Best Book(s) / Playbook(s) on PE Due Diligence / Value Creation
As a recent college grad, we see a lot of guides and materials on the mechanics of an LBO, how to model an LBO etc., but don't come across materials that explain how private equity firms go about conducting due diligence on potential investments. Understand that there is no one recipe/formula and this can range on a case-by-case basis. However, when dissecting a CIM, Management Presentation, dataroom, etc., I am assuming that PE investors have some rough framework or list they tick through in their minds. Part of that would include determining whether the target is a "good" business and, if so, ways to create further value whether through operational improvements, financial engineering, top-line growth, transaction structuring etc.
TLDR, we all know that a decision to LBO a company is not predicated upon the ability of a 25 year-old spitting out a 25% IRR in an excel model. Instead, the actual qualitative and quantiative analysis during the diligence phase is the real make-or-break. I'd appreciate if someone has any resources that would help break this down in detail. For example, if a company is looking at top-line growth, this can be achieved either through volume growth of existing products, launching new products, or price increases. If we were to just focus on price increases, how does a PE firm determine the maximum increase in price that would maximize revenue with no loss in volume/customers? I have my ideas but studying what others have done always helps.
P.S. I understand that this is not specific to PE but includes broader concepts from biz strategy, operations, economics etc., so a wide variety of material are welcome. Additionally, for those who like to remind us that we should resort to the search function, I have included two links below that I found helpful as a starting point. Feel free to comment on which of these books you have found most useful.
https://www.wallstreetoasis.com/forums/books-rele… https://www.wallstreetmojo.com/top-best-lbo-books/
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Hi, great question and its one I've been asking when I was prepping back then.
I've read or at least browsed all the books mentioned on this site (and links you shared) but I can tell you for sure none of them goes into the detail that you specified in the price example above.
The reality is that these individual value creation levers are usually 6-12 week engagements with specialist consulting firms, working alongside Management and the Sponsor. To reasonably quantify the reward and risks of that action, to the detail that you mentioned, takes considerable time/effort and its very business specific as well.
But back to your original question and trying to add something helpful - I'm in the process of writing (maybe a blog, or ebook etc.) a mega framework as its something I do for my own professional development.
It will be a "to the point" but robust / detailed framework addressing every single value creation lever I've seen in practice (going from revenue, cost, cashflows) and lay out specific diagnostic tools ("how to identify during DD phase"), and post acquisition actions ("how to implement").
its something I already do in my day job, so if you want you can PM me your email and happy to let you know when I have something "developed"
also would be interested
This sounds amazing - I would also be very interested!
Checking back in 2022 here haha
Hi! Would also be interested!
This is a great idea! Would love to see it once complete
Thank you for your response - I'll shoot you a PM.
I have made a google drive with 15 PE/VC books that all the forum users will find very useful. Some of these books deal with value creation, due diligence, and other nuances that the OP and others with the same questions may also find insightful-
[https://drive.google.com/drive/folders/1C7GjG6YUk_AkdJb37Eb7vdUvEVeEKsy…)
Amazing - will be forever grateful for this!
This is great - thanks a lot!
OG
extremely helpful and forever grateful!
Link doesn't work. Please, could you put a new one?
Bump
bump - can someone share what the link contained?
Link seems to be broken. Would greatly appreciate an updated one!
Late to this thread - link is broken, any chance we can resurface it 🤞?
Hi! Do you still have this link?
Link does not appear to work. Could you kindly reshare?
Any chance we can get a refresh on this? Be greatly appreciative
Could u send an updated link
Hi, the link expired. Can you please share with me?
Can you reshare this please?
404 error :(
Hi, this link is inactive; could you please share the updated?
You are right, your question is not specific to private equity.
If you are interested in mastering due diligence and value creation, then the topics to focus on are:
1) strategy; 2) advanced accounting; 3) business operations.
The best books on these topics will not have "private equity" in the title, as most general private equity books do not have enough capacity to focus on these topics in sufficient depth. Therefore, you need separate resources to cover these specific areas.
My views are subjective. During various points of my career, I personally found the following books indispensable:
That's a great list. I'll check it out and report back if I end up purchasing some of these. Thanks for your continuous contributions to this forum!
I found a great resource in The Private Equity Toolkit by Tamara Sakovska. Not as much in-depth breakdowns of deal mechanics per se, but a great primer into every aspect of the PE process. I'd compare it to Feld's Venture Deals in terms of scope.
I am actually searching for this ebook now. Could you send it to me? I can pay lol
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I designed my former employer’s post investment management (PIM) program. I can opine on what we did. Feel free to DM
I'm not sure there's any books per se. Firms each develop their own form of post-investment management (PIM). Broadly speaking we can talk about PIM as 'General PIM' and 'Specialized PIM'. That is, there's just some basics that most / all firms should do, and then there's specializations that some firms develop that can set them apart. You could say that General PIM consists of more distant oversight, including the tracking KPIs, managing via BOD, etc. Hands-on specialized PIM goes much further and tends to do things like embedding operations professionals or imparting technical skills or knowhow to the portco.
General PIM
Specialized PIM
This is from a PPT I put together in 2008, so it's likely quite out of date. Apologies in advance.
This is awesome man
So helpful. Where do you get that PIM information? Been looking for a graphic like this for healthcare funds.
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