Global Dealmakers. Scale and speed: Fast-growing companies defy their limits
While a proven recipe for rapid growth of companies owned by private equity funds includes cross-border expansion and modern management supported by a strong organizational culture, it is the digital transformation that is becoming one of the key elements of the strategy in the COVID-19 recovery, which has accelerated considerably since the outbreak of the pandemic.
In their third report in the Global Dealmakers 2021 series, Baker Tilly experts focus on how private equity executives are preparing their organizations for a return to rapid growth.
Our experts seek to answer the following questions in the form of interviews:
- How are companies planning to grow and transform their businesses as the world emerges from the Covid-19 health crisis?
- Are they pursuing new routes or taking counter-intuitive approaches to achieving these targets?
In light of the health crisis, respondent views are encouraging The majority believe these companies are getting back on track and can achieve growth of 50% or more in the next two years. Most are using technology and innovation to optimize and sharpen their competitiveness. Additionally, a significantly greater number of companies than in the pre-pandemic period are considering aggressive acquisition plans to branch out into new markets and seek the basis of their growth there.
“The optimism of portfolio company executives is also a contributing factor to the increased acquisition appetites of fund managers for the next several months. This is facilitated by the fact that funds maintain a high level of liquid assets, including cash (so-called dry powder), and the fact that a significant part of private equity players keep their investments longer than the originally assumed period, which has a negative impact on the predicted yields. Private equity funds with large reserves of liquid assets are now becoming a key bidder in the sale of portfolio companies of other funds, gaining a significant advantage over professional investors and investors acquiring shares in an initial public offering (IPO),” said Maciej Krokosiński, Associate Partner at Baker Tilly TPA.
Key findings from the new survey of global private equity companies indicate that:
- 68% of respondents believe their companies and investments will deliver a growth rate of more than 50% over the next two years;
- 92% say digital transformation will be the leading lever respondents deploy to achieve higher growth rates and position their companies for the future;
- More than half (67%) also feel cross-border deals will be crucial to reinventing companies;
- Economic volatility (92%) and regulatory challenges (90%) will be the main obstacles to higher growth rates in the year ahead.
Find the complete study here