Private Equity Needs a New Talent Strategy
2023-11-01 词
- Private equity firms worldwide are sitting on about $2 trillion worth of “dry powder”—assets they manage but have not yet invested—at a time when the number of attractive targets has declined. This drives prices up, weakening financial engineering’s advantage.
- Rising interest rates have made debt capital more expensive; since most PE-owned companies are highly leveraged, this means they must improve their operating performance simply to do as well as they did in the recent past.
- Because few $100 million–$400 million companies remain to be bought as standalone acquisitions, more PE deals are now “platform” or “roll-up” plays, whereby several smaller companies are stitched together into a larger enterprise. In 2022, 70% of deals were of this type, according to PitchBook’s Global M&A Report. Melding companies demands exceptional leadership and management skills—and is made even harder by the fact that these smaller (and often younger) companies have less management bench strength and only rudimentary talent-management capabilities.
- Partly because PE firms are stitching smaller companies together, they are holding on to companies longer. They once aimed to exit an investment in five years or less; today seven years has become common, which means that both owners and management must deliver value through operating excellence over a sustained period.
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