Despite their different strategies for investing, all private equity firms strive to drive operational improvements and boost the value of a company before they exit after an agreed-upon period. The majority of value creation in PE deals happens when operational due diligence reports highlight cost reductions. This could mean removing non-profitable product lines, closing stores within close proximity, and/or bringing in a new technology to generate extra revenue. These changes may also stir up legal issues, and this is where an extensive and thorough due diligence procedure for legal issues is crucial.

A PE firm will carry out the same due diligence as any other buyer, including financial statements and business plans. There is a greater focus on the quality of earnings. This includes things such as debt/equity and working capital cycle.

The management and operations phase is the time when the PE deal will look at the leadership team of the target and how easily it will be to work with them going forward. This includes a thorough examination of the way in which the management team handles day-to-day operations, and also examines the manufacturing process of the company, as well as the supply chain. It also observes the composition of power and authority within a company to look for areas of too much risk (e.g. data loss or breaches). This is where the significance of a relationship intelligence platform that is able to identify and connect you to the appropriate experts from your network within minutes can be useful.