Last Updated on March 23, 2023 by hassan abbas
Besides monetary investments, private equity firms offer way more to their portfolio companies. They can turn struggling businesses into money-making machines by helping them upgrade their equipment, increase their staff productivity, and make better business decisions. However, finding a potential portfolio company can be quite daunting. Ultimately, investors must make the right decisions because the wrong ones might lead to substantial loss. This is where external experts with great experience in private equity come in.
Here, we will discuss how private equity consulting helps firms move in the right direction.
1. Evaluate Lucrative Opportunities
Experienced private equity (PE) consultants know the intricacies of investing and help investors identify lucrative opportunities with high revenue-generating potential. Many experts recommend focusing on quality rather than quantity when investing in the right portfolio companies. Moreover, with numerous investment opportunities entering the market each day, the final decision might sometimes get overwhelming. Since private equity firms have hundreds of options to invest in, they need proper calculations, the right advice, and foresight to select the most sustainable and lucrative opportunities. PE consultants make a living doing exactly this and offer terrific industry insights to clients for the same.
Private equity consultants help PE investors evaluate various options and weed out the non-viable ones. They can use their knowledge of the current market trends and potential risks to analyze each company’s financial situation and help them make the right calls. Although it sounds simple, the process is complex and time-consuming, and companies find it much better to hand over these verticals to consultants.
2. Analyze a Portfolio Company’s Potential and Value
Of the few potential companies that reach the final consideration stages, PE firms acquire only the cream of the crop. They consider several factors to ensure they do not lose the best options. It requires a lot of research, analysis, and data collection that only experts can handle. Private equity consulting experts help the internal team make data-based decisions when choosing potential companies for investment.
Consultants consider numerous factors during the analysis, including the company’s growth potential, market position, industry trends, revenue stability, etc. Experienced consultants know the issues that might arise with the potential acquisitions and investments because they know what mistakes other PE firms have made. That is why they can guide investors in the right direction and prevent them from heading to the wrong one.
3. Help a Portfolio Company Grow After Investment
Apart from helping PE firms identify the right companies for investment, private equity consultants also support them in increasing their value and ensuring good returns on their money. Many top consultants are experts in growth and help strategize innovative ways to scale portfolio companies. PE consultants may collaborate with other freelance consultants to support a portfolio company in strategizing its growth. For instance, if a firm only sells its products through its retail store, growth experts might recommend new distribution channels, such as e-commerce platforms, to boost sales.
4. Optimize Pricing and Operations
Sometimes, businesses leave substantial money on the table because of setting the wrong pricing. Since it requires a lot of brainstorming and research, it’s best to hire a private equity consulting expert who can handle it like a pro. PE consultants can examine the competitors, gauge the market, assess supply and demand, and consider other crucial factors before setting the right price.
If the portfolio company does not perform well, it’s not necessarily because its products or services are inferior. Sometimes, the issues lie in operational efficiency. Consultants can generate new processes and streamline operations to achieve business goals in a more efficient manner.
5. Help with Digitalization
Without digitalization, businesses that do not keep up will eventually exit the market. For instance, when the Covid-19 pandemic hit, many countries started enforcing cashless payments. Businesses that already accepted digital methods had an easier time than analog businesses that mostly transacted in cash. There are several other ways how digitalization saves the day for companies. That is why PE consultants guide companies with digitalization and ensure the portfolio company adapts to changing situations.
Simply put, private equity consulting brings an expert perspective to a firm’s internal decisions:
- The consultants recommend PE firms on where to invest.
- They conduct in-depth analysis and research to choose the best investment opportunities with the highest returns potential.
- They offer ongoing guidance after investment on a long-term basis.
Whether it’s operations or growth strategy, PE consultants can help take a portfolio company to the next level and benefit investors the most.
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