Last week, our Connect community hosted a dinner event to delve into value creation in private equity, we would like to thank all our Connect members and guests who attended the insightful event.
All our guests enthusiastically engaged with the subject, which made for a stimulating and insightful discussion. There was plenty of good-natured debate and challenge as we explored how and why PE creates value, the relevance of people in that quest, and the realities behind some of the widely held assumptions about PE. Highlights of the discussion include:
- Private equity leadership: PE is not interested in employing ‘true’ leaders (transformational, inspirational, ethical) – their purpose is purely transactional
- Growth versus costs: Real value-creation is about growth more than cost-cutting, with organic (not funded) growth critical to debt-free profitability
- Regulation drives behaviours: As legally (FCA) regulated fund managers, PE professionals are obliged to make money for their investors; ruthlessness and opportunism do not enter the equation
- Family businesses: Discussed whether these are the epitome of ethical, long-term value creation, or hereditary cash cows making money for a small clique, often by investing generational profits in PE ventures
- Consulting support: To enable PE value creation, consultancies should evolve to “design to impact”, focussing only on selected activities which impact the bottom line directly
- Changing PortCo culture: To achieve rapid and positive cultural change, businesses should create an environment of high performance where people feel inspired, valued and have a sense of belonging rather than take them on a comfortable ‘journey’
- Who has the vision: In the age of the app-wielding investor, the analytical PE approach and five-year horizon may represent the long-term approach to value realisation
- Size matters: Small companies enable accelerated value creation through nimble PE decision-making, while big corporations are simply too ponderous to compete
It was a lively and enjoyable session. If you’d like to find out more about the evening’s discussion and our upcoming events, please contact our Connect manager, Sousana.
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