Panel – Demystifying private equity

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Session recap

Organic revenue growth is the key to today’s PE

As the financial landscape has shifted, the role of private equity (PE) has undergone a quiet transformation, according to panelists. PE firms are still looking to create maximum value, but the image of them buying companies and looking for an immediate exit has never been less accurate.

Today, PE is “all about how you can grow the earnings profile of the business,” says Tim Franks of Advent. Organic revenue growth is the order of the day: working with the business to improve supply chains and distribution, instill operational rigor and financial discipline, and establish the right strategy to grow the company over the long term. That often involves a hands-on approach — as Marty Wikstrom of The Atelier Fund says, “I work a lot closer with my companies than anyone can imagine.”

It also involves making sure the right people with the right skills are in place. While that can mean replacing the management team, it also means building the right relationships with employees.

In the end, PE firms want to grow the business. “Ultimately, we do have to exit,” Franks says. “We do have to create really interesting growth stories so that the next buyer wants to take [the business] off us.”

Panelists also offered advice for entrepreneurs taking a hard look at PE:

  • “Get a sense of what they’re about,” Frank advises those considering PE firms.
  • “What do you bring to the fund?” Wikstrom asks. “What are they giving to you?”
  • Selçuk Yorgancıoğlu of The Abraaj Group struck a cautionary note: “Keep in mind that we are managing other people’s money. We cannot be emotional or romantic with our decisions.”

 

Panel chair

EY - Michael E. Rogers

Michael E. Rogers
Global Deputy Private Equity Leader
EY

 
Panel members 

EY - Selçuk Yorgancıoğlu

Selçuk Yorgancıoğlu
Partner
The Abraaj Group

 

EY - Gökhan Gürcan

Gökhan Gürcan
CEO
Acibadem Sigorta

 

EY - Marty Wikstrom

Marty Wikstrom
Founder
The Atelier Fund

 

Tim Franks
Managing Director
Advent International plc, London