Operational Due Diligence Helps Maximise Value in an Era of High Multiples and Recession Planning

Summary:

Today’s high multiples and economic uncertainty decrease the margin of error and make operational improvement and effectiveness even more critical during the holding period and divestment.

Every private equity deal today has some measure of operational value factored into the investment thesis. For manufacturing companies – especially those that have already gone through one or more buyouts – the easy gains have been realised. That leaves more complex and challenging opportunities. These deals require ownership with deeper expertise to quickly grow both revenue and EBITDA.

We were invited by Private Equity International to provide an expert commentary in their 2018 Operational Excellence Special Issue.  In this article, Gary Hoover, who leads TBMs private equity practice, reviews how to accelerate value creation, along with three main opportunities for growing EBITDA that we quantify and prioritise during the operational due diligence process:

1. One-time cost savings
2. Performance gains that deliver long-term margin improvements
3. Daily Management Effectiveness (management system)