Top Ten Questions to Assess a Private Equity Firm’s Operational Improvement Capabilities

“I’ve never met a private equity firm without an operational improvement playbook.”

-Global Multi-Family Investment Office

According to BuildRI’s proprietary research, less than ⅕ of the 600 private equity firms publicly disclose the presence full-time operational improvement talent. This stark reality and lack of transparency underscores the need for limited partners (LPs) and executives of investment targets to look beyond financial metrics when considering partnering with a private equity firm. The following questions are designed to gain a deeper understanding of a private equity firm’s operational improvement capabilities. 

1. Internal Talent: Does your firm have team members to lead and support operational improvements?

2. Specialized Skills: What specific capabilities does your in-house talent have in AI, data analytics, sales and marketing, learning and development, and international growth?

3. Quantifiable Impact: Can you provide metrics from past investments where operational improvements significantly contributed to value creation? Quantify how these improvements drove investment returns beyond management’s base case.

4. Opportunity Identification: How do you identify operational improvement opportunities in potential investments? Are they part of the investment memorandum?

5. Post-Acquisition Approach: What is your approach to implementing operational improvements post-acquisition?

6. Performance Metrics: How do you measure the success of your operational improvement initiatives?

7. Technological Integration: How does technology affect your operational improvement strategies?

8. Alignment with Management: How do you ensure alignment with management teams of portfolio companies on operational improvement plans?

9. Internal Value Creation: How do you incorporate value creation strategies within your firm? In other words, do you practice what you preach to your portfolio companies?

10. ESG Integration: How do you incorporate responsible investment practices or ESG-related strategies into your value creation plan?

Crafted by BuildRI’s seasoned experts, these questions offer a lens through which limited partners, company portfolio executives and private equity firms can assess the potential for post-investment operational value-add, a critical component in today’s PE investing landscape. For sample answers and best practices to the questions above, contact us below.

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