Private equity/investment due diligence

Using investment to scale up

For many growth-oriented businesses, private equity investment offers a shot of capital and new strategic direction to take them to the next level. For their part, PE investors want to see potential for sustainable, multi-channel growth and opportunities for cost reduction (i.e., evidence they’ll see a return on their investment with mitigated risk) as well as good governance and honest/accurate information from the business owner(s).

Understanding what PE firms are looking for

A PE firm will always want a view of capital expenditure, operating costs, sales, overhead, assets, liabilities, inventory, and the cost of human capital, but they also require insight into the business’ current state, areas of challenge and how these might be improved, future-facing business/technical requirements, and value-add opportunities.

How much a company is leveraging trends and disruptive technology within its industry is also a major criterion for investment, so its mission and vision need to align with the potential for innovation and transformation (e.g., AI and automation, changing consumer behaviour, new disruptive technology, regulation, etc.).

Thorough due diligence

Accurately reflecting the existing business operations to confirm the investor/business’ understanding of where the organisation is now and what transformation/change (and hence investment) is required to meet the end-state objectives/ambitions.

Understanding the existing operating model, where the gaps lie and what needs to change to eliminate rework and inefficiency, and support growth plans around:

People – roles and responsibilities, skills, and capabilities by role.

Process – process architecture (i.e., hierarchy and decomposition).

Technology – all technical application/service/infrastructure-related information.

Organisation – functional view of people/teams, spans of control etc.

Establishing a fit-for-purpose operating model will positively influence the credibility of the business and strengthen its position in the acquisition and divestment marketplace, or for future IPO, MBO, or sale.

Enablers to success

• A deep understanding of the business, its requirements, and internal/external provisions.
• PE vision, objectives, and success criteria, including business case and intended benefits.
• Alignment of both parties’ goals and interests.
• Understanding of the business’ current state operating model and transparency of the future state.
• Requirements for management, oversight, and governance.
• Strategic mandate and engagement of business stakeholders for input. 
• Identifying risks and issues, and root causes with remediation.
• Highlighting assumptions, constraints, and dependencies.
• Documenting improvement opportunities/requirements (re: futureproofing, M&A, and enabling technologies).

We can help you

• Reduce the administrative burden by delivering best-in-class due diligence/discovery.
• Undertake a current state operating model analysis.
• Identify and document any key target operating model (TOM) risks/issues, assumptions, constraints, and dependencies.
• Identify improvement opportunities and recommendations, with prioritisation.
• Baseline the As-is process hierarchy and design the To-be
• Undertake a current IT estate review inc. core and non-core system requirements and contracts/licensing.
• Document the existing people dynamics.
• Assess and undertake a gap analysis of the current org structure.
• Prepare and articulate a full business case/benefits and strategy to satisfy the PE vision, objectives, and success criteria.

Aitemology® is the creator of the Plug and Playbook series of scale-up methodologies (Cloud, Change, Consult) that delivers effective transformational change. Consisting of a ‘how to’ primer underpinned by specific/dedicated aitems® (policies, processes, technical products, reports, templates etc.), organisations can navigate their chosen technical/non-technical transformation journey step by step from start to finish. Save time and money, retain control, maintain quality, and manage risk.