Seeking some clarification on PE strategies, as far as what happens following the actual investment. Let's assume here that I'm talking about LBO funds. I know that the megafunds (KKR, BX, etc) look to increase returns via "financial engineering," (while taking a relatively hands off approach to operations), while other buyout firms may work towards EBITDA growth through operational improvements (cost cutting, bolt-ons, etc). So two questions:
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What exactly is "financial engineering," in this context?
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What do UMM PE firms (like CVC, Madison Dearborn, Thoma Bravo, etc) do to enhance returns? Is their focus financial engineering, operational improvements, or a combination of the two?
Optimizing your capital structure with instruments that generate best returns
All wildly different but if you were to take a general UMM player the answer would be a combination of the two, however operational improvements is a very wide statement and can look very different depending on where you go
Appreciate the clarity here. Stupid question, but could you give me an example of adjusting the capital structure to generate returns? Would it just mean taking on more leverage, for example?
Lever up to the tits with every debt tranche offered costing at least 1 bp less than your base case return
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