Chapter 14
Post-deal operational improvementsa
14.1 WHAT OPERATIONAL IMPROVEMENTS ARE MADE POST DEAL?
The answer is, it depends. It depends on the company and its circumstances. The answer is also anything and everything that is required to achieve the target investment returns. Often this is referred to as the full potential program (FPP). Private equity firms with funds that have performed in the top quartile have, over the years, consistently delivered high returns by improving their value creation from post-deal operational improvements. Higher purchasing multiples for target companies have resulted from increased competition, so the need to “create more value” under private equity ownership to support lucrative exit returns became more important.
Any company encountering a change in ownership, whether it’s public or private will experience some form of transition. What is it, however, that private equity firms do differently when they acquire a business? Three key underlying factors exist identifying the opportunity; the projection of EBITDA growth; and the full utilization of its assets including its human capital.
There is no deal if there is no opportunity. Post-deal plans are interlinked to the investment thesis adopted around the identified opportunity at the pre-acquisition phase, which is covered in Chapter 11 on deal due diligence. No successful private equity firm would venture into a transaction without a clear strategic roadmap for the future of the company with ...
