Based on a request from Limited Partners and General Partners, Humatica initiated an ambitious study to understand the current state of the art in organizational due diligence. We set out to develop a better approach to getting deeper insights on management practices in an acquisition target prior to signing.
Private equity today is a mature industry with many players having entered the lucrative field in the last 10 years, during which returns have steadily declined. Increased competition has driven up both target prices and risks taken to realise a reasonable return.
Investors have reacted by focusing on enhancing performance through the engagement of «operating partners» who have the functional skills as well as operational and leadership experience to drive improvements in portfolio companies. Further, extensive effort is made pre-deal to assess potential risks in the due diligence phase including market, financial, and legal aspects. However, these methods are backward looking and provide limited insights about the target company’s ability to master new challenges and increase value in the future.
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