PE acquisition growth opportunities
I've recently done some reading relating to private equity acquisitions and the criteria for a good candidate. General things like steady cash flow and low debt percentage are relatively straight forward, but what I am most interested in is the growth opportunities in the acquisitions (e.g. EBITDA expansion, and how to obtain it).
Besides the broad answers like growing revenues or cutting costs, what specific ways do PE firms look to grow their portfolio companies? Interested in infrastructure or energy (where you can't easily expand your geographical presence), but any examples from whatever industry would be interesting too.
Thanks!
Growth opportunities generally all fall within one of 3 buckets: 1) Do the same thing for new customers / in new geographies (best organic growth since the model is proven) 2) Do new things for existing customers (also organic - more execution risk around new product/service development and market adoption) 3) Buy revenue (M&A / inorganic - value creation comes from buying at a cheaper multiple than your valuation)
Infra and energy is a very broad category - what specific type of company are you talking about (E&P, midstream, services?).
For things like consumer goods and tech organic growth is pretty easy to understand - open a new store, make your product available in a new geography, increase your value proposition through bundling or marginal cost add-ons etc...
I'm looking at solar/wind farms, hydro etc. Expanding the business, once established, seems like it would be a struggle. So what would you tell a PE firm about the growth opportunities available? Is it just that there are so few opportunities that the only return you'll get is via debt reduction, an increase in regulated price or perhaps it is soon-to-be unregulated .
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