High Valuations in the Middle Market Require a New Edge for Private Equity Investors

By Martin Okner, Managing Director, SHM Corporate Navigators and Chairman, ACG New York

For the past three plus years, high valuations and limited availability of high quality companies for sale have been the climate of the middle market.  Well-run companies have streamlined their operations and optimized their capital structures; this means that growing sales is essential to value creation for private equity investors.

However, sales growth has been challenging for many private equity portfolio companies because the economy is still experiencing slow to moderate growth, making buyers of their goods and services remain cautious.

To overcome this challenge and grow the top-line, we have seen the best deal makers and investment professionals commission attitudinal assessments of their portfolio companies, and their brands, products, and or/services.  An attitudinal assessment delivers a deep-dive into what drives the bond between the company and its core customers and their purchase decisions – for both business to business and business to consumer companies.  This assessment then becomes the foundation for the creation of a strategic roadmap for product extensions, as well as geographic and channel expansion.

Attitudinal assessments have been used for more than seventy years among consumer products executives to drive their strategic plans for branded products. Now, the practice has been emerging as a common and necessary part of due diligence and institutionalizing a portfolio company’s approach to innovation among the best deal makers and investment professionals.

Tell us: have you seen more middle market investment professional’s commission attitudinal assessments of their portfolio companies?

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