Private Equity Due Diligence

Despite their different strategies for investing, all private equity companies strive to drive operational improvements and enhance the value of a business prior to exiting after a set period. The majority of value creation in PE deals occurs when operational due diligence reports show cost reductions. This could involve removing non-profitable products or closing stores in close proximity and/or bringing new technology in to generate additional revenue. These changes can also stir up legal issues, and this is why a thorough and thorough legal due diligence process is essential.

A PE company will conduct the same due diligence process as any other buyer, such as financial statements and business plans. There is a greater emphasis on the quality of earnings. This includes things like debt/equity as well as the working capital cycle.

The management and operations stage is the time when the PE deal will look at the leadership team of the company to determine how it will work with them in the future. This involves a thorough analysis of how the management team runs daily operations and examines the manufacturing process of the company and its supply chain. It also observes the composition of authority and power within a company to look for areas where there is excessive risk (e.g. loss of data or breaches). This is where the significance of a relationship intelligence platform that can identify and connect you with the right experts within your network in minutes could be beneficial.