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Based on our recent experiences and research, these are 10 best practices on how Private Equity industry decides whether or not to invest in a target firm.
1. The pulse check: Look into the enterprise value/EBITDA multiple for that firm at entry and at a projected exit point. If it is low at present and expected to grow rapidly in future, then it is profitable to invest in that firm.
2. Benchmarking with the industry: Check the target Investment firms revenue and profit growth projections against the industry peers
3. Growth Stage Relevance: Stage of the firm in the industry relative to industry maturity. For example a health care technology in startup mode in current times is an attractive thing
4. Exit considerations: This can be determined by looking at some recent experiences in exits of similar deals in the size and sector. Of course past is not an indicator of future but it certainly helps in risk mitigation considerations
5. Demand and supply: An idea of deals in the pipeline and in the makeover stage companies that will exit at around the same time as the planned investment. If this is a crowded market, valuations may be impacted
6. What will it take to make the firm attractive?
a. External forces such as talent supply
b. Adaptability to change
c. Technology available
d. Marketing options or limitations
7. Strategic Receptiveness: Strength of current management team and their willingness to get strategic inputs from PE investors
8. Transparency of Target firm: Ability to understand the full depth of the company. Will there be any surprises down the road?
9. Synergy Index: Will the investors be able to provide complementary strengths
10. Cash and Risk appetite: Last but not least, how much cash, at what intervals and the level of risk will match the investors expectations
Six out of the above ten are external market conditions that ZENeSYS researchers specialize in. Give us a call if you need help.
References:
http://www.evca.eu/uploadedFiles/Home/Toolbox/Introduction_Tutorial/EVCA_PEVCguide.pdf
http://admin.bvca.co.uk/library/documents/Guide_to_private_equity.pdf
by Admin on March 21st, 2012
While Private Equity funds around the world prepare to raise funds for their next vintage, the big question is how to convince the limited partners on an investment strategy.
Lately limited partners have become savvy investors who demand a clear and convincing explanation of how GPs will deliver the level of performance that PE industry has come to expect.
The problem stems from the fact that PE funds are not like publicly traded instruments where plenty of market data exits to make sensible investment decisions. Performance data on various sectors, strategies and dry powder is available in a fragmented way. To make things worse, the lack of transparency can easily mislead the best of PE industry experts.
ZENeSYS has partnered with Aarmcorp (www.aarmcorp.com) to get insights on how PE funds are performing historically through public disclosure data (read as data that you can rely on). In addition, Aarmcorp has built insight mining algoritms to predict future performance.
This gives us the ability to determine which sectors, geographies and strategies are working well and are likely to continue on a growth trajectory.
Armed with this information, we are helping PE firms refocus their investment targets.
Lately limited partners have become savvy investors who demand a clear and convincing explanation of how GPs will deliver the level of performance that PE industry has come to expect.
The problem stems from the fact that PE funds are not like publicly traded instruments where plenty of market data exits to make sensible investment decisions. Performance data on various sectors, strategies and dry powder is available in a fragmented way. To make things worse, the lack of transparency can easily mislead the best of PE industry experts.
ZENeSYS has partnered with Aarmcorp (www.aarmcorp.com) to get insights on how PE funds are performing historically through public disclosure data (read as data that you can rely on). In addition, Aarmcorp has built insight mining algoritms to predict future performance.
This gives us the ability to determine which sectors, geographies and strategies are working well and are likely to continue on a growth trajectory.
Armed with this information, we are helping PE firms refocus their investment targets.
by Balaji P from IIM-C on December 9th, 2011
by Admin on December 5th, 2011
In a recent study on commercial insurance brokers done by ZENeSYS, the following came out as top of mind in this industry:
Top of mind for Brokers:
Top of mind for Brokers:
- How to improve distribution & marketing
- Ensuring business continuity in their value chain
- Better collaboration with underwriters for profitable initiatives
- Expanding the lines of business such as Risk Management & Consulting services
- Adapting new technology for addressing complex requirements
- Entering new markets to augment income from stalled economies
- The need for customized solutions for changing market conditions (shrinking economy and regulatory changes)
- A wide range of solutions from a broker is an attractive thing
- Ease of claims clearance – can the broker add value?
- The need for efficient handling of paperwork, again - can the broker add value?
- Global reach, hand-holding, advisory services, and face-time from brokers
- What other ways are brokers adding value?
by Saibal Sen on December 2nd, 2011
For some there is a stigma attached to the concept of competitive intelligence. On the contrary, competitive intelligence should be thought of as “Collective Intelligence” – it is the wisdom of business community. Knowledge alone cannot bring success. It is the “application” of knowledge that makes all the difference. Often budding entrepreneurs have asked me in our workshops “How should we handle competition?” The answer is treat them as your source of knowledge and don’t be afraid of competition. If you are good at what you do then focus on that and you will not have to worry about competition.
Knowledge is freely available today. This is the new normal. Harnessing knowledge for insights is where the focus should be.
by Admin on November 29th, 2011
Our flagship product "Competitive Landscape Analysis" (CLA) is currently our best selling product. Since it was introduced two years ago, CLA has evolved quite a bit. Our CLA product is a Competitive Intelligence (CI) report.
PE Firms, Consulting Firms and Startups have been the biggest beneficiaries of ZENeSYS Competitive Landscape Analysis.
PE Firms, Consulting Firms and Startups have been the biggest beneficiaries of ZENeSYS Competitive Landscape Analysis.
- Private Equity Firms: The ZENeSYS CLA Framework delivers an up to date snapshot of what industry leaders are striving to accomplish and what the consumers requirements are. This has helped our PE clients understand markets that are rapidly changing before moving forward with investment decisions. Example industries: Digital Media, Healthcare and IT
- Consulting Firms: Our CLA identifies industry best practices as exemplified by industry leaders. This allows our Consulting Firms to quickly assess where their clients need to play catch-up. Armed with this insight they are able to pitch their services with better focus.
- Startups: Our CLA provides visibility into opportunities that the competition is not clued up on. This allows them to spend their marketing dollars wisely and raise funding with a very clear vision on growth plans.
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