“Facing high valuations, growing competition and mounting pressure from limited partners, private equity firms are seeking non-traditional strategies to achieve more predictable returns,” according to a recent article at Bank of America’s Business Capital site. In addition to partnering with established companies, “many private equity firms are also looking to operational-oriented strategies as a way to enhance” portfolio returns. For example, powerhouse Kohlberg Kravis Roberts & Co. recently hired a former chief executive officer of a major electronics manufacturer to provide “hands-on” operational expertise. But smaller PE firms are now turning to outside professional advisors to ask questions that get at the heart of company operations, such as: Are systems and controls working optimally? What are the strengths/weaknesses of middle management? Do service delivery and production capabilities support financial projections?
Sounds like a job for seasoned business appraisers, for whom value enhancement is still perhaps the greatest under-appreciated aspect of valuation knowledge.
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