Jump-Starting Value Creation: The Crucial Role of Pre-Acquisition Due Diligence and the First 100 Day Plan 

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Marc Patterson

Managing Director of Growth, Private Equity, and Financial Services
Private Equity Solutions

Marc Patterson

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Managing Director of Growth, Private Equity, and Financial Services
Private Equity Solutions
Marc Patterson is Managing Director of Private Equity and Financial Services at E78 Partners. Marc has over two decades of experience on Wall Street both investing in and advising Private Equity Funds, Venture Capital Funds, Hedge Funds, Family Offices, Growth-stage Companies, and Institutional Investors.
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Macro Investment Market Challenges a Headwind for Private Equity Valuations 

Private Equity Sponsors are facing their most challenging valuation market since the great recession of 2008-09. Heightened inflation and interest rates will continue to be valuation headwinds. A recent article from The Economist detailed some of the challenges to private equity sponsors in this next cycle. 

As detailed in the article: “During the past decade, rising valuations for portfolio companies, and cheap financing with which to buy them, boosted returns and reeled in cash at an astonishing clip. Improving the efficiency of a firm, by contrast, contributed less to returns. The [PE] industry that emerges from this period will be a different beast from the all-consuming giant of the 2010s. The new phase will favour owners willing to roll up their sleeves and improve operations at the companies they have bought.” 

A New and Challenging Environment Calls for a Strategy Upgrade 

In this next cycle, success will depend upon the Sponsor’s ability to drive multiple expansion at the portco-level. However, with increasing inflation a looming and continued threat, time is not necessarily on their side. Value creation will need to get off to a quick start, which means that pre-transaction diligence and a 100-day plan are more crucial than ever. 

Due in large part to these challenges, private equity firms have begun to put greater emphasis on the stages of pre-acquisition due diligence and the initial 100 days post-acquisition. These phases are pivotal in assessing deals, making sound investments, and accelerating value creation.  

However, most small and midsize private equity funds run lean with respect to staffing due to budgetary constraints. Many simply do not have the internal resources available to handle these crucial functions alone. In order to achieve success at the portco-level, many funds are increasingly going to need outsourced help.  

This article will delve into how operating partners are shifting focus to these stages and how E78 Partners provides invaluable support during this critical period. 

The Crucial Role of Comprehensive Pre-Acquisition Due Diligence 

In the world of private equity, the pre-acquisition due diligence phase is essential. It lays the groundwork for the entire investment and is a key determinant of the potential success of a deal. It involves an exhaustive investigation of a target company’s operations, financial performance, legal compliance, and market position. Fail to correctly identify internal weaknesses upfront, and you can spend years paying for that mistake. 

In the current environment, where deal-making is increasingly competitive and margins are even tighter, PE sponsors must dive even deeper into due diligence. It is more crucial than ever to identify hidden risks, ensure the target’s compatibility with their investment strategy, and establish a roadmap for post-acquisition operations.  

Complete this comprehensive assessment correctly, and you will successfully determine the current and future potential value of the company. This is the first key step to laying a strong foundation for post-acquisition value creation. But you cannot stop there. 

Getting Out of the Gate Fast: The First 100 Day Plan 

After acquiring a company, the first 100 days are crucial. This period sets the tone for the rest of the ownership phase and lays the groundwork for long-term value creation.  

During the first 100 days, PE firms work closely with the acquired company to implement strategic changes, streamline operations, and address any identified weaknesses. This phase often involves key decisions about the company’s strategic direction, potential restructuring, operational improvements, and leadership changes.  

Understandably, PE firms strive to hit the ground running in this period. Swift and decisive action can significantly boost the company’s value. Unfortunately, however, most newly acquired firms do not have the operations, reporting, or talent infrastructure in place to make this happen quickly. 

It is not uncommon for a PE sponsor to encounter significant accounting weaknesses, long reporting lags, disconnected systems, ineffective KPIs, and poor forecasting abilities. In other words, getting out of the gate quickly is often not an option. 

In the current environment, it is increasingly important to immediately dedicate resources in the form of capital and talent to this phase. However, you don’t have to do this alone… 

E78 Partners: Your Pre-Transaction Diligence and First 100 Day Plan Partner 

Here at E78 Partners, we completely understand the challenges you face. We are private equity-backed and were created to help solve private equity challenges like this. 

Our team of experts provide essential support to PE firms during the critical stages of pre-acquisition due diligence and the first 100 days post-acquisition. Leveraging our industry expertise and comprehensive suite of services, we assist in thorough evaluations of target companies, including financial analysis, operational assessments, and risk identification. 

During the first 100 days post-acquisition, we work alongside PE firms to drive initial value creation efforts. We provide support in implementing strategic changes, managing potential restructuring, enhancing operational efficiencies, and executing other key value-creation initiatives. 

Our involvement in these critical phases helps ensure a smoother transition and fosters a strong foundation for long-term value creation. By leveraging our services, PE firms can mitigate risks, uncover opportunities, and maximize the value of their investments. 

With the support of experienced partners like E78, PE firms can navigate these critical stages effectively, laying a solid foundation for their investment’s success and achieving significant returns. 

Contact our team to learn more about how we can help your organization. 

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Meet the Author

Marc Patterson
Managing Director of Growth, Private Equity, and Financial Services
Private Equity Solutions
Marc Patterson is Managing Director of Private Equity and Financial Services at E78 Partners. Marc has over two decades of experience on Wall Street both investing in and advising Private Equity Funds, Venture Capital Funds, Hedge Funds, Family Offices, Growth-stage Companies, and Institutional Investors.
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