How can private equity firms enhance their investment portfolio performance?

Additionally, insights from 141 firms were gathered through an online questionnaire, supported by ARX. 

In recent years, the Irish market has seen an increasing number of private market transactions, driven by the emergence of Irish private equity funds and an influx of middle-market funds in the UK and further afield. These funds invest in businesses of a scale that is typical to Ireland and generally look at backing an existing team with their growth plans, be that organically and/or combined with acquisitions. International expansion is also often a strategy for PE funds to accelerate firm performance. This means Irish business owners and management teams now have an almost exhaustive list of options available to them when considering funding and liquidity events.

While each fund’s PE structure and approach can vary, there are some key similarities from an operating standpoint, as well as emerging trends across the board. This survey sheds light on these dynamics, offering valuable insights for businesses considering engaging with private equity investors.

We surveyed a panel of pan-European PEs, including active/passive and minority/majority shareholders and on average 70% are satisfied with the performance of their investments. Key findings are:

• Reasons for dissatisfaction are linked to strategy, management teams and operations.
• Capital control and involvement in operations make a difference.

Active majority shareholders tend to be satisfied (after three years) quicker than passive majority PEs. To meet performance expectations, all PEs have reported their need for more operation analysis before a transaction and more post-deal supervision of execution. Based on their involvement in operations, we have identified three private equity models, which are discussed in detail in our full report.

New topics of investigation are coming to the front:

• For 53% of our respondents, Environmental, Social and Governance (ESG) is either included in the due diligence package or is embedded in their DNA through their internal policy rules.
• 14% have mentioned cybersecurity risks. However, this topic is expected to shift towards the top of priorities as it is already gaining traction in regulatory audit works.

With more topics on their plate and the realisation that being involved in the management of their investment matters, PEs are left with two choices to increase performance:

• Developing in-house teams with specialists such as operating partners, ESG managers or more hands-on participation executives. 
• The involvement of specialised external advisors.

Download our full report to gain full access to private equity insights across Europe.