Driving Value Through Automating Boring, Custom Tasks
With increasing EV/EBITDA multiples amid a space overflowing with equity capital, successful private equity firms (PEs) are shifting towards a model that emphasizes Value Creation. Some firms have separated this function out analogous to the division between “Business Development” and “Investment Team”, with names of these teams including “Portfolio Management”, “Value” or “Value Creation”, “Portfolio Support” or (as a subsidiary function) “Data Science.”
In the midmarket (<$5B of assets under management), resources are scarcer, so firms are looking to add value inexpensively and creatively. Sapling Financial Consultants Inc. (“Sapling”) assists a number of private equity firms with various aspects of Value Creation on the Finance side. This is one of a series of whitepapers covering how midmarket PEs can Drive Value in portfolio companies through optimization of the Finance function. Read More
Stress Testing is the use of financial models to test the resiliency of businesses through “stressed” situations, such as this crisis. The main purpose of Stress Testing is to plan remedying actions to put the company on a sound financial basis, and to answer questions internally, such as how to continue operations in order to be able to resurrect later, and externally from key stakeholders like lenders and investors.
We have put together a free template (Canadian and US versions) and whitepaper for small and medium-sized businesses to come up with an internal plan, and to calculate detailed financials for internal and external communications.
Optimizing Your Due Diligence Resources
A QoE is aimed at providing the buyers with an understanding of “How much money does the business sustainably earn”? A QoE analysis is a routine step in the due diligence process for private M&A situations, new investments, and follow-on financing deals. QoE typically focuses on identifying critical issues and potential adjustments to revenue and cost line items, thereby providing a solid basis for estimating sustainable earnings. This is crucial for the buyside as a target’s financial statements often possess some ‘noise’ which the QoE exercise attempts to eliminate to reflect true normalized performance.
Sapling’s Pre-QofE analysis provides GP’s with credible insights on the sustainability of current earnings and future prospects of portfolio companies, without the cost of a full QofE, allowing you to gradually grow your diligence investment during a period of economic uncertainty. You can read the full white paper here.