Diego Chávez Rosete’s Post

Happy M&A Monday! Despite the current choppy #mergersandacquisitions market, we continue to see many companies in the health and commercial service sectors being rolled up, commercialized, and then sold or merged into larger private equity platforms. For those unfamiliar with the roll-up #privateequity strategy, the concept is simple: acquire smaller businesses at lower prices, implement value-add improvements like back-end support and executive leadership to boost profitability, and then sell these combined businesses as part of a larger, more valuable entity at a higher price. However, even with this strategy, certain types of private equity exits can be challenging, as explained by my colleague Louis Lehot: https://lnkd.in/gzj9EAG7. The private equity roll-up approach comes with its own set of challenges. One of the most critical is #accounting. Often, the small businesses being acquired are not GAAP-compliant; they typically only have reviewed financial statements. Why is that a problem? Reviewed financials don’t follow the same rigorous #GAAP standards, leading to inconsistencies in how financial information is presented and interpreted. This can result in overpaying for a business and having inaccurate financial projections, affecting future financing or a successful exit. As any business owner knows, accurate and consistent financial information is essential for strategic decision-making. Private equity roll-ups can be highly profitable, but developing a proactive approach to financial due diligence is crucial to mitigate risks and ensure a smoother, more successful roll-up strategy and eventual exit. #foleyforward #foleyignite #privateequity 

2024 is projected to be an even more competitive year for Private Equity firms, meaning every point of differentiation counts! The confidence to drive differentiation comes from better diligence and to see around corners, you may want to consider working with not just an industry-specific, but an asset-specific executive. #PE #PrivateEquity #executivesearch #differentiation

When dealmaking slows down, private equity firms and other investors become more cautious with their investments, leading to a few potential implications for low to mid-market companies: 1. **Lower Valuations**: 2. **Longer Time to Exit**: 3. **Alternative Exit Strategies**: 4. **Increased Importance of Performance**: 5. **Focus on Value Creation**: Each company's situation will be unique, and the impact of a dealmaking slowdown will vary based on the industry, the company's financial health, and its strategic position. Companies looking to exit in such an environment should work closely with business advisors to carefully plan their exit strategy and navigate the challenges of a slow dealmaking market. #businessstrategy #businessexit #businessadvisory

Private Equity: A Fascinating Force in Business Turnarounds I'm fascinated by private equity (PE) firms – the way they can step in, inject capital and expertise, and transform struggling businesses. It's a high-stakes game, a dance between risk and reward, and I'm always eager to learn about their strategies and successes. But the question that keeps popping up in my mind is: Are PE firms truly catalysts for long-term growth, or are they primarily focused on short-term gains and quick exits? PE firms undoubtedly bring valuable resources to the table. They can provide much-needed capital, streamline operations, and inject fresh strategic thinking. This can lead to improved performance, profitability, and even job creation. However, the PE model is often associated with a focus on rapid turnaround and maximizing returns. This can sometimes lead to cost-cutting measures and a prioritization of short-term gains over long-term sustainability. It's a complex debate, and I'm eager to understand the nuances. Do PE firms contribute to a company's long-term health and growth, or do they simply provide a temporary solution before moving on? It's important to recognize that PE firms operate with a diverse range of strategies and goals. Some might focus on rapid exits, while others take a more patient and strategic approach, investing for the long term and actively nurturing growth. Ultimately, the effectiveness of PE investment depends on the individual firm's approach, the specific circumstances of the company, and the overall market conditions. As a passionate observer of the business world, I'm keen to see how the PE landscape continues to evolve. Are they driving positive change and fostering sustainable growth, or are they simply another player in the game of short-term profits? I'd love to hear your thoughts on this! Share your insights on the role of PE firms in the business world. #privateequity #PE #turnaround #restructuring #operationalimprovement #yourthoughts #mergersandacquisitions Please note: These are my personal thoughts and observations on the private equity industry. They do not necessarily reflect the views or opinions of my employer.

See the latest article on creating meaningful value - before you buy an asset.

Private equity (PE) is more than just buyouts and leveraged deals. The strategies PE firms employ vary widely, with each firm tailoring its approach to the types of companies they invest in and the goals they set. 🎯 Whether it’s a buyout, growth equity investment, or a turnaround strategy, PE firms bring a mix of financial restructuring, operational improvements, and strategic expertise to drive value. In this post, we’ll break down different PE operating strategies, explore management styles, and offer real-world examples to clarify each approach. Curious about the future of PE? ⏳ Let’s dive into the nuances of how private equity firms create value and what lies ahead in this dynamic space. 💡 Which PE strategies and management approaches do you think will dominate the future? #PrivateEquity #GrowthEquity #Buyouts

⛔ No exit? William Louch at the Financial Times has another interesting piece on the travails of the #privateequity industry. Anyone who's followed the private markets' expansion over the past ten years knows this was likely to happen when the cheap debt stopped. In the UK this is exacerbated by a particularly unattractive IPO environment and a limited number of large cap options available to the highly competitive mid-market. Making your unsold asset stand out in the market is going to require new forms of creativity beyond accounting and nebulous claims to 'sustainability'. Different mindsets will be needed to identify and sharpen competitive advantages.

In the professional services world, more firms are taking the private equity route. But some are choosing to remain independent. Is it worth it? Here’s what I’ve learned working with firms on both sides: Staying independent can be a huge advantage, but only if your firm can adapt quickly and position itself strategically. Here’s how independent firms can stay competitive: 1️⃣ Move Faster Private equity-backed firms don’t wait around. They make quick decisions, acquisitions, and investments. If your firm is independent, you need to match that speed to stay ahead. 2️⃣ Highlight Your Unique Value Without the big checks from private equity, you need a clear reason why target acquisitions and talent should choose you. Culture, flexibility, and long-term stability become your biggest selling points. 3️⃣ Invest in Strong Leadership Support Too many independent firms try to run lean. It slows decision-making and growth. You need strong operational and leadership support to move faster and innovate more effectively. Staying independent can give you more control over your destiny, but only if you act like a firm backed by private equity… … with speed, structure, and a strong value proposition. If your firm is committed to staying independent but wants to compete, let’s talk.

Interesting article by EY's Bridget Walsh, Jon Morris, Paul Pan, and Luke Pais on How Private Equity Firms Create Value in Uncertain Times... The article talks about five critical areas that PE owned companies are looking to transform - i.e., cash and liquidity, cost, talent, technology, and sustainability.

Private equity's success often sparks curiosity and admiration, attributed to their adept utilization of debt, focus on cash flow and margins, and freedom from public company regulations. However, the true essence of their triumph lies in a strategy rarely embraced by public entities: buying to sell. Barber and Goold, directors of the Ashridge Strategic Management Centre, shed light on this strategy's core advantage—a focus on undervalued or undermanaged acquisitions, ripe for value enhancement. Once this potential is unlocked, private equity firms capitalize on their investment, maximizing returns through timely exits. Contrastingly, public companies, fixated on synergies, tend to retain acquired businesses even after value growth plateaus, diluting potential returns. Yet, there's a compelling case for public entities to rival private equity's success. They can either mirror their model, as exemplified by investment companies Wendel and Eurazeo, or adopt a flexible ownership approach, maximizing value for as long as feasible. Both paths entail challenges, including tax implications and skill shortages. However, the primary obstacle lies in public companies' reluctance to exit thriving businesses, failing to recognize exits as strategic triumphs rather than setbacks. Embracing lessons from private equity, public companies can carve their path to success, capitalizing on opportunities for value creation and strategic exits. #PrivateEquity #ValueCreation #Strategy #BusinessSuccess #InvestmentManagement https://lnkd.in/dHdd76RT