I just took a look at a news item that arrived in my daily PEHub Wire news roundup: Gotham Consulting Partners’ private equity survey on value creation. While I’ve only had time for a quick read, three things jumped out at me immediately.
- 6% of the time spent on due diligence is spent on IT systems. This seems low, especially in light of what the rest of the survey says about value creation. A figure of at least 10% would make much more sense for PE firms that are serious about driving operational value creation initiatives.
- Post-merger integration does yield greater than expected results, according to survey respondents. A logical extension of this thought would be to begin integration planning early, to achieve those results as quickly as possible after the close.
- Most firms are relying on standard financial and operational reporting as tools for managing their portfolios. However, among the more active methods of portfolio management cited, shared purchasing /shared services is the least used among the respondents. However, a followup question listed shared purchasing/shared services as one of the two active management techniques that yielded better than expected results.
There is a lot of great information in this survey, but at a high level, it points to the need for further changes in approach both before and after deals close. More time spent vetting out risks at a deep level within operations and IT, rapid integration, and new approaches to active portfolio company management could drive these results in a different direction when the 2010 survey rolls around.