Despite their varying strategies for investing, all private equity companies seek to make operational improvements and increase the value of their clients prior to exiting following an agreed-upon time. Operational due-diligence statistics highlight cost reduction opportunities, and this is where most PE deals will see the bulk of their value creation. This could involve removing non-profitable products or stores that are close to them, or bringing in new technologies to generate additional revenue. These changes may also cause legal issues. A thorough and comprehensive due diligence process will be crucial.
In terms of financial due diligence the PE firm will be examining the same documents that other buyer would, which includes financial statements, business plans and contracts. There is a greater focus on quality of earnings. This includes things like debt/equity as well as the working capital cycle.
The management and operations due diligence stage is where the PE deal will look more closely at the management team of the target and how it will be easy to work with them in the future. This involves an in-depth examination of the way that the management team conducts day-to-day operations and looks at the company’s manufacturing process and supply chain. It also analyzes the authority and power structure within a company to identify areas at risk. much risk (e.g. data loss or breaches). This is where an intelligence platform for relationships can be extremely beneficial. It can pinpoint and connect you with the right experts within your network within minutes.