Private Equity 4.0: Reinventing Value Creation

6 The supporting cast

Executive summary

Private equity firms tend to be relatively lean economic animals, relying on a small dedicated staff primarily focused on executing deals and possibly creating post-investment value at portfolio companies. For all other activities, they prefer to punctually acquire external resources to bring to bear on specific situations. Consequently, a very fluid and dynamic ecosystem has appeared around private equity firms, with numerous providers offering specialized teams and services to eager clients.

With the industry maturing, a bewildering array of services has become available to private equity firms, including: fundraising, fund administration, financial, legal, commercial and environmental due diligences, structured finance, M&A advisory, accountancy as well as recruitment and public relations. These services are often required at specific times in the life of a fund, in particular during fundraising and deal closing phases, i.e. “transaction” times.

Banks have also carved out a nice operating niche serving the industry. They generate private equity-related income through at least three different activities: advising private equity firms on M&A, structuring syndicated loans to support acquisitions and providing leveraged finance. During the credit bubble of the mid-2000s, bankers often “double-dipped” by also generating generous initiation ...