Working capital and cost initiatives are areas of elevated operational focus
For firms’ existing portfolios of assets, one of the primary consequences of extended hold periods is imperative to optimize operational value-add to offset longer ownership periods. Even for new acquisitions, with many assets continuing to be “priced to perfection,” there is little wiggle room for suboptimal execution.
While firms continue to execute across the full range of value creation levers, the specifics of today’s operating environment mean certain initiatives in particular are taking clear priority:
Liquidity and working capital: 80% of the PE professionals surveyed indicated they’re paying more attention than usual to helping companies get visibility into cash and liquidity needs. It’s a critical endeavor — in today’s market, portfolio companies that can create more cash are not only better positioned from a resiliency perspective, but also from an offensive perspective, insofar as they can deploy excess cash to fund acquisitions, repay debt, invest in talent or fund business transformation at a time when many of their competitors are on the back foot.
Cost initiatives: Cutting costs is another area of focus, with 70% of firms saying they’re paying more attention to cost takeouts than usual. For those firms, a thoughtful approach that keeps costs under control while keeping growth drivers intact is imperative.