In today’s market, PE firms are becoming much more sophisticated in their value creation strategies. But are they actually converting their strategies into realised value? Building on data presented in KPMG’s Private Equity Landscape report, this article looks at the evolution of value creation in the UK.
Value creation has become much more sophisticated over the last decade. Whereas in the past, fund managers could rely on financial leverage and multiple expansion to deliver value uplift through the holding period, today’s market environment – characterised by high interest rates, low growth and low valuations – has prompted PE firms to become much more innovative in their strategies.
Many PE firms – both large and mid-market – are now rapidly improving their operational capabilities in order to unlock value through the optimisation of supply chains, capital management, inventories, procurement and human resources, for example. And that is being driven by much deeper due diligence (particularly related to technology) and much greater use of data and analytics in the targeting and pre-deal process.
Now the focus is shifting to post-deal value realisation. Finding and calculating value creation upside in the pre-deal phase is one thing. Actually delivering on the value identified is often much more challenging.
