home services revenue. The entire consolidation was eventually sold to ServiceMaster, owner of Terminix. Fast forward to current days, when many of the old problems with M&A are the same, but there’s a new twist. In the world of Private Equity, today’s sky-high valuations require making even smarter decisions when buying a company. Solid due diligence on ALL aspects of the business and a fast start on value creation are needed to reach the end-point of a strong ROI for the investors at exit.
Jan 24, 2020 10:55:28 AM — Every company operates within its own economic cycle, defined by internal and external pressures and trends that apply to them exclusively. Understanding where a business is in its own cycle is key for PE firms to properly value and grow the enterprise, according to Paul Sparrow of Chief Outsiders. From the headlines, these are good times with plenty of clear weather and money-making sunshine. Marquee stats from the major stock exchanges and quarterly job reports tout an unprecedented economic expansion, despite cautionary signs like last year’s inverted yield curve. But a deeper dive into individual sectors and more specific economic metrics complicates that rosy forecast.