…. Investors in private equity are constantly seeking to understand the elusive qualities that distinguish a high-performing CEO from the rest. Identifying these characteristics early can significantly impact investment outcomes.

…. Our recent report "Comforting delusion or expensive blind spot? The importance of management teams in mid-market private equity transactions", drawing on data from 94 investors across 50 UK private equity houses, highlights that investors attribute two-thirds (67%) of investment returns to management quality, which is not only very high but also represents a substantial rise from 58% in 2004.

…. In today's private equity landscape, investors seem to be doing less management due diligence using third parties than previously. This retreat from formal MDD often stems from fast-moving deal processes or concerns about affecting the investor-CEO relationship at a sensitive time. When diligence is done, it frequently focuses narrowly on referencing and individual assessment.

…. A well-established predictor of team effectiveness has some similarity with a predictor of good partnerships or even marriages: moderate diversity of cognitive style but strong alignment around goals and values.

…. There is a striking takeaway from the latest Catalysis research on mid-market investor approaches to handling people issues is that when asked for their gut feel on the relative importance of management quality compared to other factors (including market, technology etc) in determining investment outcomes.

…. Plenty of the mid-market growth companies we work with create group structures. That may be because of expansion into new territories, the separation of, say, services activities from a technology product, or through acquisitions.

Catalysis has carried out tens of training sessions with private equity investment teams in recent years and we ask participants to answer a few questions to help us focus the topics we cover…

…. We all know - by all the main metrics - that deal volumes and value have decreased significantly over the last, say, 18 months. Buyers and sellers both appear more reluctant to transact due to uncertain valuations, costly debt and economic sluggishness.

…. It is often helpful to give labels to new concepts which otherwise stay fuzzy. The problem with fuzzy concepts is that they are hard to visualise, communicate and work on.

Armed with more empowering assumptions; the insight, focus, and acceleration questions; and a desire to seek out low cost (in money but especially time) but high impact solutions, how might activities across the investment lifecycle become more value-adding?

The way that formalised Value Creation has been deployed means that it is often hindering its own objective of systematically growing economic value. This article explains why.

Most of us are familiar with the Pareto Principle, often referred to as the 80:20 rule. The idea, as captured in the graphic below is that a few activities are disproportionately responsible for a large majority of results. The implication, if we can identify the valuable few and take action to deliver them, is that we can achieve substantially better outcomes…

Because 2020 let us work with some investor friends more than others, I thought it might be helpful to briefly summarise the ways in which the Catalysis team has been honing its ability to provide you with what we believe has become the most agile and insightful source of support for mid-market investors around management…

You are, of course, very familiar with financial balance sheets and how they relate to on-going activities (think P&L) and concrete outcomes (cash). Likewise, you know about the category of intangibles, i.e. assets you cannot touch, see or count easily such as software…

It is not surprising, that with so much going on in the news at the moment, we tend to stay focused on coping with the short term disruptions we are faced with: a second wave of Covid, the messy economic environment and the unpredictable implications of Brexit…

So, we got through the initial lockdown period, hopefully relaxed a bit over the summer and it’s now back to school - and back to investing. The deal pipelines of Catalysis clients and the CF advisers appear busy again which is encouraging. But to state the obvious, there are more uncertainties…