Portfolio Value Creation

Having paid record-high prices for recent acquisitions and with exit conditions likely to be less favorable than those at entry, private equity firms need a radically different formula to earn attractive returns. They are replacing passive stewardship with a hands-on approach to building value in their portfolio companies.

Bain is a leader in supporting an activist approach to ownership. We often find that the work we do immediately post-close has the biggest impact, and our numbers tell the story: The mean return of all investments during the first year where Bain has been retained is 3.3 times invested capital, well over the industry average of 1.8 times. We assist in post-close activity in three time-tested ways:

• Blueprint: Create a value creation plan that defines the full potential of the business and creates a program to capture it—complete with specific initiatives, detailed action plans, assignment of accountability for results and a dashboard of metrics to track operational and financial performance;
• Focused initiatives: Identify highest priorities first, such as new product introductions, salesforce productivity and integration of add-on acquisitions; and
• Management workshops: Provide a structured, interactive forum for sponsors and managers to develop a value-creation plan.