The Private Equity (PE) industry underwent a fundamental transformation in 2022, resulting in many new challenges and opportunities for the sector. In the first half of the year, the landscape appeared to follow a pattern similar to 2021. However, currently set at 4.75 percent, the Federal Funds Rate represents a significant risk to both consumers and enterprises. Interestingly, The CFO Survey, a partnership between the Federal Reserve Banks of Richmond and Atlanta and Duke University's Fuqua School of Business, indicates that more than half of the surveyed CFOs are more optimistic about the rest of 2023, albeit marginally up from the prior quarter. Despite the highest Federal Fund Rate since 2006, continued news of layoffs and what seems to be teetering banks, is there a silver lining?
When examining the findings of The CFO Survey, the most pressing concerns for CFOs this latest quarter appear to be labor, inflation and monetary policy. These concerns closely mirror what I have gleaned from my extensive meetings with numerous portfolio CFOs, operating partners and leaders at PE firms over the past year. However, a prevalent theme emerging from these discussions is the imperative to pursue innovation and drive EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) growth to secure a sustained competitive advantage. This goal encompasses various sub-categories, as detailed in the chart below:
Unlocking Private Equity Innovation with Agile Models, Analytics & Automation
In response to these challenges, I recommend that you look inside your company and embrace agile private equity operating models, leverage analytics, and drive a technology and automation agenda to achieve portfolio optimization and ensure that your organization is scalable for the future.
For instance, we helped a leading automotive distributor increase EBITDA by over 20 percent while streamlining processes and implementing innovative technology tools and insights. In doing so, we enabled their business leaders to focus on mission-critical issues and reduce noise from all stakeholders.
To thrive in this challenging environment, PE firms must drive down costs, achieve efficiencies and improve productivity. They should also take a more hands-on approach than before when working with portfolio companies.
I will delve deeper into this topic at the 11th Annual Private Equity New York Forum scheduled on May 15-16, 2023. I will moderate this panel discussion, which will feature an esteemed group of influential panelists.
Below are the details of the event:
Topic: Portfolio Optimization and Value Creation
Moderator:
Panelists:
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Bala Ganesan, Managing Director, Special Situations, Oaktree Capital Management
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Kate Migliaro, Global Head of Portfolio Talent, Searchlight Capital Partners
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Javier Rojas, Founder & Managing Partner, Savant Growth
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Dan Ginsberg, Managing Director, Private Equity, SGS Maine Pointe
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Ajay Parkhe, Managing Director, Cinven
Join us for the panel discussion at the 11th Annual Private Equity New York Forum.