The principles of due diligence are the same regardless of sector however, there are specific difficulties that private equity transactions must overcome. Private equity investors usually have to work with less accessible information, as non-listed companies do not make their financial information easily accessible and the process can be time-consuming for both sides because of this lack of transparency.
Private equity (PE) companies are financial buyers, rather than strategic ones. Their aim is to generate the desired return on investment for their limited partners within a short time, by implementing improvement in operations that increase the value of a business. The PE sector is heavily dependent on quantitative analysis. It is possible to begin by assessing a company’s position in its industry, conducting Monte Carlo simulations and viewing recent transactions within the industry using their multiples.
The PE firm will conduct a thorough management due diligence to find out how the company’s leaders are doing and identify areas of value creation. This involves analysing performance metrics, understanding the technology that can help the company compete, and reviewing customer relations.
In the end, the legal due diligence element is a crucial component of any due diligence and is a major aspect in determining if the deal will be concluded. To avoid costly delays, it’s essential to identify and address potential legal issues as early as possible in the process. PitchBook information on 3.5M+ companies allows you to quickly gain complete understanding of a company’s. This includes cash flow statements, balance sheets including income and expense statements, financial multiples and ratios in addition to consensus estimates and fundamentals.