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Bain Book

Lessons from Private Equity Any Company Can Use

Lessons from Private Equity Any Company Can Use

By Orit Gadiesh and Hugh MacArthur

Lessons from Private Equity Any Company Can Use

How do private equity firms become powerhouses? PE masters follow a basic set of disciplines that any senior executive can employ for similar results. Some of these lessons will sound familiar. However, in our view, they are not being applied rigorously by businesses around the world, giving way to the pervasive disease of satisfactory underperformance.

In Lessons from Private Equity Any Company Can Use, Bain Chairman Orit Gadiesh and Partner Hugh MacArthur lay out the six disciplines that PE firms use to attain their edge.

  • Define full potential: They generate high returns primarily by creating operating value. Top firms start by building an objective fact base. They scrutinize demand, customers, competition, environmental trends and the details of how money is actually made. Only then do they pursue a few core initiatives to reach full potential.
  • Develop the blueprint: They turn the few core initiatives into results, choreographing actions from a standing start to the finish line.
  • Accelerate performance: They mold the organization to the blueprint, use a rigorous program, and monitor a few key metrics.
  • Harness talent: They create the right incentives for employees to act like owners, and they assemble decisive and efficient boards.
  • Make equity sweat: They embrace leverage. Scarce cash compels managers to manage working capital aggressively, discipline capital expenditures and work the balance sheet hard.
  • Foster a result-oriented mindset: They create repeatable processes that spur performance improvements again and again.

By following the PE formula, companies of any industry can unleash their true potential.

About the Authors

About the Authors

Orit Gadiesh

Orit Gadiesh

Orit Gadiesh, chairman of Bain & Company, is one of the leaders in today's strategy consulting industry and is widely recognized for her expertise in the implementation of change within the corporation. She has contributed to a number of leading journals, such as the Harvard Business Review and The Wall Street Journal, and given speeches at leadership conferences around the world.

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Hugh MacArthur

Hugh MacArthur

Hugh MacArthur is head of Bain’s Global Private Equity practice. He helped found the practice 15 years ago, and works with a variety of PE funds and alternative asset managers. Hugh has written frequently on private equity value creation and the state of the industry in publications around the globe, including The Wall Street Journal and the Financial Times.

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