Top Value Creation Strategies for Private Equity Firms
December 17, 2021at10:30 PM
Early in a deal’s lifecycle, it’s essential to create a value creation strategy to give your team a holistic view of every opportunity to maximize benefits and make an investment thesis optimized for the new asset and industry. The more far-reaching and inclusive the strategy, the more certainty a private equity firm has regarding value creation from acquisition to exit. A consultant group such as Daggerfoil Group has years of experience in not only coaching clients to seize opportunities but in spotting potential red flags and pitfalls. We bring years of experience to our clients on the buy and sell-side of deals, as well as mergers.
Get comprehensive expertise and experience when you implement these top value creation strategies.
Build strong relationships with management
Value creation strategies involve long-term planning that considers potential pitfalls and pain points. A holistic approach incorporates management–current or new–and acting early to pave the way for establishing the leadership and processes that will build enduring value for your organization. Building solid relationships with management early in the deal lifecycle gives your firm foresight and preparation for the more intricate nuances of an operation that may arise in the future.
Daggerfoil Group offers years of experience consulting private equity firms with value creation strategies that provide benefits throughout the deal lifecycle.
Use tax planning to prevent value erosion
An essential part of value creation is preventing value erosion. That is why every strategy should include consulting with experienced accounting services to establish a tax plan that supports ongoing value creation for existing and acquired assets. A tax preparer will approach the post-close deal, considering:
Automatic and non-automatic method changes
Estimated quarterly tax payments
Transaction cost analysis
Restrictions on tax attributes
Data collection is crucial, as is accurate interpretation and analysis. A clear, organization-wide value creation strategy enables your bookkeeper or accountant to ensure your tax plan supports long-term value creation.
Align technology with people and processes for post-close value creation
One of Daggerfoil Group’s unique attributes is our ability to align technology with people and processes at every stage of a deal’s lifecycle. Streamlined and efficient, your new asset will be poised for value creation on day one after acquisition.
A value creation strategy should address all aspects of an asset post-close, from organizational changes to negotiating with suppliers and re-evaluating logistics.
Upgrade finance functions
Most private equity firms anticipate the need to upgrade the technology and processes of an acquired asset. Your private equity firm can create value from day one after acquisition by having new functions ready to go after closing.
Upgrading finance functions includes bringing in a third-party firm to audit current operations and identify areas for improved efficiency. They can recommend software and processes that will enhance the sophistication of the existing finance functions.
Establish performance-based equity incentives
Performance-based equity incentives align the motivation of the team members, management, and C-suite of an acquired asset with investors. They are a reliable way to improve organization-wide performance from day one until exit.
There are various ways to measure and reward performance–including individually and organizationally–– and types of equity to award. When building a value creation strategy, performance-based incentives eliminate the uncertainty regarding organizational performance after acquisition.
The software professionals with Daggerfoil Group create custom value creation strategies for private equity firms.
We’re the leading technical advisors in the private equity industry. Our philosophy is to take the time to get to know our clients and their evolving investment thesis to offer strategies that continue to maximize value. Daggerfoil Group aligns technology with people and processes, offering services through the investment lifecycle that create more significant returns.
Get side-by-side support for an enterprise-wide in-depth look at your organization. We offer ways to improve operations and processes to maximize value at every deal stage. Contact Daggerfoil Group for custom value creation strategies.