PEI Portfolio Monitoring Supplement 2011

The mega-trend towards operational value-add is irreversible

In the old days of private equity portfolio management, speed of execution was often valued over sustainability, financial savvy over sector credentials and gearing over operational improvement. For a long time it worked like a treat.

But it didn’t last. It couldn’t. As the industry grew in size, competition for assets drove up prices, and the pioneers of the early years quickly lost their first mover advantage. Then came the global credit freeze, and with it a lasting change to the financial framework, in which purely financially driven value creation strategies, such as using tax shields on debt for savings, now look thoroughly out of date.

For private equity, this is not all bad news. What has emerged is an evolved investment model that increasingly relies on operational improvement in order to drive up returns.

Find our more in the PEI Portfolio Monitoring Supplement 2011

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