How Private Equity Will Respond to the Next Crisis
Private Equity (PE) industry is better prepared for the next crisis than it was a decade ago. With the significant growth in PE we have seen new entrants and established PE becoming bigger more diversified. The industry continues to evolve.
The question is how will the industry respond to the next crisis? What has the industry learned from the past? How has your model developed since? What will you do different or the same? Do you have a plan to execute?
For the industry we see four trends that help the industry be prepared for the next crisis.
1. The last decade has seen a mega trend of capital allocated to private equity.
2. PE has specialized or diversified in ways to increase its resilience, such as creating expertise in various industries.
3. Operating partner capabilities and strategic capabilities have expanded.
4. Investors in PE are more sophisticated. Communication and sharing of information has increased.
These trends have help the PE industry’s evolution and we believe it will continue to spur resilience in PE. With more capital PE is better able to support companies through a macro distress. PE has improved operating and strategic capabilities to help companies. Many PE have expanded their industry expertise. They are using data and analytics to create playbooks to accelerate the value creation process. This allows PE to support in ways they largely didn’t have years ago.
The question is, do you have a plan for that next crisis? Does this plan include how to take advantage of value creation opportunities that might arise during the crisis?
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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