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New Data Shows Private Equity Industry Overwhelmingly Focused on Portfolio Company Growth, Not Cost Cutting
[July 30, 2020]

New Data Shows Private Equity Industry Overwhelmingly Focused on Portfolio Company Growth, Not Cost Cutting

BluWave, a private equity-focused advisory firm, today released new data on how private equity funds are allocating resources. The results demonstrate that in the immediate aftermath of the COVID-19 pandemic, the private equity industry was far more focused on investing in portfolio companies than slashing jobs or cutting costs. Among the most common investments at portfolio companies were human capital and digitization.

"We've seen a clear trend toward value creation over the past two years," says Sean Mooney, CEO of BluWave. "That trend has accelerated following the outbreak of the COVID-19 pandemic. Although many assumed the pandemic would force private equity funds to focus on operational efficiency, cost cutting and layoffs, what we've actually seen is agility and a focus on valuation creation that has spurred new investment in human capital, IT and software strategy, and data-driven decision making."

Additional key findings from the report include:

  • The top three categories for value creation investment in 2020 Q2 were executive and staff recruiting, hiring interim leaderhip and growth/go-to market strategy.
  • The most popular value creation investment category, human resources, increased 19% over the last two years, from 13% of value creation initiatives in 2018 Q1 to 32% in 2020 Q2.
  • Private equities' emphasis on value creation has been steadily increasing over the past two years, climbing from 51% in 2018 Q1 to 71% in 2020 Q2.

"The data shows that people matter now more than ever," Mooney says. "Despite the uncertainty of the current environment, private equity has increased its efforts to hire top talent -- engaging recruiters and offering more flexible contracts in hopes of scooping up talent which was largely unavailable prior to the crisis. At the same time, private equity firms are digitizing portfolio company operations so they can collect data to inform critical business decisions. We expect both trends to continue for years to come as competition in private equity forces firms to invest across all functional areas."

The BluWave Insight Report includes data from over 1000 initiatives implemented in 2020 Q2 by over 350 U.S.-based private equity funds.

About BluWave

BluWave is a private equity-focused advisory firm that leverages proprietary data and human ingenuity to connect private equity funds and proactively managed companies with best-in-class, third-party resources for more efficient and effective due diligence and value creation activities. BluWave offers highly curated and extremely selective resources across functions, including sales and market, operations, technology, human resources, corporate finance, technology and IT, due diligence, preparing for sale, and business strategy.

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