Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 1Q 2023 that are top of mind for Private Equity (PE) investors. PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit https://www.ey.com/pepulse to view this quarter’s summary.  In this episode, we will provide a quick rundown of what we’re seeing in the private equity space. All the important themes and trends, and how today’s macro environment is impacting PE – in terms of deployment, fundraising, financing, and some of the longer-term impacts. 

Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 1Q 2023 that are top of mind for Private Equity (PE) investors. PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit <a href="https://www.ey.com/pepulse" rel="nofollow" target="_blank">https://www.ey.com/pepulse</a> to view this quarter’s summary.  In this episode, we will provide a quick rundown of what we’re seeing in the private equity space. All the important themes and trends, and how today’s macro environment is impacting PE – in terms of deployment, fundraising, financing, and some of the longer-term impacts.

PE Pulse: five takeaways from 1Q 2023

In this episode of the NextWave Private Equity podcast, Bridget Walsh, EY Global Private Equity Leader, will be discussing the entrance of retail investors in the private equity market with Jenny Johnson, CEO of Franklin Templeton.

In this episode of the NextWave Private Equity podcast, Bridget Walsh, EY Global Private Equity Leader, will be discussing the entrance of retail investors in the private equity market with Jenny Johnson, CEO of Franklin Templeton.

The growth of retail investors in the private equity markets

In this episode, Mark Benedetti, Co-Head of Ardian US, joins our host Bridget Walsh, EY Global Private Equity Leader, to discuss the growing role of secondaries in the private equity market.

In this episode, Mark Benedetti, Co-Head of Ardian US, joins our host Bridget Walsh, EY Global Private Equity Leader, to discuss the growing role of secondaries in the private equity market.

How the private equity secondaries market is coming of age

Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 4Q 2022 that are top of mind for PE investors. PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit https://www.ey.com/pepulse to view this quarter’s summary.  2022 was an incredibly dynamic year for the private equity (PE) industry, characterized by growth, innovation, creativity and the trademark resiliency that has defined the industry since its inception. The first half of the year saw a deal environment that carried over much of the momentum from 2021’s record levels of activity and the second half of the year saw PE firms become increasingly cautious in the face of rising inflationary pressures, the macro impacts of the war in Ukraine, a widening valuations gap, and widespread dislocation in the financing markets that restricted access to PE’s traditional sources of financing.

Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 4Q 2022 that are top of mind for PE investors. PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit <a href="https://www.ey.com/pepulse" rel="nofollow" target="_blank">https://www.ey.com/pepulse</a> to view this quarter’s summary.  2022 was an incredibly dynamic year for the private equity (PE) industry, characterized by growth, innovation, creativity and the trademark resiliency that has defined the industry since its inception. The first half of the year saw a deal environment that carried over much of the momentum from 2021’s record levels of activity and the second half of the year saw PE firms become increasingly cautious in the face of rising inflationary pressures, the macro impacts of the war in Ukraine, a widening valuations gap, and widespread dislocation in the financing markets that restricted access to PE’s traditional sources of financing.

PE Pulse: five takeaways from 4Q 2022

Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 3Q 2022 that are top of mind for PE investors. PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit https://www.ey.com/pepulse to view this quarter’s summary.  The PE sector continued to experience a number of cyclical headwinds in the third quarter, as rising interest rates, growing concerns of a recession, deteriorating macro sentiment and challenges in the financing markets all conspired to limit firms’ ability to execute new transactions. At the same time, however, firms continue to position themselves for long-term strategic growth, with new product launches and innovations, and by tapping new sources of capital that will allow the industry to continue to grow.

Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 3Q 2022 that are top of mind for PE investors. PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends. Visit <a href="https://www.ey.com/pepulse" rel="nofollow" target="_blank">https://www.ey.com/pepulse</a> to view this quarter’s summary.  The PE sector continued to experience a number of cyclical headwinds in the third quarter, as rising interest rates, growing concerns of a recession, deteriorating macro sentiment and challenges in the financing markets all conspired to limit firms’ ability to execute new transactions. At the same time, however, firms continue to position themselves for long-term strategic growth, with new product launches and innovations, and by tapping new sources of capital that will allow the industry to continue to grow.

PE Pulse: five takeaways from 3Q 2022

Greg Schooley, EY-Parthenon US Value Creation Leader, joins Winna Brown to discuss what tasks PE is outsourcing across business functions such as finance, IT, HR and customer service to create value. The path to successful value creation in private equity (PE) today goes beyond typical levers such as G&amp;A cost-cutting, sales force effectiveness and strategic sourcing. It’s about an approach that leverages digital tools including automation, strategic outsourcing and advanced analytics. Going forward, PE-owned companies of all sizes may need to look at outsourcing as a way to access cutting-edge technologies and capabilities that can lead to revenue growth opportunities, in addition to reducing costs.

Greg Schooley, EY-Parthenon US Value Creation Leader, joins Winna Brown to discuss what tasks PE is outsourcing across business functions such as finance, IT, HR and customer service to create value. The path to successful value creation in private equity (PE) today goes beyond typical levers such as G&amp;A cost-cutting, sales force effectiveness and strategic sourcing. It’s about an approach that leverages digital tools including automation, strategic outsourcing and advanced analytics. Going forward, PE-owned companies of all sizes may need to look at outsourcing as a way to access cutting-edge technologies and capabilities that can lead to revenue growth opportunities, in addition to reducing costs.

What PE is outsourcing to create value [re-release]

Pam Jackson, CEO of Level20, joins Winna Brown to reveal how mentorship programs can help women build long-term careers in PE.  According to a report that EY teams recently published on diversity, equity and inclusiveness (DEI), the private equity industry’s ability to meet stakeholder demands, access capital, win deals and compete for talent is increasingly contingent on progress against DEI metrics. Talent management has become the number two strategic priority across PE firms of all sizes, second only to asset growth. DEI initiatives are now proliferating in private equity as the industry begins to address how its culture has historically impeded diversity. Level20 is a non-profit organization based in the UK that is dedicated to improving gender diversity in the European PE industry and specifically in senior leadership roles at PE firms.  Read “Can PE win deals if it doesn’t deal with DEI?”:  https://www.ey.com/en_gl/private-equity/can-pe-win-deals-if-it-doesn-t-deal-with-dei Calculate how long it will take to achieve your diversity goals: https://kenaninstitute.unc.edu/diversity-integration-model/ Ten ways male PE leaders can support and mentor their female colleagues:  Serve as role models and mentors Engage with colleagues who are different from yourself Encourage women to realize their value Promote stories of inspiring women Engage in small interventions Embody inclusive leadership Give cultural shifts time to come to fruition Build a diverse talent pipeline from the bottom over time Recognize that recruiting senior women is not a “quick win” Model how long it will take to achieve your diversity goals with the EY Diversity Integration Model 

Pam Jackson, CEO of Level20, joins Winna Brown to reveal how mentorship programs can help women build long-term careers in PE.  According to a report that EY teams recently published on diversity, equity and inclusiveness (DEI), the private equity industry’s ability to meet stakeholder demands, access capital, win deals and compete for talent is increasingly contingent on progress against DEI metrics. Talent management has become the number two strategic priority across PE firms of all sizes, second only to asset growth. DEI initiatives are now proliferating in private equity as the industry begins to address how its culture has historically impeded diversity. Level20 is a non-profit organization based in the UK that is dedicated to improving gender diversity in the European PE industry and specifically in senior leadership roles at PE firms.  Read “Can PE win deals if it doesn’t deal with DEI?”: <a href="https://www.ey.com/en_gl/private-equity/can-pe-win-deals-if-it-doesn-t-deal-with-dei" rel="nofollow" target="_blank"> https://www.ey.com/en_gl/private-equity/can-pe-win-deals-if-it-doesn-t-deal-with-dei</a> Calculate how long it will take to achieve your diversity goals: <a href="https://kenaninstitute.unc.edu/diversity-integration-model/" rel="nofollow" target="_blank">https://kenaninstitute.unc.edu/diversity-integration-model/</a> Ten ways male PE leaders can support and mentor their female colleagues: <ol> <li>Serve as role models and mentors</li> <li>Engage with colleagues who are different from yourself</li> <li>Encourage women to realize their value</li> <li>Promote stories of inspiring women</li> <li>Engage in small interventions</li> <li>Embody inclusive leadership</li> <li>Give cultural shifts time to come to fruition</li> <li>Build a diverse talent pipeline from the bottom over time</li> <li>Recognize that recruiting senior women is not a “quick win”</li> <li>Model how long it will take to achieve your diversity goals with the <a href="https://kenaninstitute.unc.edu/diversity-integration-model/" rel="nofollow" target="_blank">EY Diversity Integration Model</a></li> </ol>

Why mentoring matters for women in PE [re-release]

In this episode, Laura Grattan, Managing Director at Crosspoint Capital, and Jeff Vogel, Head of the Software Strategy Group at EY-Parthenon, join Winna Brown to explore how PE firms can position themselves to win tech deals in today’s highly competitive market. Contact Laura: lgrattan@crosspointcapital.com  Contact Jeff: jeffrey.vogel@parthenon.ey.com According to the latest EY PE Pulse report, 2021 was the year of the tech deal: 30% of total capital deployed last year was allocated to technology companies. The technology sector, once just another industry vertical, now permeates every sector, claiming an ever-increasing share of deals as more companies differentiate themselves based on their technology regardless of the industry in which they sit or serve. Crosspoint Capital focuses on the cybersecurity, privacy and infrastructure software sectors. PE firms that choose a niche specialization in the tech sector can bring deep sector expertise that translates to value creation for their portfolio companies. In an increasingly competitive tech environment, PE firms that focus on a highly targeted category of assets can find themselves in a differentiated position. They are able to quickly discern where to spend time, recognize the opportunities and limitations of an asset, and identify patterns indicative of future success. Three characteristics of today’s tech deal environment include:  Increasing presence of and need for club deals Increasing speed at which deals are clearing Developing deal theses early 

In this episode, Laura Grattan, Managing Director at Crosspoint Capital, and Jeff Vogel, Head of the Software Strategy Group at EY-Parthenon, join Winna Brown to explore how PE firms can position themselves to win tech deals in today’s highly competitive market. Contact Laura: <a href="mailto:lgrattan@crosspointcapital.com">lgrattan@crosspointcapital.com</a> Contact Jeff: <a href="mailto:jeffrey.vogel@parthenon.ey.com">jeffrey.vogel@parthenon.ey.com</a> According to the latest EY PE Pulse report, 2021 was the year of the tech deal: 30% of total capital deployed last year was allocated to technology companies. The technology sector, once just another industry vertical, now permeates every sector, claiming an ever-increasing share of deals as more companies differentiate themselves based on their technology regardless of the industry in which they sit or serve. Crosspoint Capital focuses on the cybersecurity, privacy and infrastructure software sectors. PE firms that choose a niche specialization in the tech sector can bring deep sector expertise that translates to value creation for their portfolio companies. In an increasingly competitive tech environment, PE firms that focus on a highly targeted category of assets can find themselves in a differentiated position. They are able to quickly discern where to spend time, recognize the opportunities and limitations of an asset, and identify patterns indicative of future success. Three characteristics of today’s tech deal environment include: <ol> <li>Increasing presence of and need for club deals</li> <li>Increasing speed at which deals are clearing</li> <li>Developing deal theses early</li> </ol>

How PE firms can win tech deals [re-release]

To the NextWave Private Equity audience: Since February of 2020, just before the covid-19 pandemic uprooted all of our lives, the EY global private equity team has turned to this podcast series to discuss the topics and insights that are top-of-mind for our audience of PE executives and practitioners. From the bottom of my heart, thank you! For listening, for giving us your time and for trusting us to deliver best-in-class perspectives. Over the next couple of months, we will re-publish some of our most downloaded and talked-about episodes about tech deals, DEI and other timely topics. These are some of our best episodes, and when you listen, you will surely understand why. Thanks for tuning in! Winna Brown, EY Americas ESG Private Equity Leader winna.brown@ey.com 

To the NextWave Private Equity audience: Since February of 2020, just before the covid-19 pandemic uprooted all of our lives, the EY global private equity team has turned to this podcast series to discuss the topics and insights that are top-of-mind for our audience of PE executives and practitioners. From the bottom of my heart, thank you! For listening, for giving us your time and for trusting us to deliver best-in-class perspectives. Over the next couple of months, we will re-publish some of our most downloaded and talked-about episodes about tech deals, DEI and other timely topics. These are some of our best episodes, and when you listen, you will surely understand why. Thanks for tuning in! Winna Brown, EY Americas ESG Private Equity Leader <a href="mailto:winna.brown@ey.com">winna.brown@ey.com</a>

A note from Winna

Maha Eltobgy, Chief Sustainability Officer and Managing Director at Brightstar Capital Partners, joins Winna Brown to explore how operating executives can effectively communicate the value prop of ESG at the portco level. ESG is top of mind for PE executives right now. According to the 2022 EY Global Private Equity survey, ESG is one of the top four strategic priorities listed by PE firms. 42% of the largest fund managers seriously consider ESG in their decision-making process, while a further 39% say they consider ESG issues seriously in certain risk areas. ESG is a top priority for firms, but effectively implementing ESG strategy and principles across the portfolio remains challenging. Five ways PE can navigate the implementation of ESG strategy and principles across the portfolio include:  Win trust of management teams Start with employee retention and engagement Meet the portfolio company where they are in their journey Demonstrate how ESG values translate to business value Translate ESG principles into tangible, actionable initiatives 

Maha Eltobgy, Chief Sustainability Officer and Managing Director at Brightstar Capital Partners, joins Winna Brown to explore how operating executives can effectively communicate the value prop of ESG at the portco level. ESG is top of mind for PE executives right now. According to the 2022 EY Global Private Equity survey, ESG is one of the top four strategic priorities listed by PE firms. 42% of the largest fund managers seriously consider ESG in their decision-making process, while a further 39% say they consider ESG issues seriously in certain risk areas. ESG is a top priority for firms, but effectively implementing ESG strategy and principles across the portfolio remains challenging. Five ways PE can navigate the implementation of ESG strategy and principles across the portfolio include: <ol> <li>Win trust of management teams</li> <li>Start with employee retention and engagement</li> <li>Meet the portfolio company where they are in their journey</li> <li>Demonstrate how ESG values translate to business value</li> <li>Translate ESG principles into tangible, actionable initiatives</li> </ol>

How Brightstar balances value and values when implementing ESG

Listen to the NextWave Private Equity podcast series, where Bridget Walsh, EY Global Private Equity Leader, will speak with industry leaders to discuss emerging opportunities and industry trends shaping the global private equity landscape.

Super helpful podcast with great insights from industry leaders!! Highly recommend for anyone interested in learning more about PE

EY FAAS

An insightful podcast from industry leaders. Highly recommend!

Insightful!

NextWave Private Equity

Jackie Kelley, EY Americas IPO Leader discusses IPO readiness for private equity-owned companies. Visit ey.com to read our latest private equity perspectives. An IPO is often a desired exit for private equity-backed companies. Soaring valuations in sectors, such as technology and biotech have led business leaders to choose an IPO to secure both investment and trust from the public market. Companies that choose an IPO must prepare not only for the event itself but also to meet public market shareholder expectations around growth, transparency, accountability and performance. An assessment of IPO readiness is a critical step in ensuring a company is prepared not only to enter the public markets, but to be successful in both the short and long term. Key takeaways  Start discussions about IPO readiness 18-24 months in advance. Team with experienced advisors who have seen the pitfalls and know how to avoid them. Invest to mature back-end infrastructure, build/scale critical processes and acquire the talent needed to run a predictable business that will continue to scale and can meet the regulatory compliance requirements of the public market. Focus on creating a strong foundation for both the IPO and for the company’s rapid growth post-IPO. Private Equity investors should not expect to fully exit at the time of IPO as existing shareholders are expected to remain invested for a few years.  

Jackie Kelley, EY Americas IPO Leader discusses IPO readiness for private equity-owned companies. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> An IPO is often a desired exit for private equity-backed companies. Soaring valuations in sectors, such as technology and biotech have led business leaders to choose an IPO to secure both investment and trust from the public market. Companies that choose an IPO must prepare not only for the event itself but also to meet public market shareholder expectations around growth, transparency, accountability and performance. An assessment of IPO readiness is a critical step in ensuring a company is prepared not only to enter the public markets, but to be successful in both the short and long term. Key takeaways <ul> <li>Start discussions about IPO readiness 18-24 months in advance.</li> <li>Team with experienced advisors who have seen the pitfalls and know how to avoid them.</li> <li>Invest to mature back-end infrastructure, build/scale critical processes and acquire the talent needed to run a predictable business that will continue to scale and can meet the regulatory compliance requirements of the public market.</li> <li>Focus on creating a strong foundation for both the IPO and for the company’s rapid growth post-IPO.</li> <li>Private Equity investors should not expect to fully exit at the time of IPO as existing shareholders are expected to remain invested for a few years. </li> </ul>

How private equity-backed companies can prepare for IPO

Resilience

Jeff Schlosser, EY US Supply Chain Transaction Leader and Jay Camillo, EY Americas Operating Model Effectiveness Leader, explain why a post-pandemic supply chain will prioritize resilience over efficiency.  Visit ey.com to read our latest private equity perspectives.  COVID-19 has forced companies across all industries and geographies to pivot towards a “new normal” related to their supply chains. Supply and demand plans became irrelevant practically overnight as companies reprioritized to serve critical needs Lean, linear supply chains are losing favor to parallel structures that allow executives to pivot production in response to demand shocks Traditional levers of consolidation and rationalization will lose popularity and efficiencies will have to be found elsewhere amid rising costs and condensed margins Companies are modelling future scenarios to plan for catastrophic events Regulation is widely anticipated to be a global response to the pandemic, as companies will be increasingly scrutinized (and rewarded) for supply chain resiliency  In order to forge a sensible path to this new world, tax teams will need to work closely with business and operations teams and ensure tax efficient measures are considered including evaluating the challenges and opportunities inherent in this pivot from lean to agile.    Near term: for liquidity and tax liability management, internal reviews of legal contracts and government agreements to find opportunities for flexibility and efficiency Medium term: as companies pivot, external evaluation of new incentives as tax authorities seek to help companies cope Long term: as companies move to resiliency, shifts of manufacturing require close evaluation of exit liabilities, IP development and use will require careful review, and indirect tax consequences in the excise, customs and VAT area will require management 

Jeff Schlosser, EY US Supply Chain Transaction Leader and Jay Camillo, EY Americas Operating Model Effectiveness Leader, explain why a post-pandemic supply chain will prioritize resilience over efficiency.  <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> <ul> <li>COVID-19 has forced companies across all industries and geographies to pivot towards a “new normal” related to their supply chains.</li> <li>Supply and demand plans became irrelevant practically overnight as companies reprioritized to serve critical needs</li> <li>Lean, linear supply chains are losing favor to parallel structures that allow executives to pivot production in response to demand shocks</li> <li>Traditional levers of consolidation and rationalization will lose popularity and efficiencies will have to be found elsewhere amid rising costs and condensed margins</li> <li>Companies are modelling future scenarios to plan for catastrophic events</li> <li>Regulation is widely anticipated to be a global response to the pandemic, as companies will be increasingly scrutinized (and rewarded) for supply chain resiliency</li> </ul> In order to forge a sensible path to this new world, tax teams will need to work closely with business and operations teams and ensure tax efficient measures are considered including evaluating the challenges and opportunities inherent in this pivot from lean to agile.   <ul> <li>Near term: for liquidity and tax liability management, internal reviews of legal contracts and government agreements to find opportunities for flexibility and efficiency</li> <li>Medium term: as companies pivot, external evaluation of new incentives as tax authorities seek to help companies cope</li> <li>Long term: as companies move to resiliency, shifts of manufacturing require close evaluation of exit liabilities, IP development and use will require careful review, and indirect tax consequences in the excise, customs and VAT area will require management</li> </ul>

Why a post-pandemic supply chain will prioritize resilience over efficiency

Nick Boaro and Sven Braun of the EY Transaction Advisory Services and Working Capital Group explain why freeing cash from working capital can allow PE to prolong sustainability, realize value sooner and invest earlier. Visit ey.com to read our latest private equity perspectives. Four reasons why a PE-backed company would want to optimize cash flow now include:  Up to 7% of sales can be unlocked and released quickly. Unlocking cash is the cheapest source of liquidity. Companies with optionality are in a stronger position to reinvest for growth. A successful outcome in one portfolio company can inspire other portfolio companies to take the same journey.  Working capital is the cash a company has tied up in assets less the cash it holds as a liability; a financial metric that represents the amount of day-to-day operating liquidity available to a business. Freeing cash from working capital is the cheapest source of additional liquidity often unlocked to pay down debt, fund day-to-day operation or fund strategic initiatives. Today, private equity funds and their portfolio companies are able to unlock on average 5%-7% of revenue in cash flow improvement within 3-6 months of completing 8-12 week operational improvement programs. A company that optimizes working capital increases liquidity, improves predictability of cash flow and increases visibility in all areas of cash. Because of COVID-19, many PE funds are laser focused on forecasting and releasing cash to prolong sustainability, realize value sooner and invest earlier. PE funds are asking for liquidity forecasts from across the portfolio to measure exposure, identify opportunities and quickly accelerate cash flow for as many companies as possible. Where corporations have complex hierarchical structures that force them to move slower with more measured outcomes, PE is able to act more quickly. Having a “cash culture” is important for any company, especially now. After all, cash is the cheapest source of liquidity a business can generate, and it provides critical funding in either a downturn or growth period. Healthy cash flow is a positive indicator of a company’s preparation for an economic downturn; however, it isn’t too late for companies to improve cash flow, so they have greater optionality when opportunities arise.

Nick Boaro and Sven Braun of the EY Transaction Advisory Services and Working Capital Group explain why freeing cash from working capital can allow PE to prolong sustainability, realize value sooner and invest earlier. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> Four reasons why a PE-backed company would want to optimize cash flow now include: <ol> <li>Up to 7% of sales can be unlocked and released quickly.</li> <li>Unlocking cash is the cheapest source of liquidity.</li> <li>Companies with optionality are in a stronger position to reinvest for growth.</li> <li>A successful outcome in one portfolio company can inspire other portfolio companies to take the same journey.</li> </ol> Working capital is the cash a company has tied up in assets less the cash it holds as a liability; a financial metric that represents the amount of day-to-day operating liquidity available to a business. Freeing cash from working capital is the cheapest source of additional liquidity often unlocked to pay down debt, fund day-to-day operation or fund strategic initiatives. Today, private equity funds and their portfolio companies are able to unlock on average 5%-7% of revenue in cash flow improvement within 3-6 months of completing 8-12 week operational improvement programs. A company that optimizes working capital increases liquidity, improves predictability of cash flow and increases visibility in all areas of cash. Because of COVID-19, many PE funds are laser focused on forecasting and releasing cash to prolong sustainability, realize value sooner and invest earlier. PE funds are asking for liquidity forecasts from across the portfolio to measure exposure, identify opportunities and quickly accelerate cash flow for as many companies as possible. Where corporations have complex hierarchical structures that force them to move slower with more measured outcomes, PE is able to act more quickly. Having a “cash culture” is important for any company, especially now. After all, cash is the cheapest source of liquidity a business can generate, and it provides critical funding in either a downturn or growth period. Healthy cash flow is a positive indicator of a company’s preparation for an economic downturn; however, it isn’t too late for companies to improve cash flow, so they have greater optionality when opportunities arise.

Why “cash culture” is a critical lever in today’s PE climate

Jennifer Shearer and Alexander Ludwig Reiter of the EY International Tax &amp; Transaction Services group help PE funds and portfolio companies understand and manage the tax implications of recent coronavirus stimulus packages. Visit ey.com to read our latest private equity perspectives. COVID-19 stimulus legislation in the US and Europe is designed to ease the strain on businesses with particular focus on small and medium sized companies, keep people employed, increase liquidity and provide access to much-needed capital. Loan programs, cash tax defer programs, tax incentives and compensation for reduced working hours are all being deployed. Key focus areas for private equity are as follows: Immediate: focus on liquidity and establishing task forces to triage needs across the portfolio. Short-term: use a coordinated approach to evaluate need and eligibility for assistance. There is a lot of detail and nuance to consider when evaluating these programs, as loans have restrictions and some PE complexes may not qualify depending on how they are structured. Differences in policy adoption across US states and between European countries also adds complexities. Medium term: take time to understand the fund and portfolio structure in order to determine which measures can be taken without inflicting damage. Debt buybacks present an attractive opportunity but come with important tax considerations. Longer term: broken supply chains at the portfolio level will need to be fixed. Global sourcing structures will be re-evaluated. The “just-in-time” inventory management strategy will also be re-examined as company seek to protect themselves against future global disruptions. Digitization will drive improvements in sourcing practices and multi-channel distribution. Lastly, a focus on improving “corporate hygiene” by investing in cybersecurity and technology that enables remote ways of working will remain top-of-mind.

Jennifer Shearer and Alexander Ludwig Reiter of the EY International Tax &amp; Transaction Services group help PE funds and portfolio companies understand and manage the tax implications of recent coronavirus stimulus packages. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> COVID-19 stimulus legislation in the US and Europe is designed to ease the strain on businesses with particular focus on small and medium sized companies, keep people employed, increase liquidity and provide access to much-needed capital. Loan programs, cash tax defer programs, tax incentives and compensation for reduced working hours are all being deployed. Key focus areas for private equity are as follows: Immediate: focus on liquidity and establishing task forces to triage needs across the portfolio. Short-term: use a coordinated approach to evaluate need and eligibility for assistance. There is a lot of detail and nuance to consider when evaluating these programs, as loans have restrictions and some PE complexes may not qualify depending on how they are structured. Differences in policy adoption across US states and between European countries also adds complexities. Medium term: take time to understand the fund and portfolio structure in order to determine which measures can be taken without inflicting damage. Debt buybacks present an attractive opportunity but come with important tax considerations. Longer term: broken supply chains at the portfolio level will need to be fixed. Global sourcing structures will be re-evaluated. The “just-in-time” inventory management strategy will also be re-examined as company seek to protect themselves against future global disruptions. Digitization will drive improvements in sourcing practices and multi-channel distribution. Lastly, a focus on improving “corporate hygiene” by investing in cybersecurity and technology that enables remote ways of working will remain top-of-mind.

Managing COVID-19 tax implications in the US and Europe

Remote

Karim Anani, Financial Accounting and Advisory Partner, and Lukas Hoebarth, Strategy &amp; Operations Partner explain how to manage a remote close in today’s volatile financial and regulatory environment. Visit ey.com to read our latest private equity perspectives. While there has been a growing trend towards remote (or virtual) close for several years, the need for this capability has not only been accelerated but thrust into an volatile environment. Unforeseen complexity due to macroeconomic uncertainty, regulatory change, remote ways of working, incomplete information, workforce uncertainty and cybersecurity risks threaten vital systems of control that must now pivot to cover the risk mitigation they were designed to provide. Private Equity CFOs and finance teams are instrumental in connecting the dots throughout the organization and will play a pivotal role as the business partner to the CEO. Analysis of short-term liquidity forecasts, tax implications and business plans will impact investment decisions and expose resource constraints across the private equity portfolio in the weeks and months to come. In order for CFOs to cultivate successful remote close outcomes, they must focus on:  Communication: holding regular meetings and establish expectations for communication Collaboration: establish and maintain healthy ways of remote working Preparation: organize a PMO to map the close calendar, identify exposure and predict/solve for different scenarios Motivation: keeping spirits high and nurture positivity  Five complexities will drive additional focus on the upcoming reporting cycle:  Delays in the close process due to remote ways of working, personal distraction and impact of available (or unavailable) technology Different/additional analysis will be required to “close the books” Incomplete information from upstream operational activities and suppliers Sensitivity of data in a remote working environment brings cybersecurity and potential vulnerabilities into question The ability to ensure the controls environment is sufficient to ensure accuracy for stakeholder signoff 

Karim Anani, Financial Accounting and Advisory Partner, and Lukas Hoebarth, Strategy &amp; Operations Partner explain how to manage a remote close in today’s volatile financial and regulatory environment. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> While there has been a growing trend towards remote (or virtual) close for several years, the need for this capability has not only been accelerated but thrust into an volatile environment. Unforeseen complexity due to macroeconomic uncertainty, regulatory change, remote ways of working, incomplete information, workforce uncertainty and cybersecurity risks threaten vital systems of control that must now pivot to cover the risk mitigation they were designed to provide. Private Equity CFOs and finance teams are instrumental in connecting the dots throughout the organization and will play a pivotal role as the business partner to the CEO. Analysis of short-term liquidity forecasts, tax implications and business plans will impact investment decisions and expose resource constraints across the private equity portfolio in the weeks and months to come. In order for CFOs to cultivate successful remote close outcomes, they must focus on: <ul> <li>Communication: holding regular meetings and establish expectations for communication</li> <li>Collaboration: establish and maintain healthy ways of remote working</li> <li>Preparation: organize a PMO to map the close calendar, identify exposure and predict/solve for different scenarios</li> <li>Motivation: keeping spirits high and nurture positivity</li> </ul> Five complexities will drive additional focus on the upcoming reporting cycle: <ol> <li>Delays in the close process due to remote ways of working, personal distraction and impact of available (or unavailable) technology</li> <li>Different/additional analysis will be required to “close the books”</li> <li>Incomplete information from upstream operational activities and suppliers</li> <li>Sensitivity of data in a remote working environment brings cybersecurity and potential vulnerabilities into question</li> <li>The ability to ensure the controls environment is sufficient to ensure accuracy for stakeholder signoff</li> </ol>

How to navigate a remote close during COVID-19

Mike Lo Parrino, EY Americas FSO Private Equity Leader, explores the evolving role of the private equity CFO. Visit ey.com to read our latest private equity perspectives. In the seven years since EY has conducted the Global Private Equity (PE) survey, private equity CFOs have assumed increasing responsibility for the overall operations of their firms. They have expanded their oversight beyond the traditional finance functions to include IT system implementation, investor relations and cybersecurity, even as the industry has experienced record growth. Now they are expected to take on an even more strategic role, assisting with the decision-making and deployment of new investment products, location strategy and a changing investor profile, while also keeping a mindful eye on increasing margin pressures. At the same time, private equity CFOs are also leading the effort to find ways to deploy innovative new technologies, particularly those that leverage next-generation data and robotics. As part of their more strategic mindset, they are also helping to elevate their firms’ overall talent profile and interact more frequently with portfolio companies. The PE CFO’s role has evolved over the past seven years in five key ways:  The CFO spends more time than ever on asset growth, innovation and talent. CFOs must strike a balance of tactical and technical skills to be effective, strategic leaders for their entire organization Attracting and retaining diverse talent combined with an inclusive culture are top talent management priorities CFOs consider advanced technology solutions to complement new, strategic responsibilities The next generation CFO will leverage data for the benefit of both the private equity firm and portfolio.  To read the full survey, visit ey.com/privateequity. 

Mike Lo Parrino, EY Americas FSO Private Equity Leader, explores the evolving role of the private equity CFO. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> In the seven years since EY has conducted the Global Private Equity (PE) survey, private equity CFOs have assumed increasing responsibility for the overall operations of their firms. They have expanded their oversight beyond the traditional finance functions to include IT system implementation, investor relations and cybersecurity, even as the industry has experienced record growth. Now they are expected to take on an even more strategic role, assisting with the decision-making and deployment of new investment products, location strategy and a changing investor profile, while also keeping a mindful eye on increasing margin pressures. At the same time, private equity CFOs are also leading the effort to find ways to deploy innovative new technologies, particularly those that leverage next-generation data and robotics. As part of their more strategic mindset, they are also helping to elevate their firms’ overall talent profile and interact more frequently with portfolio companies. The PE CFO’s role has evolved over the past seven years in five key ways: <ol> <li>The CFO spends more time than ever on asset growth, innovation and talent.</li> <li>CFOs must strike a balance of tactical and technical skills to be effective, strategic leaders for their entire organization</li> <li>Attracting and retaining diverse talent combined with an inclusive culture are top talent management priorities</li> <li>CFOs consider advanced technology solutions to complement new, strategic responsibilities</li> <li>The next generation CFO will leverage data for the benefit of both the private equity firm and portfolio.</li> </ol> To read the full survey, visit <a href="https://www.ey.com/en_gl/private-equity/is-your-next-step-about-changing-direction-or-directing-change" rel="noopener nofollow" target="_blank">ey.com/privateequity</a>.

Why the CFO is becoming private equity's quarterback

Andrew Wollaston, Global Private Equity Transactions Leader, and Peter Witte, Global Private Equity Lead Analyst, discuss how PE firms are planning for a potential market correction and the opportunities it might afford.  Visit ey.com to read our latest private equity perspectives. While PE-backed companies performed generally well during the GFC, over the last decade, the PE model has evolved in a number of ways that make it even better prepared for future downturns:  The industry has more capital at its disposal PE has diversified in ways that increase its resilience. PE firms have expanded their operating capabilities. LPs are more sophisticated and have access to better portfolio management tools. Perhaps most significantly, PE firms are prepared to deploy more aggressively than during the 2008 recession 

Andrew Wollaston, Global Private Equity Transactions Leader, and Peter Witte, Global Private Equity Lead Analyst, discuss how PE firms are planning for a potential market correction and the opportunities it might afford.  <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> While PE-backed companies performed generally well during the GFC, over the last decade, the PE model has evolved in a number of ways that make it even better prepared for future downturns: <ul> <li>The industry has more capital at its disposal</li> <li>PE has diversified in ways that increase its resilience.</li> <li>PE firms have expanded their operating capabilities.</li> <li>LPs are more sophisticated and have access to better portfolio management tools.</li> <li>Perhaps most significantly, PE firms are prepared to deploy more aggressively than during the 2008 recession</li> </ul>

Why private equity can endure the next economic downturn

In this episode, Karim Anani and Alex Zuluaga, EY Global SPAC Practice Co-Leaders, explore why SPACs attract PE investors and advise how they should manage SPAC transactions. Contact Karim: karim.anani@ey.com  Contact Alex: alex.zuluaga@ey.com  Visit ey.com to read our latest private equity perspectives.  Special Purpose Acquisition Companies (SPACs) are rapidly evolving from an interesting option to a desired path of taking a company public. This malleable vehicle is becoming better understood, more widely accepted and is proving to be a highly adaptable way to meet the needs of both operating companies and investors. A key factor in this flexibility is because a SPAC transaction is a merger, not an IPO. Unlike a traditional PE fund vehicle in which a fund invests in multiple companies, a SPAC will instead effectuate a single transaction. As a result, a PE fund’s investment philosophy, strategy and approach for a SPAC differs from its traditional investment model. A SPAC appeals to private equity (PE) investors for several reasons:  Speed at which capital can be raised Opportunity to expedite entry to public market Ability to tell the story with the aid of future projected earnings of the company Opportunity to explore a different investment thesis Potential for significant upside as SPAC sponsor Definition of minimum cash and financing structuring options on the front end create a lower risk of deals falling apart  PE funds interested in utilizing a SPAC as an exit vehicle should consider the following recommendations:  Define transaction goals and value drivers Choose a SPAC that aligns with the industry of operating company “Get your house in order” to be more attractive for a SPAC exit Attend to backward-looking compliance procedures Ensure company is able to function like a public company from an operational and talent standpoint Anticipate the regulatory and compliance landscape to continue evolving 

In this episode, Karim Anani and Alex Zuluaga, EY Global SPAC Practice Co-Leaders, explore why SPACs attract PE investors and advise how they should manage SPAC transactions. Contact Karim: <a href="mailto:karim.anani@ey.com">karim.anani@ey.com</a>  Contact Alex: <a href="mailto:alex.zuluaga@ey.com">alex.zuluaga@ey.com</a> <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> Special Purpose Acquisition Companies (SPACs) are rapidly evolving from an interesting option to a desired path of taking a company public. This malleable vehicle is becoming better understood, more widely accepted and is proving to be a highly adaptable way to meet the needs of both operating companies and investors. A key factor in this flexibility is because a SPAC transaction is a merger, not an IPO. Unlike a traditional PE fund vehicle in which a fund invests in multiple companies, a SPAC will instead effectuate a single transaction. As a result, a PE fund’s investment philosophy, strategy and approach for a SPAC differs from its traditional investment model. A SPAC appeals to private equity (PE) investors for several reasons: <ul> <li>Speed at which capital can be raised</li> <li>Opportunity to expedite entry to public market</li> <li>Ability to tell the story with the aid of future projected earnings of the company</li> <li>Opportunity to explore a different investment thesis</li> <li>Potential for significant upside as SPAC sponsor</li> <li>Definition of minimum cash and financing structuring options on the front end create a lower risk of deals falling apart</li> </ul> PE funds interested in utilizing a SPAC as an exit vehicle should consider the following recommendations: <ul> <li>Define transaction goals and value drivers</li> <li>Choose a SPAC that aligns with the industry of operating company</li> <li>“Get your house in order” to be more attractive for a SPAC exit</li> <li>Attend to backward-looking compliance procedures</li> <li>Ensure company is able to function like a public company from an operational and talent standpoint</li> <li>Anticipate the regulatory and compliance landscape to continue evolving</li> </ul>

Why PE is on the SPAC inside track

Charles Honnywill, EY UK&amp;I Divestiture Advisory Services Leader, discusses specific actions PE fund managers can take to prepare for a successful, well-timed exit. Visit ey.com to read our latest private equity perspectives. It can be difficult for PE fund managers to have a comprehensive outside-in perspective when considering the sale of a portfolio company due to what Charles calls a “baggage of ownership”: the inability of a fund manager to adopt the mindset of a likely buyer due to their proximity to an investment. As a result, PE funds historically have not always planned as methodically around the exit of a business as they do upon its investment. In this episode, Charles explains this challenge, articulates the benefits of an IPO vs. outright sale and recommends specific actions PE fund managers can take to prepare for a successful, well-timed exit. Key takeaways:  While IPO remains the most popular exit route, other options include an outright sale to a strategic buyer or PE fund PE funds are starting to think more methodically around exit, but there is a trend toward greater preparedness The top five exit considerations for a PE-backed company include:   Create a plan 18 months prior to expected sale Consider the equity story of potential buyers Make necessary changes to your management team Consider the timetables of the market and likely buyers Consider your sale from a financial, operational, commercial, tax/legal and regulatory perspective   

Charles Honnywill, EY UK&amp;I Divestiture Advisory Services Leader, discusses specific actions PE fund managers can take to prepare for a successful, well-timed exit. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> It can be difficult for PE fund managers to have a comprehensive outside-in perspective when considering the sale of a portfolio company due to what Charles calls a “baggage of ownership”: the inability of a fund manager to adopt the mindset of a likely buyer due to their proximity to an investment. As a result, PE funds historically have not always planned as methodically around the exit of a business as they do upon its investment. In this episode, Charles explains this challenge, articulates the benefits of an IPO vs. outright sale and recommends specific actions PE fund managers can take to prepare for a successful, well-timed exit. Key takeaways: <ul> <li>While IPO remains the most popular exit route, other options include an outright sale to a strategic buyer or PE fund</li> <li>PE funds are starting to think more methodically around exit, but there is a trend toward greater preparedness</li> <li>The top five exit considerations for a PE-backed company include:  <ol> <li>Create a plan 18 months prior to expected sale</li> <li>Consider the equity story of potential buyers</li> <li>Make necessary changes to your management team</li> <li>Consider the timetables of the market and likely buyers</li> <li>Consider your sale from a financial, operational, commercial, tax/legal and regulatory perspective</li> </ol> </li> </ul>

How private equity-owned businesses can prepare for an exit

Glenn Engler, EY-Parthenon Global Digital Leader and EY Americas Strategy and Transactions Digital Strategy Leader discusses how and where digital competence can be incorporated into the diligence process and manifested in a PE firm or portfolio company’s business strategy. Visit ey.com to read our latest private equity perspectives. The word “digital” can be interpreted in a multitude of ways, but it’s important for PE firms and CEOs to start with a broad view regardless of industry or competency in the context of a deal. Because digital impacts every aspect of a business, digital strategy should be owned by the CEO, not siloed into individual functional areas such as marketing or technology. PE firms, whether considering investment decisions, operational improvements or driving growth, must inject digital competence throughout the diligence process and business strategy to fully understand the value in both the target landscape and company DNA.     Key takeaways  Digital touches every aspect of a PE firm or portfolio company, so the CEO should own a digital strategy inspired by the needs of the business and customer. Digital competence is critical in understanding a target’s value and must be woven throughout the diligence process. PE firms must look holistically and more upstream where PE, VC and corporate dollars flow to understand where value is created in the target landscape. PE firms can explore digital in driving operational expertise and growth in portfolio companies with intelligent automation, digitizing supply chains, cloud, omnichannel/ecommerce, "frictionless" customer experience and new revenue models.  

Glenn Engler, EY-Parthenon Global Digital Leader and EY Americas Strategy and Transactions Digital Strategy Leader discusses how and where digital competence can be incorporated into the diligence process and manifested in a PE firm or portfolio company’s business strategy. <a href="https://www.ey.com/en_gl/private-equity" rel="noopener nofollow" target="_blank">Visit ey.com to read our latest private equity perspectives.</a> The word “digital” can be interpreted in a multitude of ways, but it’s important for PE firms and CEOs to start with a broad view regardless of industry or competency in the context of a deal. Because digital impacts every aspect of a business, digital strategy should be owned by the CEO, not siloed into individual functional areas such as marketing or technology. PE firms, whether considering investment decisions, operational improvements or driving growth, must inject digital competence throughout the diligence process and business strategy to fully understand the value in both the target landscape and company DNA.     Key takeaways <ul> <li>Digital touches every aspect of a PE firm or portfolio company, so the CEO should own a digital strategy inspired by the needs of the business and customer.</li> <li>Digital competence is critical in understanding a target’s value and must be woven throughout the diligence process.</li> <li>PE firms must look holistically and more upstream where PE, VC and corporate dollars flow to understand where value is created in the target landscape.</li> <li>PE firms can explore digital in driving operational expertise and growth in portfolio companies with intelligent automation, digitizing supply chains, cloud, omnichannel/ecommerce, "frictionless" customer experience and new revenue models. </li> </ul>

How to rethink diligence and business strategy in digital PE deals

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