After the pandemic, the economy is beginning to shift from treading water to a growth-oriented outlook. Corporate strategies the world over have weathered (hopefully) the worst of this unexpected event and are now looking to shift into high gear.
The Private Equity (PE) sector will benefit particularly from this shift. PE-driven investment deals slowed down in early 2020 causing an accumulation of cash on balance sheets, but have since sped up. Unlike 2008, when Limited Partners
withdrew from private asset classes too early, investor appetite remains strong. In the technology sector alone, according to Gartner, by 2022, the level of global mergers and acquisitions (M&A) activity will surpass previous record highs from 2018. It is expected that successful acquirers will consider the impact on the end-user and ensure that customer experience remains paramount throughout the acquired company’s lifecycle. Acquisition is easy; integration, however, is tough, and requires significant change management skills.
Some concerns of Private Equity Firms are:
A MORE SUSTAINABLE OPERATING MODEL
But the ultimate goal is to create value and increase ROI. The tension between a PE firm’s two main objectives of meeting price expectations while delivering satisfactory returns to investors has thus increased. Analyzing the target from both a financial and operational angle is the only way to alleviate this tension. Though most firms have teams to conduct financial analyses on the companies that they are looking to acquire, they struggle with operationally maximizing efficiencies and finding opportunities for cost savings.
The Poirier Group’s experience working collaboratively with PE firms has led to an abundance of opportunities focusing on this operational side – financial planning and analysis, accounts receivables and payables, legal, procurement, corporate culture, production, supply chain and logistics, information technology, etc. Our due diligence process has uncovered 20% to 50% of an employee’s time is focused on non-value add tasks. In firms where we have repurposed, outsourced or automated these tasks, we have catalyzed an increased focus on value-add and strategic tasks, thereby generating, on average, tens of millions of dollars in net annualized savings. Specifically, this was done by looking beyond the financial statement and:
