Hi,
I'm looking for books/papers about the different strategies used by LBO funds to make firms more financially efficient and create value. I found this article by INSEAD https://knowledge.insead.edu/blog/insead-blog/ope… but was wondering if you knew about more detailed resources, with case studies for instance.
Thanks!
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This a pretty broad topic and depends on what role you want to play here. Eg are you thinking about being an investment team member or operating team?
By operational improvement I mean strategies that are not pure financial engineering, for instance working capital optimization as opposed to just cutting the firm in several parts and selling those parts separately at higher multiples. I guess it involves both corporate finance and management and may therefore be industry-dependent, but what I'm looking for are resources explaining the areas to look at to streamline a firm's operations. So I guess it's more on the operating team side?
In that case, my suggestion is to look into management consulting case studies for general problem solving skills and high level understanding of the common types of problems that businesses try to solve. This will also help you relate the operating metrics to financials (though mainly P&L). PE thinking is better to link to 3 financial statements (e.g. working capital and capex). Reading up on corporate finance thinking (e.g. NPV) and project management would also provide useful general skills.
In addition, think about a sector you are really interested in and dive into that. Paths to an operating partner role is usually someone with a lot of industry expertise and proven track record. Starting your career as a management consultant is a pretty good choice but you wouldn't want to do that for more than a couple of years (unless you want join a KKR Capstone type shop) and instead get some real experience.
Many thanks for your advice! I'll definitely dive into the industry I'm interested in so I can really understand its dynamics and what's driving firms' operations.
@m_1 shared this HBR article on another thread that I thought was very insightful. It's about CD&R's success in the 80s and 90s and is still very applicable today.
Lessons from Private Equity Any Company Can Use (Gadiesh & MacArthur) is a short handbook written by two Bain consultants. In my opinion, some of the content was a little generic and fluffy, but it's such a quick read that I had no problem reading it cover-to-cover twice. I think they wrote a series of handbooks/memos like this one; I haven't read them, but they may be worth checking out.
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