The private equity market has been on a roller coaster. After a decade of exponential growth with low interest rates, firms raising unprecedented amounts of money, plentiful credit and valuations skyrocketing, new deal activity ground to a standstill during the financial crisis. Long-planned IPOs were put on hold and highly leveraged portfolio companies strained against lending covenants.
While leveraged buyout acquisition volume in 2010 was still roughly 80% below the record volume set in 2006, buyout firms are sitting on a record war chest of over $500 B of undeployed capital that needs to be put to work within the next three years. With the opening of the credit markets and the overhang of uninvested capital, the biggest challenge in the near term will be maintaining pricing discipline with rising purchase price multiples and intense competition for quality assets. One of the legacies of the crisis will be the need for more equity in deals, which will put pressure on returns. The focus will switch from relying on financial engineering to running businesses well. Without operational improvement it will be very hard to make money.
In today’s challenging environment, private equity has to create real strategic and operating value within their portfolios – and that’s where Argo can help. Our private equity consulting teams bring extensive experience to our engagements across the entire value-creation spectrum: from operational due diligence, to operational strategy and operations transformation post-acquisition, to successful exit planning.
With a presence in over 20 countries and serving the U.S., European and the Asia-Pacific markets, Argo’s private equity practice has a solid track record. Since 1998, we have worked in more than 500 deal evaluations and hundreds of portfolio company projects. We understand the urgency that this type of work demands and have highly responsive teams that can complete the work in short order. Once the acquisition is made, our biggest contribution is assisting companies in achieving the full revenue and EBITDA potential.
Read our new paper The Hidden Value of Operational Due Diligence authored by Argo’s CEO, Fernando Assens. According to estimates, operations now accounts for around half of all value creation. PE firms typically focus on high-profile due diligence areas – in part because they often lack in-depth knowledge of operations. Learn the three areas of operational due diligence we believe hold the greatest potential to improve performance and generate significant amounts of value.