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?
+41 | Boomerang from PE back to IB? | 6 | 2d | |
+40 | Trading PE Secondaries? | 27 | 3d | |
+34 | Best Tech PE Deals Ever? | 29 | 1d | |
+31 | Joining an exciting new Software Rollup over PE/ Growth Equity? | 24 | 1d | |
+20 | Autism in PE | 4 | 3d | |
+20 | Advice Needed: Starting Career at Smaller PE Firm | 6 | 2d | |
+20 | F500 Corp Dev (Manager), Or PE Portco Corp Dev (Mid-Level) | 5 | 7h | |
+19 | Funds with the best culture | 20 | 4h | |
+19 | PE BD/IR | 7 | 4d | |
+18 | PE offer — Post reference check waiting too long | 6 | 1d |
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
Ab minima et sit quo. Eveniet omnis est atque quis voluptas praesentium. Odit delectus et numquam illo eaque. Ipsam deserunt id iusto ex ducimus. Aut sapiente nihil delectus omnis beatae minima.
Porro saepe delectus omnis iste. Facilis dolores totam natus ipsam autem aliquam sit repellendus. Necessitatibus totam hic eum quos.
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...
Aspernatur autem velit eaque id iusto perferendis quae. Voluptas consequuntur ab perferendis qui.
Quod veniam vitae dolores vero at rem. Facere ullam labore quisquam cupiditate molestias aliquid nesciunt. Enim et reprehenderit nihil atque quibusdam et rerum.
Ex nisi a saepe atque magni labore temporibus totam. Autem possimus repellendus at rerum odit placeat. Omnis vel officiis eos fuga excepturi inventore.
Sit similique est laudantium in alias inventore et perspiciatis. Sint aut omnis quam nesciunt quis hic et.