How does PE increase margins?
What exactly are key sources of margin cutting (common ways companies waste money) which PE sponsors look for when they evaluate whether the target has significant opportunity for cost reduction/margin expansion?
What exactly are key sources of margin cutting (common ways companies waste money) which PE sponsors look for when they evaluate whether the target has significant opportunity for cost reduction/margin expansion?
+39 | Which PE firms are on the rise? | 53 | 2h | |
+37 | Pro tips to exercising during ASO stint | 16 | 11h | |
+19 | Is there any point learning a European language for PE recruiting (London) | 17 | 1d | |
+17 | How to prepare to break into PE | 7 | 14h | |
+16 | PE Secondary Advisory vs Model Internal Audit | 5 | 7h | |
+14 | Current European Leveraged Financing Terms Superthread | 7 | 1d | |
+13 | Quality of PE Associates | 7 | 2d | |
+13 | Earn-out modeling between seller and buyer | 3 | 1d | |
+13 | Technical question - Revenue sensitivity in LBO Model | 3 | 1d | |
+12 | Cove Hill 2024 | 1 | 4d |
Career Resources
Depends on the industry but other general examples are cutting out middlemen/using more direct distribution channels, driving better labor absorption, automation, better sourcing, taking certain functions/production areas in house, passing on price increases etc.
They cut the fat
Easy ones are listed, but also removing legacy businesses. Depending on the size of the company, you’d be surprised on the amount of smaller firms that are trying to sell something they have no business being in the business of 😂
This is pretty important. We often trim product lines / entire business units which sure may result in lower sales but our realized margin tends to increase more with some of the more inefficiently run / impractical / archaic areas of the acquired company. Pretty high level and generalized statement but I would say overall a good point
acardboardmonkey TheBuellerBanker For legacy divestitures, what do you think of the following scenario: hypothetically if a business's core division (70-75% of revenue) has high operating leverage (high gross margin), that should imply that after SG&A it should have high EBIT margins when making lots of revenue. However, if the remainder of the business (25%-30%) is let's say services-oriented that would cause SG&A to be higher and depress the EBIT margin. How would PE think about the key considerations here - would the non-core business like this be a good spin-off target or would the sale compromise the balance of the business?
EBITDA add-backs
Sit id dolorum hic fugiat accusantium omnis. Aliquam iusto eligendi similique illum ducimus amet nemo ipsam. Mollitia est illo dolore rerum ducimus maiores.
Cum dolorem a iste aliquam rerum dolor. Possimus et ut doloremque.
Accusamus et esse consequatur voluptas animi. Ut animi fuga et eum quasi maiores. Rerum nihil nihil saepe mollitia.
Dolor odit tenetur minima facere libero accusamus magnam ea. Et omnis tempora tenetur nulla aperiam. Est qui nihil id quasi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Nobis porro fugiat id excepturi modi. Et et voluptas autem esse numquam. Eos labore modi quia. Repudiandae fugit sunt voluptatibus qui rerum.