PE Portfolio Value Generation
The usual portfolio value generation imperatives such as
- Increase equity portion/ decrease leverage in anticipation of exit
- Improve operations to increase financial metrics (e.g., EBITDA)
- Expand multiple to have a very successful, valuable exit
reflect a perspective rooted in the value of the firm rooted in its power to create free cash flows from operations. This is the often the main focus of portfolio company value management. We have broad and deep expertise in the operations of several industries to provide specific, actionable, prioritized, best-practice analytically-based insight to help our clients in this area.
There are also additional avenues to value which may even consume cash but seek increased wealth (growth of capital) insofar as this is a more propitious view of value creation. Overall (and in the spirit of Marty Whitman) we provide assistance to:
- Define and implement rigorously the portfolio company’s operating model
- Ensure operating model aligns with principals' investment thesis
- Seek value internally by both cost and top line improvements
- Conduct (re)financings (debt, equity) opportunistically
- Seek value externally through M&A, spin-offs, carve-outs, spin-outs, buy-and-builds, etc.
This non-ops set of approaches does not necessarily contemplate a traditional complete exit as the main source of value unless so desired. In any way, it assumes control of timing to best suit the portfolio strategy
- Examine the stated strategy for the PE portfolio and the executed strategy to date to assess alignment and glean real/ realized sources of value and their further applicability
- Assess operational model of portfolio components to identify individual portfolio company value sources (focus on cost take-out CoGS/SG&A) and/or potential combinations thereof
- Review portfolio company project set (new products, new marketing, new markets, other investments) for feasibility and value potential and feed into executive business plan(s); also examine possible cross-pollination to other portfolio members
- Assess, plan, lead operational execution of corporate transactions for portfolio companies performing integrations and divestitures as well as the operational aspects of spin-offs, spin-outs, carve-outs, etc.