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Survey Report_Managing Portfolio Investments Final

Survey Report_Managing Portfolio Investments Final

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Published by Dan Primack

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Published by: Dan Primack on Jun 30, 2009
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2009 Managing PortfolioInvestments Survey
Navigating a new direction formaximum portfolio performance
 
2009 Managing Portfolio Investments SurveyJeff Johnson Hector J. CuellarExecutive Managing Director PresidentRSM McGladrey Inc. McGladrey Capital Markets LLC
RSM McGladrey and McGladrey Capital Markets would like to thank the nearly 100 private equitysenior executives and professionals nationwide who provided their information and insight for ourMarch 2009 survey. The participants shared current concerns and business practices related to themanagement of their portfolio companies.The research in this report reveals a range of business practices and trends among surveyparticipants involved in a cross section of fund sizes and types.Faced with a difficult economy and an anemic dealmaking environment, survey respondents haveshifted their focus from acquiring new platform portfolio companies to managing the performanceof existing investments. Information collected provides strong evidence of active monitoring andinvolvement with portfolio companies. Eighty-five percent of funds participating in the survey reportthat communication with portfolio companies has increased in the past six months
and as manyare in contact with their portfolio companies on a weekly and daily basis.The report provides an inside look at the key areas and priorities private equity executives arefocused on to maximize portfolio performance. Consider the following:Acquiring new customers, expanding existing customers and enhancing existing products andservices are the top three portfolio company growth initiatives in 2009.Add-on acquisitions are the most frequent management activity being considered in today’senvironment. Workforce reductions, working-capital management and salary freezes are the topthree activities already implemented in response to the current economy.More than half of the respondents identified corporate strategy as the area they will focus onmost to increase portfolio company performance and value.These and other findings provide insight into how your peers are managing their portfolioinvestments and may serve as a way for you to examine new ideas for your own business practices.
Contents
Executive summaryPortfolio management and monitoringTransaction and investment informationRespondent demographics231321
 
Executive summary
2
The 2009 Managing Portfolio Investments surveyreport provides research collected from nearly 100private equity senior executives and professionals.With private equity executives turning their attentionto the management of their existing portfolioinvestments, the survey reveals activities andinitiatives survey respondents are focusing on toimprove portfolio performance and profitability.The following is an overview of key findings fromthe survey:
Areas of concern
Survey respondents ranked a weak economy, theability to meet business forecasts, and the potentialfor defaults on loan covenants as their primaryconcerns for 2009. Anecdotal observations suggestfinancial institutions that lend to private equity firmsshare these concerns.
Key management activities
Almost nine out of ten (88 percent) surveyrespondents said they have implemented workforcereductions in response to the current economicenvironment, while another 10 percent are activelyconsidering such actions.Significant majorities are also focusing on working-capital management (83 percent), salary freezes (75percent), business process improvements (71 percent)and reductions in capital spending (68 percent).
High priority growth initiatives
Acquiring new customers, expanding existingcustomers and enhancing existing products andservices are the top three portfolio company growthinitiatives in 2009. These top initiatives appear tobe aimed at investments that are likely to bring thequickest return and require the least amount ofcapital.
Areas of focus to increase portfolio companyperformance
Respondents identified corporate strategy as the areawhere they will focus most on increasing portfoliocompany performance and value. This is followed byoperations and cash management
not surprisinggiven the current marketplace where top-line growthis extremely difficult.
Survey methodology
In March 2009, RSM McGladrey and McGladrey Capital Markets asked private equity executives across the U.S. for informationrelated to the management of their portfolio companies. This survey report is intended to provide insights into the current stateof managing portfolio companies owned by private equity groups. Respondents shared information on key concerns and growthinitiatives, as well as deal sources, industry and geographic investment focus, and the impact of important tax matters andaccounting issues.A total of 99 surveys were completed, with respondents representing a cross-section of fund types, including buyout funds,mezzanine funds and venture funds. Fund sizes ranged from less than $100 million in assets to more than $3 billionAll private equity responses in the survey are weighted equally.

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