PE – Ideas for 2025

A few ideas for 2025 – to become the best in the industry, PE firms & teams have to the following approaches and insights from the sources:

  • Focus on specific expertise and market segments
    • Specialize: Hone in on specific areas like tech & be good at profitable revenue growth (aka GTM) as your unique skillset in equity value creation
    • Consider niche markets: Explore opportunities in areas with higher degrees of inefficiency and return dispersion, such as low mid-market buyouts
  • Develop a unique sourcing strategy
    • Create proprietary deal situations: Aim to find deals where valuations are moderate and less than the market. This involves unique sourcing strategies to win deals, even when facing stiff competition
    • Map the universe of opportunities, triage quickly to filter out those that do not meet your criteria, then seek to meet with as many options that meet your criteria as possible and proactively approach the best teams
  • Prioritize team building and culture
    • Build a strong team: Assemble a team of smart, hardworking individuals who work well together – an A+ team can navigate even unfavorable market conditions
    • Focus on culture: Establish a shared mission and sense of purpose to create a strong community within the company – strong identifiable culture is very difficult to copy and gives you a core competency
    • Incentivize core behaviors: Set up structures, compensation, and oversight processes that incentivize the behaviors that the institution needs and wants
  • Unique value creation – GTM 
    • Great investors have A+ professionals with unique skills in equity value creation: focus on profitable growth and improving acquired companies operationally – the key risk in a PE buyout is execution so have A+ team members who can instill GTM & operational excellence
    • Drive value: Have a different point of view on what others don’t see and what you can deliver
  • Implement continuous improvement processes
    • Adopt a Kaizen program: Establish a program of continuous improvement to foster innovation – this can lead to innovation in areas like CEO training, sourcing, and acquisition integration
  • Set big goals and maintain a long-term perspective
    • Aim for exceptional BHAG returns: Strive to outperform the private equity mean by a significant margin
    • Define your BHAG goals: Set specific targets, such as delivering 5x  – 10x on every fund, to push for completely different thinking
  • Focus on people and talent development – PE is a people business
    • Hire for personal characteristics (i.e. for “un-teachables”): Focus on attributes like will to win, which are hard to teach/train
    • Be a talent business: Deploy talent into private equity and aim to be world-class at talent management (starts with good leadership at the PE firm)
  • Be adaptable and embrace change
    • Be open to new ideas: Technologies and tactics will change, so a strong culture and adaptability are essential
    • Be willing to zig and zag: Find a way to create value, even if the market isn’t great
  • Understand market dynamics and risks
    • Long-term growth prospects: Link the valuation of a business to its long-term growth prospects
    • Mitigate risk: Apply investment criteria consistently and focus on great businesses. Mitigating risk can be achieved by diversifying across end markets, geographies, and customer bases
  • Cultivate a service mindset and teamwork
    • Be a top teammate: Focus on teamwork and mission orientation
    • Provide leadership: Sometimes leadership means doing the work so that people can see how it’s supposed to be done