Morgan Stanley IM: Hands-On Operational Improvement Key to Creating Alpha in the Middle Market

A successful approach to operational value creation has been key to driving successful private equity outcomes over the last decade.

05.11.2024 | 07:35 Uhr

It is increasingly important as we adjust to an environment of higher interest rates and inflation, lower levels of financial leverage, and uncertain macroeconomic growth.

Key Features

  • ‘Buy and Hold’ is no longer a viable strategy in the current macro environment.
  • Hands-on portfolio operations is critical to driving profitability and equity value creation.
  • Alignment and integration of investment and operating teams is key throughout the investment lifecycle.
  • A deep and broad team of operating resources is essential to driving real change in the portfolio.

Differentiation is critical in a dynamic private equity landscape
The middle-market private equity landscape has evolved significantly in the past decade. Investable dry powder has set new records each year from 2010 to 2023 and the sponsor universe has seen a significant volume of new entrants. An increasing number of investors, a larger pool of capital that needs to be deployed, and a fixed supply of top-quality companies have combined to drive up asset values, and in turn placed an ever-greater importance on the ability to drive true alpha.

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