Portfolio companies hungry for improved exit advice

Amy King
10 April 2013

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Portfolio companies consider exit advice as the most important contribution to value generation that their private equity backers make, yet performance falls short of expectations, according to a recent PwC survey.

According to a study released by PwC, management teams perceive a number of shortcomings on the part of their backers as expectation and reality diverge. Number one on the list of contributions to value creation provided by private equity owners was exit advice, followed by strategic direction.

In both areas, management teams hoped for more guidance than they received. But given the tough exit environment, gone are the luxuries of several competing bids and pricing tension. As holding periods lengthen while GPs wait for the exit route that reaps the highest returns, perhaps portfolio companies need to extend their patience.

But it isn't all slapped wrists for GPs, who undertake a stronger advisory role in the area of acquisitions than portfolio companies initially expected. This is hardly surprising given the popularity of buy-and-build strategies in the current environment, where LPs are on the lookout for true value-added strategies and buyout giants are forced to consider smaller assets compared with their pre-crash preference.