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DUE DILIGENCE 2020

PRIVATE EQUITY DUE DILIGENCE  - New Era 2020


  • The era of EV/EBITDA has long been favoured instead of revenue growth or margins . The macros are affected and hence PE’s will now be lower. This makes the current environment even more challenging for VC’s , as they have to search for potential winners in a worsening economy.
  • Due Diligence which was a forgotten art in the last 10 years or so will now come back in favour. Remember it’s the hard work that pays and not cheap imitations. It takes blood  , sweat and tears to find the real diamonds. The miner always holds the key.
  • Technology itself will now be questioned for delivery. VC’s will realise that true value behind business is not just another technology but a valuable Enterprise Software product.
  • Cyber security and Payment modulation platforms  are in demand. 
  • Advanced due diligence with data and analytics will be key to identify new winners. Hence companies will need expert counsel to help them sell well to VC’s. 
  • Disrupters will be favoured. Sources of disruption will be analysed.
  • Companies will be forced to evaluate the ratio of profits -  Is it the product or the customers that are  bringing in the bulk of profits?
  • It’s impossible to chase both growth and price. Growth will win the battle and must be prioritized. Growth can be monetised in a great manner in the long term for pricing, if short term greed is overlooked. 
  • Too much competition between Investors in the last 10 years led to unreasonable price valuations. The same will now be reversed from 2020, as Due Diligence will take the driver seat and a more realistic approach will be worked in paper. 
  • Investors are not immortals to identify the next big disrupters. Sound due diligence will help to understand the value of the product in the foreseeable future. Owners are good at doing the business, but lack art to sell themselves to VC’s.
  • Companies have to come to the street and study the necessity of the bottom of the pyramid . There is no point in competing with the established businesses.  Always build a business around the bottom of the pyramid. 
  • Investors know they are not lucky with all investments. Hence a deep analysis of Due Diligence will help the evaluate the risks and disruptions.
  • Same goes for companies who don’t understand the needs of the investors and lack expertise to project the future of their own business. An expert analytical Due Diligence will help to create a biography of the business and present it to the Investors. It also means that the medium between the Investors and Companies are far more important, as they have the expertise to do ground level reality research and capture the facts in the Due Diligence report.
  • There is competition between companies to attract capital. Dearth of experts will undermine the case of raising funds. Consultants that specialize in performing proper Due diligence should be considered by owners to build and  present a case for investment in a more formal way to Investors.                                                                                                                                                Due Diligence report  is more than numbers and graphs. It is a  realistic and practical look into the future of the Company and a roadmap to bring it to the market.


We at CAPITAISE take pride in conducting Due Diligence with our wealth of research, identify the hot spots, advise the owners, dig deep to find the disruption of the business and help companies come to the street to raise capital.


1 comment:

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