Private Equity (PE) firms are playing a more influential role in the operational performance of their portfolio companies compared to previous years. The first step in this evolution was to provide guidance/resources to troubled portfolio companies. Once the troubled companies were back on track, the focus shifted to helping solid companies get even better.
PE firms now want to know the operational situation before acquisition, specifically at the time of due diligence. Equity partners are setting the foundation and implementing improvements in the early stages of ownership versus waiting a year or two to find out if the infrastructure is inadequate or needs minor improvements. Conducting a business operations and information systems evaluation as part of due diligence activities has provided a significant “jump start” for portfolio companies. PE firms want answers to some basic questions about the technology assets in these target acquisitions; What are we buying? How long is it going to last? When will we need to invest? And how much will we need to invest? Top line, what they are asking: what infrastructure will be required to support a business that will double or triple its EBITDA? All these questions are about maximizing shareholder value at the time of the exit, regardless of the type of buyer. In this article we will share with you theapproach and value of conducting this effort.