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| | | 'Sizing the Prize' from revenue growth |
| | PitchBook Dealmakers Column
By James R. Corey, Managing Partner, Blue Ridge Partners |
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 | | James R. Corey |
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Portfolio company revenue growth can be challenging. Why? Because revenue growth is the result of a complicated set of interdependent components and growth investments that can take a long time to achieve full impact. But over a three-year holding period, revenue growth represents almost 60% of value creation. So it’s essential to fight through the complexity to help portfolio companies grow faster.
There are many growth acceleration actions a company might take. But they can’t all be tackled at the same time. Companies must choose their focus. To help them achieve this focus, private equity sponsors need a repeatable and standardized technique for targeting, estimating and communicating revenue growth initiatives. Our technique, which has been adopted by many private equity firms, is called Sizing the Prize. It is based on answering two fundamental questions:
1. Of all the potential actions a company could take to accelerate profitable revenue growth, which 4-6 are the most appropriate for this specific company? This can be answered through a variety of analytic steps that PE firms are increasingly capable of performing. The Sizing the Prize technique supports them in their efforts.
2. What is the “size of the prize” in terms of revenue and EBITDA associated with each of these potential actions? This sizing is essential for prioritizing actions but also for measuring achievement of the estimated impact.
This approach is now being used by many PE firms during pre-bid, due diligence and post-close situations to assist in targeting, estimating and communicating the value creation potential available from revenue growth initiatives. For a more detailed discussion of this approach, click here to read our full post.
This article represents the views of the author only and does not necessarily represent the views of PitchBook. |
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| | | | | | | | | Tesla to acquire DBAG-backed engineering firm, scale production |
| | Tesla (NASDAQ: TSLA) has agreed to acquire Deutsche Beteiligungs-backed Grohmann Engineering, formally expanding the automaker's operations into Europe for the first time in its brief history. Founded in 1963, the German manufacturing firm has, on the other hand, a lengthy track record of helping automakers build automated facilities suited to electric car-battery production.
That experience will come in handy as Tesla sets out to... |
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| | | | | | | | | The state of the US PE middle market |
| | Where is all the private equity action?
Well, for many firms, the answer is the US middle market, as investors hunt for value in a persistently pricey environment. But even at the lower end of the spectrum, prices have been inching upward with competition growing.
Our 3Q US PE Middle Market Report examines the entire landscape, featuring in-depth data and analysis on how MM activity is now declining at a faster pace than the broader PE market. Limited partner interest in the space, an evolving lending scene, a growing divide in the quality of acquisition targets—it's all covered. Key highlights from the report: - Through 3Q, this year's MM value has hit $265 billion across 1,330 deals, decreases of 9.7% and 16%, respectively.
- SBOs made up 52% of PE-backed MM exits in 3Q, well above what we’re used to seeing.
- ABRY Partners and HarbourVest were the top MM investors last quarter, with 12 deals apiece.
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| | | | | | | | | | | Despite their differing politics, Blackstone boss Stephen Schwarzman would endorse BlackRock CEO Larry Fink for Treasury secretary. [Fortune]
Twenty mini-profiles of Americans who just cast their first vote. [The New Yorker]
How much bigger can the private equity asset class get? [Forbes]
A nice look at PE activity in the northern UK. [BVCA] |
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| Since yesterday, the PitchBook Platform added: | | 194 Deals | 1344 People | 470 Companies | 1 Funds |
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| | | 2010 Vintage US Buyout Funds with Healthcare Investments |
| | | Median IRR | | | | Top Quartile IRR Hurdle Rate | | | | 1.36x Median TVPI | $383 Average Amount Contributed |
| | | | *IRR: net of fees | | 27 Funds in Benchmark » |
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| Deals in Play & Announcements |
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| | | Blackstone backs out of $800M energy venture |
| | | Energy Exploration | Kuala Lumpur, Malaysia |
| Blackstone won’t go through with an $800 million commitment it made in 2014 to Southeast Asian oil & gas business Tamarind Energy, according to The Wall Street Journal. Blackstone reportedly failed to find attractive deals in Asia in the face of sliding oil prices—a downturn that began shortly after the firm and Tamarind struck their original deal. The two had planned to create an upstream company focused in part on building relationships with governments and national oil companies. |
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| | | Warburg Pincus invests $75M in Rivigo |
| | | Logistics | Gurgaon, India | PE Growth |
| Warburg Pincus has made its latest venture into India with an investment in Rivigo, a logistics provider working with the apparel, frozen food, pharmaceutical, automotive and other industries across 29 Indian states. The company has now raised $117 million in funding, including a $30 million round last December. |
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| | | | | | | | | Windjammer acquires lab equipment maker |
| | | Healthcare Supplies | Norwood, MA | Buyout |
| Windjammer Capital Investors has bought Advanced Instruments, a manufacturer of lab equipment for the food & dairy, microbiology, pharmaceutical and biotech industries. Windjammer made the investment out of its Senior Equity Partners IV fund, which closed on $726 million in 2013. |
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| | | | | | | | | Francisco Partners takes stake in Prometheus |
| | | Database Software | Raleigh, NC | Secondary Buyout |
| Francisco Partners has acquired a majority stake in Prometheus Group. Founded in 1998, Prometheus is a provider of software used in planning, scheduling and executing maintenance for plants and other industrial assets. The company had been backed by TA Associates since 2013. |
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| | | Limerston adds AdviserPlus |
| | | Human Capital Services | Wirral, UK | Buyout |
| Limerston Capital has acquired AdviserPlus, a provider of HR advisory services including coaching, case management and data analytics. Founded in 2001, the company works with clients in both the public and private sectors. |
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| | | | | | | | | Warburg Pincus buys into United Internet |
| | | IT Consulting and Outsourcing | Montabaur, Germany | Secondary Transaction |
| Warburg Pincus has agreed to acquire a 33% stake in the web-hosting business of United Internet (FRA: UTDI) for €450 million, valuing that unit of the company at €2.55 billion including debt. The business provides email, marketing and storage services in addition to its primary web-hosting offerings. United Internet CEO Ralph Dommermuth said the sale will delay a planned IPO for the business applications division from next year until at least 2018, according to reports. |
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| | | Essex Woodlands closes ninth fund |
| | | The Woodlands, TX | PE Growth |
| Essex Woodlands has closed its Fund IX on $543 million, according to an SEC filing. The healthcare-focused firm had indicated a goal of $750 million for the fund with an earlier filing. Essex Woodlands closed its previous flagship fund on $900 million in 2009. |
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| | | | | | | | | Southern Cross tops $500M for fifth PE fund |
| | | Buenos Aires, Argentina | Buyout |
| Founded in 1998, Southern Cross has raised over $500 million in capital commitments for its fifth Latin American flagship fund. The firm, which closed its previous fund on $1.68 billion in 2010, has backed companies including Chilesat, Estrella and HotelDO. |
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| | | Graycliff buys Installs, MHH advises |
| | | Philadelphia, PA | Investment Bank |
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