Private Equity: A Rising Power

This chapter explores the private equity (PE) model that has grown and developed over the last 40 years. It sets out the reasons why it consistently outperforms other investment categories prompting more and more investors to switch funds from public markets to private equity to the extent that, by 2021, one-third of all M&A activities were conducted by private equity. The primary concern of this chapter is what can be learnt from the buy–improve–sell model by others. Governance, objectives and incentives are all examined with a view to establishing how they drive every element of financial management from profit performance to exit multiples and cash efficiency. Identifying new growth markets and approaches is identified as a common theme in any bid to drive performance. These areas are addressed as levers which management can pull to vastly improve performance and optimise exit proceeds. Whilst imagination and innovation play a part, much can be achieved with focused initiatives and appropriate incentivisation. These approaches are repeatable, and most can be applied to all forms of business, not just those in the hands of private equity.