Private equity firms, despite different investment strategies, seek to increase efficiency in their operations and increase the value of an organization before they leave at an agreed-upon time. Operational due diligence statistics point out cost reduction opportunities and this is the place the area where the majority of PE deals will see the majority of their value creation happen. This could involve removing non-profitable products or closing stores in close proximity and/or bringing in new technology to generate additional revenue. These changes could also cause legal issues. A thorough and comprehensive due diligence procedure is vital.
In terms of financial due diligence, a PE firm will be examining the same documents that any other buyer would, such as business plans, financial statements, and contracts. There is a greater focus on the quality of earnings. This includes things like debt/equity and working capital cycle.
The management and operations stage is the point at which a PE deal will look at the leadership team of the target and how easily it will work with them in the future. This will include a thorough analysis of how the management team manages the day-to-day operations as well as the manufacturing process and supply chains. It also looks at the power and authority structure within a business to identify areas at risk. high risk (e.g. data loss or breaches). It is here that a relationship intelligence platform can prove to be very beneficial. It can help you identify and connect you to the most qualified experts in your network in minutes.