After an unpredictable and turbulent start, the turn of the decade marks the private equity (PE) industry’s coming of age. Despite initial volatility, McKinsey’s annual review found that fundraising activity across private markets reached an all-time high of $7.3 trillion in 2020, of which PE accounted for 61% and was the biggest driver of this growth. Zeroing in on the U.S., PitchBook’s analysis indicated that PE deals and exits are on pace for a record-setting year in 2021.
Establish a Productive Private Equity Partnership
Deals ultimately succeed or fail because of the people involved.
November 08, 2021
SasinParaksa/Getty Images
Summary.
While the private equity (PE) industry’s reported resilience amid a global pandemic is a cause for celebration, one overlooked aspect of due diligence is a cause for concern. Most due diligence efforts center on investigating the nuts and bolts of a company — financials, legal, patents, corporate documents, etc. — that provide a good understanding of the business on paper. However, what’s often underestimated and overlooked is management due diligence, a process that provides insight into the target company’s management team and what it would actually be like to work with them. The authors surveyed 50 North American PE industry executives, comprising 25 managing directors of middle-market firms and 25 members of management teams at target companies that were previously owned by the PE firms. Based on their research questions, they offer fundamentals for establishing productive and flourishing PE partnerships.