The buyout market is very competitive, which has led to higher prices for buyouts and shorter hold periods. Today, private equity (PE) firms need a focused and accelerated path to value creation for their portfolio companies. 

In the first installment of this Executive Insights series for PE firms, “Six Smart Ways PE Firms Are Mining Profits in a Challenging Environment,” we discussed six strategies to generate superior returns by creating advantaged deal flow. While advantaged deal flow may lead to a lower purchase price, PE firms will want to increase the value of their portfolio companies during their hold periods regardless of purchase price.

To address this leg of value creation, we introduce the S.M.A.R.T. playbook in this second installment of the series. We created the S.M.A.R.T. acronym to describe a systematic approach to portfolio company value creation that we observe PE firms utilizing to face the demands of the ROI clock. S.M.A.R.T. is composed of:

  • Strategic focus
  • Management & organization
  • Asset alignment
  • Revenue growth
  • Total cost alignment

In this Executive Insights, we take a closer look at each component of the S.M.A.R.T. playbook and how successful PE firms are utilizing these components.

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