Has Private Equity shifted from a rocking market to rocky market?
Updated: May 1
It's April 2023 and Anne Sraders from Fortune's Term Sheet just published "Private equity had a pretty resilient Q1, but the ‘risk is this is the best quarter of the year’. Sraders points to a new PitchBook report detailing that deal count dropped 9.3% (with over 2,100 deals), deal value rose 11.4%. but the trend is “still flat to down, and we have yet to make a definitive bottom.” Per the report, U.S. PE exit count and value both declined for the third consecutive quarter in Q1 as reflected in the two charts below.
With global economic headwinds impacting this market, what performance can PE managers actually control with their portfolio companies?
Warren Buffett shared his perspective for navigating recessions "Risk comes from not knowing what you're doing". As a private equity manager, have you considered that this may apply to the sales maturity of your firm's portfolio companies? In simple terms, is each PortCo mastering what they can control? Investor Mark Cuban once said "Do the work. Out-work. Out-think. Out-sell your expectations. There are no shortcuts". Are your PortCo's out working and out selling their competitors? Or are your PortCo's being outworked?
Now, more than ever, the sales pipeline is now the financial lifeline. The growth-at-all-costs model has been retired, and revenue discipline has stepped on stage. PE managers are starting to ask tougher questions of their startup CEOs, and in turn these CEOs are beginning to inspect more of their sales teams activities.
In my e-book titled "Red Flags in Revenue: A Guide for Private Equity", we hit the impacts of low sales maturity head on. We know that Private Equity firms are motivated to scale their Portfolio Company's business, but their approach has been forcefully altered by the COVID-19 pandemic. Most of this disruption still lives under the surface, invisible to average operators still using old playbooks and tactics to grow the business as they did pre-pandemic. As a PE manager, one signal of revenue risk is to check the born on date of your PortCo's sales playbooks. If any sales leadership team is using a sales playbook that predates 2021, you're getting out sold. If your PortCo isn't using sales playbooks, then they haven't done the required work.
If you are a PE manager who has a portfolio company struggling, or you are a start up CEO trying to get their sales team's activities aligned to high performing selling motions, our team at Lucrum Partners can help.
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