How are PE houses delivering value through operational improvements?
The question KPMG professionals are frequently being asked is: how are pioneering private equity houses moving from concentrating on financial engineering to delivering value through operational improvements?
The private equity landscape has changed dramatically over the past decade. In 2017, European PE deal values reached their second highest point on record, a total of €363bn ($436bn) across 3,015 deals. European M&A EBITDA multiples reached their highest median levels (7.6x) in a decade, nearly three times higher than the recent low of 4.8x in 2010 (Pitchbook, European PE Breakdown, 2017).
The need to maintain competitive advantage and to minimize risk in an increasingly crowded and high-priced market is forcing PE houses to re-think how they drive value. The result: their focus is shifting from leverage and multiple arbitrage to operational improvement.