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What is a value creation plan?
December 3, 2021 at 5:00 AM
A man walking his team through a presentation with a whiteboard.

When a major investment is on your horizon, you can’t go in without a plan.

Investment in a target asset is done with the intention that the asset will produce a reasonable return within a certain time frame, but that return won’t be realized on its own. You need to understand the asset’s full potential value and determine a plan to create that value from day one.

This kind of planning, of course, needs to be founded on certain insights about the asset for it to be truly effective. When you need those insights, you need a team of expert advisors equipped with cutting-edge technology and tactics to supply you with actionable information and strategies.

DaggerFoil Group is that team of advisors, and we’ve worked with some of the biggest private equity firms currently in business to achieve outstanding results in deals of any scale. Part of how we do that is by helping our partners develop a value creation plan for the asset they’re targeting.

What is a value creation plan? Read through the rest of this post to find out, learn more about why you’d need one, and better understand why we’re the team to trust with helping you make one.

Making a value creation plan

A value creation plan is a look at how the business you’re targeting can be improved, the true potential value of that business over time, and the projected cost of realizing that value.

The ability to craft a great value creation plan is essential as business valuations and market competition increase. They can help you better determine whether a target business is worth investing in at its current valuation, as well as how exactly you’re going to realize a return on your investment from the beginning.

A value creation plan should take a comprehensive set of information into account and set specific steps, or “action items,” for reaching the asset’s full potential value. This study of value creation plans published in the Harvard Law School Forum on Corporate Governance groups typical action items into five general strategies:

  • Operational improvements
  • Top-line growth
  • Governance engineering
  • Financial engineering
  • Cash management

These strategies use data points like internal and external resources, capabilities, and the business’ governance framework to identify areas of improvement.

Why do you need a value creation plan?

A solid value creation plan helps you in a few different ways.

Understanding how you’re going to get the most value possible out of an asset you’re substantially investing in can be very helpful for both the deal itself and the ultimate result you see from that deal over time.

Before the transaction is complete, you’ll be able to ask more informed questions about the business and engage in the deal more confidently. When it is complete, you’ll know from the very beginning what to do with the business, allowing you to get a strong start and see greater value more quickly and effectively.

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How DaggerFoil can help

Now that you understand what a value creation plan is and why it might be worth your time to think about more, you may also be wondering: why DaggerFoil?

Value creation plans are an integral part of our process as advisors for some of the leading private equity firms active today, and our partners have come to trust our ability to consistently deliver valuable insights and actionable strategies for maximizing returns on any investment.

You get the best deal when you have a plan for achieving your desired value from the start. Why not work with experts who’ve worked to perfect this part of our approach over 20 years of business?

If you’d like to learn more about DaggerFoil Group’s advisory services, contact us now with any questions.