During the years of low interest rates, many investors were spoilt by financial leverage. Portfolio companies just had to perform more or less steadily.
Today, the only way to increase a company’s value is through value creation: innovation, cost management, digitalisation.
PE firms’ value creation strategies vary widely. Some leave it to portfolio management, some have their own operations teams, others work through the advisory board. Every model has its pros and cons.
The problem: many portfolio companies, or their investors, recognise the pressure to transform too late, or fail to improve the top line. By then, the question of the right approach is being asked too late.
As a young man, I once took a sailing course on Long Island Sound. The instructor said something that struck me as absurd: “Reef the sails the first time you think you should.” Reefing means reducing the sail area, for example when a storm is coming or the wind picks up. Wait too long and the wind can overload the sails and capsize the boat.
You have to listen to your gut. It often gets too little attention.
• We know the full range of value creation strategies
• We know the right type of candidate for each approach
• We’ve built relationships with these candidates over many years
• Regardless of current demand, that’s part of TALENTspy’s DNA
What’s your experience with different value creation strategies?
