Every day there seems to be a new article in the PE industry press about the importance of PE firms generating growth from their portfolio companies. Many of the articles conclude that in today’s brave, new PE world, that generating portfolio company growth is now more important to a PE firms’ overall investor returns than are a firms’ proprietary deal flow or its financial management/expertise.
This short article on PE Industry growth begins by commending the ACG on the webinar it sponsored today: “Advanced Customer Due Diligence – 5 Tools to Improve Integration & Accelerate Growth.” The informative, well produced and moderated webinar focused on a growth related platform for PE firms that was developed by Walker Information, Inc. (http://www.walkerinfo.com/) and executed by Driehars PE (http://www.driehauspe.com/).
Walker’s approach seems to be onto something. It is a PE growth platform that is straight forward, proven effective, measurable and affordable. To get the best results from their platform, PE firms use it to pre-plan for growth at a target company during the due diligence process. The specifics of how they help PE firms and their target companies to segment and then plan for growth at the target company’s customers is intriguing and well worth a review. I wanted to hear a bit more about the challenges of implementation, but the PE executive from Driehars PE gave his testimony as to how well it worked for them.
The Walker approach and Walker’s historic positive results for PE firms are all the more impressive in light of today’s slow growth markets. In slow growth markets, PE firms that need growth from their portfolio companies (i.e. all PE firms) need a pro-active organic growth planning process and Walker seems to have it.
Like Walker, MRA has also been blogging about its growth planning process and results for PE firms. The MRA process is also best used at the time of due diligence work and like Walker, MRA’s process is straight forward, proven, measurable and affordable. While Walker is far more detailed and precise on customer related segmentation and planning, MRA’s process is much more encompassing of broader target company sales and marketing issues and plans. For more information, see http://michaelrothadvisors.com/brave-new-pe-world/#more-477.
Both platforms can be the difference in a PE firm succeeding in generating immediate target investment growth and overall PE firm investor returns.
April 23, 2014
On 3/5/14, Mary Josephs wrote for Forbes magazine that based upon a Bain & Co. report, that there were several reasons why middle market companies would not be getting more attention and investment from PE firms in 2014. In her article which is called “Four Reasons Middle Market Owners Shouldn’t Wait For Private Equity” which can be found at: http://www.forbes.com/sites/maryjosephs/2014/03/05/four-reasons-middle-market-owners-shouldnt-wait-for-private-equity/, Ms. Josephs gives a couple of reasons for why this is to be, including: Continue reading Who is Correct, Bain & Co. or Bain & Co.?
MRA recently helped a PE firm on an acquisition through due diligence and post-acquisition strategic advisory. Regrettably this acquisition is not working out well. Simply stated, the PE firm that acquired the Company ignored some of the “softer” issues needed for success. Most notably the PE firm allowed the acquired company’s brand equity to atrophy and it fought the existing company management’s very unique, yet very pronounced cultural norms. Continue reading The Surprising “Most Frequent” Reason for a Failed Acquisition
The PE industry has evolved since the 1980’s. Back then, the industry used leverage to generate investor returns. In the 1990’s the PE Industry made money by buying companies and expanding them. The 2000’s ushered in a period of earnings growth fueled by strong beta market growth trends. And now, for better or for worse, the industry is being driven by returns PE firms are generating through management of and operational improvements in their portfolio companies. Continue reading The Brave New PE World
WSJ article says that PE firms and Hedge funds are picking up the lending slack to small and middle market companies – while banks are usually open to using professionals, the PE industry is very difficult to pierce. Very interesting data in the article on lending data. http://online.wsj.com/article/SB10001424127887324637504578567383459564510.html?mod=WSJ_hps_LEFTTopStories
Just last week, a Preqin press release proclaimed that “There were 705 private equity-backed buyout deals in Q2 2012, valued at an aggregate $60.4bn – a 37% increase in deal value from Q1 2012, and a 6% increase from the $56.8bn in Q4 2011. In addition, 293 private equity-backed exits were announced in Q2 2012, with an aggregate value of $77.7bn – a significant rise from the $47.2bn in exit value seen in the previous quarter.” Continue reading Was PE Dealmaking Activity Strong or Weak in Q2 2012? The Experts Disagree
In a series of articles in Forbes, contributors from Bain & Company dissected the current state of the PE market and discussed the outlook for investor returns in 2012 and beyond. The good news was that PE Industry returns will still likely out-pace most other comparable investments. The bad news was that returns will likely be at their lowest since at least 2009. All things remaining equal, the Bain contributors concluded that those PE firms that can drive organic growth from their portfolios would be those that would excel in the industry. Continue reading Bain and Forbes: Best PE Returns in 2012 will be Driven by Alpha Growth
For weeks we have been blogging about the overall weakness in the PE industry and specifically about weaknesses in capital formation, deal activity and most of all about how few investment exits there were in the industry. Just last week, we blogged about the poor May 2012 results vis-à-vis May 2011 and we like many others speculated that June 2012 and Q2 2012 as a whole could be as poor a month/quarter as Q1 2012 (which was one of the PE Industry’s poorest quarters in several years). Continue reading June 2012 Was Likely the Most Active M&A Month Since Early 2011
A host of recent studies from the likes of Deloitte, Bain & Company, McGladrey and others have all concluded the same thing: The PE Industry and the broader middle market have reached a critical tipping point where organic portfolio company growth is perhaps the preeminent need. However, as most PE firms and middle market companies know already, one of the only things clearer than the need for growth is the difficulty associated with attaining that growth. Continue reading Generating Organic Growth from Portfolio Companies in the PE Industry
In January 2012, Greg Zuckerman of the Wall Street Journal spoke of the decreasing returns of the PE Industry and the implications of those declines. He spoke about the need for much more intensive portfolio management. However, at the time, he could only use Q3 and Q4 2011 data. Since then, we all know that the activity of the PE industry has fallen off the cliff. The problems have only become more intense and the challenges for portfolio management have only become greater. Continue reading WSJ Had it Right in January-It Has Only Become Worse Since Then