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Despite their different strategies for investing All private equity firms endeavor to bring about improvements in operational efficiency and boost the value of a company before exiting following an agreed-upon time. Operational due diligence statistics highlight opportunities to cut costs and this is the place where most PE deals will see the bulk of their value creation happen. This could mean getting rid of unprofitable products or closing stores in close proximity and/or bringing in new technology to generate additional revenue. These changes may also stir up legal issues, and this is where an extensive and thorough due diligence process for legal compliance is crucial.

A PE firm will perform the same due diligence as any other buyer, such as financial statements and business plans. But there is a greater emphasis on the quality of earnings, with a greater importance placed on aspects such as working capital cycle, debt/equity ratios and conducting a Monte Carlo simulation for the industry’s future growth prospects.

The management and operations due diligence stage is where the PE deal will take a closer look at the management team of the target and how it will be easy to collaborate with them in the future. This includes a thorough review of the way the management team is managing daily operations, as well as the manufacturing process and supply chains. It also analyzes the structure of authority and power within a company, and looks for areas where there is too much risk (e.g. data loss or breaches). This is where the importance of a relationship intelligence platform that is able to identify and connect you to the appropriate experts within your network in minutes could be beneficial.

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