The Private Equity (PE) market is under increasing pressure to make smart deals. Low and even negative government bond returns, combined with low yields and high volatility available in the global equity markets, are pushing more investors to PE firms in their attempt to generate solid and stable returns. As a result, PE firms are sitting on record amounts of cash, while the high demand for attractive targets has driven valuations to high multiples. This “sellers’ market” makes a great environment for firms to divest, but the cash realized must often be reinvested with the same dearth of top quality targets at reasonable multiples in which to do so.
One option available to PE firms is to move down the quality scale and acquire targets with more operational challenges. In this case, the multiples are more reasonable, but the companies must be restructured in order to realize the desired return. Venetia Partners has a team with extensive experience turning around all types of manufacturing and distribution operations. We partner with the PE firm to increase its profitability, free up cash flow and improve the valuation of the portfolio company. These services can be provided either in a program management or by taking the reigns in an interim management arrangement.
Another option for PE firms to extract value is to consolidate a number of smaller targets in the same industry to increase scale and profit margins. We can deliver the expected synergies from these industry roll-ups through strategic, organizational, cultural and systems integration using our Integrated Business Outcomes (IBO)SM approach. We partner with PE firms to stand out by delivering superior investor returns in this challenging environment.