Author: Josh

Value Over Volume: Shifting Development Priorities

Posted on September 13, 2022 by - Deal & Pipeline Management

You don’t need us to tell you that creating value is essential. In Private Equity, value creation doesn’t stop short once a deal is reached. The value created throughout and beyond the deal often matters most. 

However, planning for value creation early, and tracking it consistently, can be easier said than done–especially when it feels disruptive to your current deal flow. It’s no wonder why only 34% of PEs surveyed said value creation was a priority for them on day one. But, if presented with the opportunity to go back and do the deal again, 61% admitted value creation would be a top priority from the get-go, attributing its ROI as a deciding factor.

While it can seem like a drastic change at first, when PEs shift their priorities to adding value over volume, it pays off. 88% of deals with a value creation plan in place reported moderate or significant returns. That’s nearly a 20% increase over those without a plan. 

So how can you shift your firm’s focus to prioritize adding value throughout the deal cycle? It starts with having a solid value creation plan as early in the relationship as possible. To realize the true ROI potential, PEs can begin by focusing on boosting value across revenue enhancement, strategic clarity embedded early on, having a closer eye on talent retention and culture that can drive value, and a formal exit plan. Keep reading as we dive into the specifics so you can keep pace and differentiate your firm from the fierce competition in today’s fast-paced deal market.

Four Ways PEs Can Boost Value Creation

  1. Maximize Revenue Growth

Through greater alignment between buyer and seller and shifting focus to multiple expansions, portfolio companies, and financial investors can meet on the same page to maximize revenue growth together. After all, investors are well positioned to realize the drivers of multiple expansions and can help make significant changes and unveil new growth opportunities. In turn, PEs can spend more time strategizing their exit from the deal inception, leading to more predictable growth and returns. 

  1. Plan Early and Track Vigorously 

Once a plan and process are in place as early on in the deal cycle, systematic tracking of the value creation plan throughout each phase becomes crucial to demonstrate the value growth achieved and value potential ahead. Whatsmore, by tracking progress against a clear roadmap, all stakeholders can align and see the path to value.

  1. Put Culture and Talent at the Center

Failing to focus on hiring and retaining top talent, and fostering a positive culture, can be a value destroyer. Successful dealmakers can quickly identify leaders, innovators, and the talent that will help the company maximize its portfolio’s potential. 

Talent and operational stability go hand-in-hand. By forging a cultural bridge between the buyer and port-co, PEs can keep people at the heart of dealmaking, creating the engagement and incentives that drive long-term retention and motivation, which is crucial in value creation across all stakeholders.  

  1. Think About the Business from the Bidder’s Perspective

Good exit planning means considering the business as a bidder and planning for their potential questions and concerns. By opportunistically having a value creation plan in place, PEs can better predict the unique value they can add to each investment and structure accordingly before the acquisition. This kind of preparation is invaluable when it comes time to strategize an exit.

The Future of Value Creation in a Fast-Paced Deal Market

For PEs, now is the time to focus on strategizing how to attract and retain the best people, using digital operating models and automation, and outsourcing functions. While traditional levers, such as solid cost management and lean manufacturing, will continue delivering value for firms, that may not be enough. 

To keep pace and differentiate your firm from the fierce competition in today’s fast-paced deal market, firms need industry-specific software to seamlessly drive and monitor value throughout the deal cycle. By adopting leading technology, PEs can differentiate themselves despite fierce asset competition and narrowing time frames in today’s fast-paced deal market.  

To learn how Altvia’s industry-specific software can help you strategize, execute, monitor, and optimize your firm’s value creation plans, start a conversation with our team.

Growth Investing: A High-Velocity Game

Posted on September 7, 2022 by - Investor Relations & LP Experience

Growth investing has been around for a long time. However, it’s largely been the domain of specialists and ignored by most investors.

That has changed significantly in recent years. Digital technology has disrupted “business as usual” and created new interest in growth equity and late-stage venture capital.

In fact, these growth classes have added assets under management (AUM) at double the rate of buyout over the past 10 years and produced deals at an astonishing rate. Recent figures indicate that growth equity and venture AUM have reached more than 80% of the buyout total.

The Flywheel Effect

In mechanical science, a flywheel is a heavy revolving wheel that increases a machine’s momentum and provides a power reserve that helps keep the device moving. That dynamic is increasingly at work in the symbiotic relationship between companies and technology investors.

It’s driving explosive revenue growth and profitability. And as a result, it’s attracting a significant amount of private capital and delivering stronger returns faster than private equity in general.

Here and Gone or Here to Stay?

Investors tend to be skeptical by nature. Those who aren’t often aren’t investors for long. So, they’re asking whether this powerful flywheel will continue functioning or is a transient phenomenon. After all, it’s elevating the valuations investors are paying, so they’re certainly hoping it continues.

The answer is unknown at this point. However, what is known is that the rush to cash in is leading to some transactions that most would consider ill-advised.

Still, there are signs that tech-focused investing has a relatively strong foundation. That’s because the target companies have crucial features like identifiable addressable markets and plans for becoming profitable. Contrast this with the dot-com bust, where investors put money into companies that, in many cases, had no plan for or path to profitability. 

Velocity and Prices: Both Are Increasing

Significant valuation increases continue to occur. As they do, they attract many types of growth investors, from hedge/crossover funds to traditional growth funds. The number of investments from these funds ranges from nearly 70 to almost 250.

Not everyone is “all in,” of course. Diversified buyout leaders are moving more cautiously. Many seem to believe that value-creation principles that have worked for them in buyouts will eventually deliver similar results in growth investing.

Hedge/Crossover Funds

These funds are the pacesetters in growth investing. Their behaviors have changed the rules and the competitive landscape.

The keys to success when they find it is that they make fast decisions, have aggressive equity funding, and are agnostic in their approach to control. They no longer rely on a buyout model based on high-touch interactions, leverage, majority ownership, and value creation.

Traditional Growth Equity

These funds have always been focused on growth in the niche between early-stage venture capital and buyout firms. But until recently, they operated more like buyout investors, with very deliberate deal-making.

Now, with more capital and opportunities available, they’re getting more involved in growth. And that statement applies to all funding rounds (early-stage to buyout). These investors are also exploring new geographical locations.

Buyout Funds

Fund mandates like controlling interests and getting board seats have limited traditional PE firms historically. But the wealth of opportunities has caused many buyout firms to establish growth-focused funds with more mandate flexibility.

Blackstone is a prime example. Its Blackstone Growth fund is the first in the company’s history to focus exclusively on growth. Blackstone has also built a team of growth experts, which tells you a great deal about where they’re heading and their objectives.

The Right Tools for the Job

Whether in growth investing or elsewhere, there are ample opportunities out there currently. Do you have the right systems in place to identify and pursue them?

The Altvia product suite is built to help firms move as quickly as they’d like to but always with advanced capabilities in outreach, stakeholder interactions, and more. Contact us today to request an informative demo.

Marlin completes significant majority growth investment in Altvia

Posted on July 26, 2022 by - Uncategorized

DENVER, July 26, 2022 /PRNewswire/ — Altvia is pleased to announce that Marlin Equity Partners (“Marlin”) has completed a significant majority growth investment in Altvia, a market leader in software solutions for the alternative asset space. Altvia’s comprehensive platform, comprising a verticalized CRM built on Force.com, investor engagement offerings, and analytics engine, helps hundreds of asset managers more effectively raise and deploy capital, optimize workflows, collaborate cross-functionally, and analyze performance across their investments. 

The transaction enables Altvia to further expand its leadership position within the software ecosystem for alternative asset managers by accelerating product innovation and supporting the go-to-market function. 

“We are incredibly proud of the market-leading products and loyal customer base that we have built at Altvia,” said Brie Aletto, CEO of Altvia. “Marlin shares our strategic vision of equipping private capital market participants with purpose-built systems to drive world-class partnerships between Limited Partners and General Partners. We are thrilled to partner with Marlin as we enter the next phase of growth.”

“Participants in the private capital markets are rapidly adopting new technologies to drive improvements and efficiencies as they navigate increasing demands from regulatory bodies, ESG impacts, and expanding partnerships with Limited Partners,” said Nick Lukens, a managing director at Marlin. “We look forward to providing our operational expertise and financial support to further advance Altvia’s position in the market, accelerate technological innovation, and enhance its existing product capabilities for its current and future customer base.”

About Altvia

Altvia is a market-leading provider for investor and deal management systems specifically built for private capital market firms. Founded in 2006, Altvia has hundreds of clients and supports over 40,000 Limited Partner investors. The company’s mobile-optimized platform (AIM, ShareSecure, Correspond and Answers) is transforming the way General Partners deliver continuous value, real-time decision support and secure communications to their valued constituents. Marquee firms across multiple verticals trust Altvia to optimize operational functions and enable critically important communications. For more information, please visit www.altvia.com.

About Marlin Equity Partners

Marlin Equity Partners is a global investment firm with over $8.1 billion of capital under management. The firm is focused on providing corporate parents, shareholders and other stakeholders with tailored solutions that meet their business and liquidity needs. Marlin invests in businesses across multiple industries where its capital base, industry relationships and extensive network of operational resources significantly strengthen a company’s outlook and enhance value. Since its inception, Marlin, through its group of funds and related companies, has successfully completed over 200 acquisitions. The firm is headquartered in Los Angeles, California, with an additional office in London. For more information, please visit www.marlinequity.com.

4 Best Practices for Private Equity Firms To Secure the Best Deals

Posted on June 23, 2022 by - Fundraising Strategy

According to Bain & Co., the number of deals executed in 2020 was down by approximately 1,000 as compared to numbers from prior years. In 2021, the number of deals was still down, but the total investment value increased due to transactions having larger values. The first six months of 2022 closely resembled the record-breaking performance of 2021, but pipelines started slowing after the Federal Reserve rate hike in June 2022. Raising concerns of persistent inflation and a minor recession, this pause has continued into 2023 and will likely persist until macro factors stabilize.

What’s the takeaway for PE firms? Now is the time to implement operational efficiencies to find and close deals faster and smarter.

How do you do that? We explain below. 

Proven Tactics for Improving Your Firm’s Performance

The last thing you want during challenging economic times is to find your firm grasping at straws as team members scramble to determine the actions or processes that will help you land much-needed large deals. You need to have a plan with proven tactics that you’re already executing before things go south.

Successful firms will tell you that these four best practices are essential:

  1. Hire and properly equip business development professionals. There’s plenty of data out there showing that growth investors with well-staffed deal sourcing teams almost always find themselves in the top quartile across stage, sector, etc. Of course, the people you add to your team must be smart, savvy, and eager to succeed. But they also need the right tools, including a PE-specific CRM like Altvia they can use to prioritize outreach activities, log proprietary information, set task reminders, etc.
  2. Leverage the latest data analytics technology. PE-focused solutions can turn data into easily digested visuals your team can use to target companies that fit your thesis. Spotting companies that are outperforming expectations before your competitors do is a great way to get ahead. You’ve got to have tools that enable you to “hear” the buzz a company is generating before others do. That gives you a head start in determining if they represent a valuable opportunity.
  3. Stay top-of-mind with business development reps. This doesn’t have to mean costly day-long, in-person meetings. Simply sending a weekly or monthly newsletter, calling to touch base, or connecting for a quick conversation at events you’re already planning to attend can be all that’s needed to remain on someone’s radar.
  4. Segment deals into tiers. Segmentation helps ensure that your team members spend the majority of their time on the most valuable deal opportunities. You’ll still want them to put some effort into deals at every level, but they’ve got to prioritize deals with higher upsides.

An added benefit of taking these steps is that it helps build your firm’s brand. And when people start recognizing your name, you’ll find that this recognition opens doors to opportunities that were previously closed. You’ve still got to close the deal, but getting your foot in the door is the first step.

Focusing on Deal Quality vs. Quantity

Many firms find that landing a big deal is more emotionally rewarding than landing 10 smaller deals that add up to the same total deal value. That’s not surprising. You get to know the people involved, and the resulting camaraderie adds to the sense of accomplishment.

And, as noted above, developing the ability to close more significant deals can be a lifesaver when something adversely affects the PE environment and the pool of smaller opportunities quickly dries up.If you’re not yet using purpose-built solutions like our AIM CRM, you owe it to your firm to check them out. Contact us today to request an informative demo.

Source: Bain & Co. Global Private Equity Report 2023

Altvia President & CEO Brie Aletto Shares Insights With PreSales Collective

Posted on June 21, 2022 by - Uncategorized

Recently our President and CEO, Brie Aletto, had a conversation with PreSales Collective in a presentation titled The Rise from SE to CEO: In Conversation with Brie Aletto.

The company asked Brie to provide details on her path to becoming Altvia’s leader and one of the driving forces behind our triple-digit growth. That journey involved serving in many roles, from a solutions consultant that helped IQNavigator scale from $10 million to $47 million to co-leading TalentReef $3M to $30M in ARR.

Below are some highlights from that interesting interview. You can also watch it in its entirety on YouTube.

Aspiring Meteorologist Turned Company Executive: Brie’s Career Journey

The presentation starts with Brie explaining that as a college student, she envisioned herself pursuing a career as a meteorologist or another role on TV. “I was never going to go into sales, and definitely never into software,” she says with a smile. But graduating into a tight job market, she got her first job working in customer support for a software company.

While that wasn’t her “dream job,” she can now reflect on how pivotal that role was in her career. It allowed her to learn about all the facets of running a business, from operations and system implementation to sales and marketing.

Ultimately, she gravitated toward sales, and the role of sales engineer “fell into her lap.” Being what she describes as the “entertainer” in sales pitch calls ended up feeling very natural to her. Over time, that role expanded into other sales and marketing responsibilities.

Later, when joining Altvia in an operations capacity, she could see how advantageous her sales engineering background was when it came to understanding the “big picture” at her new company. It also made her an excellent candidate when the CEO position opened up.

Brie’s Leadership “Light Bulb” Moment

Although Brie was involved in student government and other leadership activities growing up, she wasn’t sure that being a decision-maker within a company was for her. But, as she started building a team, she eventually realized that letting her employees spread their wings and take on more responsibilities would be good for them and for her. That’s when mentorship became a passion for her.

Brie shares that she recently read a book that uses the phrases expert leader (the person in the room that people look to because they have the expertise) and spanning leader (someone who is an asset because of their overarching understanding of the business).

She acknowledges that it takes time and effort to relinquish control to others but that it’s an important step for those looking to advance their careers.

Tips for Gaining Visibility Within Your Company

The interviewer also asks Brie how she made herself visible and a viable candidate for taking on added responsibilities and new roles. Brie begins her answer by noting that it’s common for product experts to fear that their expertise will, ironically, keep them from advancing since that means the company will no longer have them as their “go-to” technical person.

To keep from being pigeonholed, she recommends taking action to get involved in other areas. She gives the example of solution consultants getting a seat at the table regarding developing the product roadmap. You’ve got to make yourself the “connective tissue” across your organization, Brie says.

What Makes an Incredible Leader?

Next, Brie is asked about what makes someone a good leader, what advice she has for first-time leaders, and how long-time leaders can energize their leadership style. She laughs about the cliches that come to mind but says they’re true. You’ve got to surround yourself with the right people, empower your people to do their best work, and be willing to offer praise but also have tough conversations, for example.

The last of these is the most difficult for her. But she says the ability to offer constructive criticism is essential and something every aspiring leader must learn.

As for things seasoned leaders can do to inspire their teams, Brie acknowledges that’s a significant challenge. However, she mentions employee engagement surveys as a way to determine what’s important to the people you’re leading.

She also explains a few frameworks like EOS (entrepreneurial operating system) and GWC (get it, want it, capacity to do it) that leaders can use to run their business and understand their employees.

The Importance of Mentorship

In another part of the conversation, the interviewer asks Brie about mentorship—the role it’s played in her career, how to find a mentor, etc. She says that it starts with determining whether the person and company you work for value you and the contribution you make. If they don’t, she says, you should consider moving on. 

But when you find a potential mentor, she points out that mentorship can be a two-way street. If you’ve got something to offer a potential mentor—a task you take off their plate or some other way you can assist them or their team—you’re more likely to establish a relationship that will benefit both of you.

Brie also points out that, in most cases, having one mentor isn’t enough. You’re wise to seek out mentor/mentee relationships with multiple people who are experts in their area.

Insightful Answers to Great Attendee Questions

The interview then moves on to Brie answering excellent questions from webinar attendees. Many of them are follow-ons to the mentorship discussion. For example, how do you find a mentor when you’re already in a somewhat senior role? And, how should you pursue finding a mentor outside your company? 

Others address the challenges Brie has faced as a woman in a male-dominated industry, how she walks the line of being humble yet confident, and others.

The discussion is full of insights for any sales engineer—or anyone, really—looking to enjoy their work and advance their career! We encourage you to check it out. And if you have questions about products and services, contact us today to request an informative demo.

A Hyper Competitive Market Means Deal Flow Needs to Go Digital

Posted on June 14, 2022 by - Deal & Pipeline Management

Throughout the year, mid-sized VC firms source and screen anywhere from 200 to 1,000 potential deals. With this kind of volume, PEs/VCs need every tool they can get to screen the markets and develop portfolio companies. 

It’s no longer enough to look at the usual factors (market position, historical performance, industry trends, cash flows, and capital expenditures). To improve and streamline all areas of the business and keep your firm operating at peak performance, PE/VCs must take steps to digitize their deal flows or risk being left behind by the competition. 

Why Digitize Your Deal Flow?

Digitization often requires additional capital, but the benefits of the investment pay off quickly. As more and more firms undergo a digital transformation, CRM software revenues are expected to reach +$80 billion by 2025, and, based on findings from The PwC 2016 Global Industry 4.0 Survey, it’s clear why.

Companies that have implemented a full digitization strategy are projected to increase revenue by an average of 2.9 percent within the next five years while reducing costs by an average of 3.6 percent per year. But that’s just the start. 

Firm digitization benefits have a cascading effect across every functional department, from R&D through to IT. By implementing a digital strategy, paired with visionary C-Suite leaders focused on driving the changes digitization brings, portfolio companies can be armed with the right approaches to increase revenue and growth and justify higher valuations. 

Support R&D and Innovation

When it comes to R&D and innovation, change and distribution are rapid, but a company with the right strategies to quickly adapt and address those changes will be most successful in lowering costs and increasing sales. 

Collecting and analyzing different data quickly is a common challenge most companies face, but with a PE-designed tool like Altvia, firms can arm portfolio companies with visual reports on a combination of industry, traditional, and nontraditional data to quickly identify problems, industry trends, and drive changes and decisions. 

Streamline Purchasing and Production

While the upfront costs of digitization can be high, the investment pays off quickly as operating expenses decrease and outputs and earnings increase. By integrating automation into purchasing and production, companies can continually monitor offers and suppliers to ensure costs stay low asproduction outputs grow.

Leveraging data and analytics in sourcing and operations management also allows for continuous monitoring and prediction of processes, which can then be quickly optimized. As an example, through the monitoring of equipment and performance, companies can use predictive maintenance, which allows for equipment maintenance to be automatically scheduled, essentially solving problems before they even happen. 

Optimize Supply Chains and Logistics

Digital capabilities can be used in every link of the supply chain, leading to big gains in efficiency, maximizing integrations, and optimizing inventory levels. Through cloud-based platforms, companies can plan in real-time and benefit from end-to-end collaboration with suppliers and customers. 

Additionally, data-driven analytics and communication enabled by digitization supports improved forecasts and performance throughout the supply chain, allowing companies to track and trace supplies and identify problems in real-time. 

Empower Marketing, Sales, and Customer Service

To close digital marketing, sales, and service gaps and add value quickly, PEs need to be focusing on digitization. Companies with omnichannel marketing strategies focused on B2P – reaching people – are more effective in reaching a new generation of digital natives.

With a digital sales interface complete with customer reviews, custom product configurations, and algorithms that integrate and analyze data from supply and demand, companies gain the ability to not only automatically match things like competitor pricing but can also enhance the customer experience. 

For example, through gathering data about the customer experience – i.e., search trends, social media, transactions – brands can improve marketing, sales, and customer service by tailoring each and every experience to specific consumer profiles and behaviors. 

Better Enable Enabling Functions (HR, IT, finance)

Human resources, information technology, and finance departments that take advantage of digitization potential will not only support a company’s transformation but also run their own teams more efficiently.

HR can use technology to attract and retain better talent; IT can fully integrate collaboration and knowledge management tools with all business applications and ensure stronger cybersecurity; finance can access and analyze data to drive decisions across every area of the business. Through digital operations, teams can cut the time spent on critical reporting and regulatory functions, freeing up resources and sharpening the company’s insights. 

Five Steps to Digitize Your Deal Flow

The benefits of digitization across all business functions are clear, but it can be a challenge to get started. By breaking it down into a six-step framework, firms can quickly get started and make the most of their digitization efforts:

  1. Develop a Digital Strategy

    Hire the right people to lead the strategy, with an end goal to digitally connect your entire organization, including portfolio companies.

  2. Upgrade Your FIrm’s Digital Capabilities

    Determine the right tools to help level up your digital capabilities. With an all-in-one CRM designed specifically for PE/VCs, firms can leverage technology to streamline areas like operational efficiencies and investor communications.

  3. Embed Digital Capabilities in Deal Sourcing

    By utilizing data and analytics in deal sourcing, firms can find more qualified opportunities faster, get a full-picture view on how they stack up to the competition and make a stronger offer that will guarantee an acceptable return.

  4. Employ Digital Capabilities to Help Manage, Optimize, and/or Merge Portfolio Companies

    The ultimate goal for your digitization efforts should be an interlinked system that feeds into all of your portfolio companies. All-in-one platforms like Altvia make this otherwise time-intensive project a breeze and empowers firms to access the data and information needed to maximize portfolio performance.

  5. Develop a Talent Strategy

    To maintain and continually optimize your digitalization, you’ll need a team with strong digital and analytical skills in place. Train your current team, and hire new talent if needed to ensure you have the right digital expertise in-house to keep up with ongoing trends and innovations in digital. 

Digitize Your Deal Flow with Altvia

For private equity firms, digitization offers many ways to create value within portfolio companies by

improving their processes, as well as upgrading and expanding their product and service portfolios

As innovation in PE/VC continues to accelerate, PE/VCs must take steps to go digital to scale with the market – and Altvia can help. To learn more about Altvia’s solutions for digitizing your deal flow, start a conversation with our team.

Leveraged Buyout (LBO) Model for Private Equity Firms

Posted on June 8, 2022 by - Uncategorized

Leveraged buyouts (LBOs) are a cornerstone of private equity, where financial engineering meets strategic acquisition. In an LBO transaction, PE firms acquire companies using a substantial amount of debt, aiming to amplify returns by leveraging the acquired company’s assets and cash flows. But, what does that even mean? How do LBOs work? And what are the implications for both the investors and companies involved?

What is a Leveraged Buyout (LBO)?

A leveraged buyout is a financial transaction in which a PE firm acquires a company primarily using borrowed funds, with the expectation that the target company’s cash flows will be sufficient to service the debt. The PE firm typically contributes a portion of equity capital, often alongside limited partner investors, while the remaining purchase price is funded through various debt instruments.

What does an LBO process look like for PE Firms?

Before making an acquisition, PE firms conduct their due diligence through a series of steps, including analyzing a potential company’s assets, cash flows, and cash expenditures. If the deal seems to have potential, the PE firm negotiates a price and outlines a deal structure. Next, they source capital to take ownership of the business, and then implement strategic changes and cost-cutting measures to accelerate growth (and revenue).

To determine if a deal is worth pursuing, firms use an LBO model for evaluation, which, as the Corporate Finance Institute explains, can get pretty complicated due to the unique factors that go into such a deal. These include, but are not limited to:

  • A high degree of leverage
  • Multiple tranches of debt financing
  • Complex bank covenants
  • Issuing of preferred shares
  • Management equity compensation
  • Operational improvements targeted in the business

Once evaluating these factors, firms need to measure key metrics to ensure the deal is favorable, such as:

  • Debt/EBITDA
  • Interest Coverage Ratio (EBIT/Interest)
  • Debt Service Coverage Ratio (EBITDA – Capex) /  (Interest + Principle)
  • Fixed Charge Coverage Ratio (EBITDA – Capex – Taxes) / (Interest + Principle)

When analyzing these metrics, firms should also conduct what’s called a sensitivity analysis. This analysis forecasts LBO outcomes based on different assumptions and scenarios, such as changing the EV/EBITDA acquisition multiple, the EV/EBITDA exit multiple, and the amount of leverage (ie: debt) used.

If using a templated LBO model, it’s essential to keep in mind that certain models use specific assumptions. In Firmex’s templated LBO model, for example, it assumes 100% acquisition of the target company, that the most recent year-end balance sheet is the closing balance sheet, that there are no step-ups in asset values, and that there will be no amortization of goodwill from an acquisition. If these assumptions don’t apply to your deal, factor that in during your analysis. 

How to structure an LBO:

At the heart of an LBO lies the intricate structuring of financing. PE firms work closely with investment banks and lenders to craft a capital structure that optimizes returns while managing risk. This structure typically involves a mix of senior secured debt, subordinated debt, and equity financing.

  • Senior Secured Debt: This forms the backbone of the LBO financing and is usually collateralized by the assets of the acquired company. Senior debt holders have priority in repayment in the event of bankruptcy or liquidation, providing a level of security for lenders.
  • Subordinated Debt: Also known as mezzanine financing, this type of debt sits between senior debt and equity in the capital structure. It often carries higher interest rates and may include equity kickers such as warrants or convertible securities, providing lenders with additional upside potential.
  • Equity Financing: PE firms contribute equity capital to the transaction, typically ranging from 20% to 40% of the total purchase price. This equity investment serves as a cushion against potential losses and aligns the interests of the PE firm with those of its investors.

How do PE firms ensure success with LBOs?

Positive Cash Flow:
Central to the success of an LBO is the target company’s ability to generate sufficient cash flows to service the debt. PE firms conduct extensive due diligence to assess the target company’s financial health, market position, growth prospects, and operational efficiency. By identifying opportunities to improve efficiency, increase revenue, or reduce costs, PE firms aim to enhance the target company’s cash flow generation potential.

Value Creation:
Another key point to understand is that PE firms execute LBOs with the ultimate goal of creating value for their investors. This means that the fund managers are hyper-focused on value creation in their portfolio companies. This value creation can take various forms, including operational improvements, strategic initiatives, and financial engineering. Over the investment horizon, the fund managers work closely with the portfolio company’s management teams to implement value-enhancing strategies and position the company for a successful exit.

Exit Strategies:
Exit strategies for LBO investments vary but typically include selling the company to a strategic buyer, conducting an initial public offering (IPO), or recapitalizing the company to distribute cash to investors. The timing and method of exit depend on market conditions, industry dynamics, and the specific objectives of the PE firm and its investors.

In conclusion, leveraged buyouts represent a powerful tool for PE firms to unlock value and drive growth in target companies. By leveraging debt to finance acquisitions, PE firms amplify returns while carefully managing risk. However, successful LBOs require rigorous due diligence, disciplined execution, and strategic value-creation initiatives. As a cornerstone of the PE industry, LBOs continue to shape the landscape of corporate finance and investment, driving innovation, efficiency, and shareholder value.

Unlock value, drive growth, and amplify returns with Altvia. Discover how our comprehensive suite of solutions streamlines your due diligence, execution, and strategic value-creation initiatives for successful leveraged buyouts. To learn more about Altvia’s solutions, start a conversation with our team.

PE/VC Financial Due Diligence Checklist

Posted on June 3, 2022 by - Deal & Pipeline Management

In general terms, due diligence is putting an appropriate amount of effort into assessing or confirming the details about something. People perform due diligence in various situations, including when buying a car or a home, for example.

The amount of assessment necessary varies based on the item or issue being considered. When purchasing a car, looking it over and going for a quick test drive may be all you need to do.

If you’re buying a house, it’s appropriate to visit it multiple times, check out similar homes, review the “comps” in the area, and have a professional do a thorough inspection. When there’s a significant amount of money on the line, thorough due diligence is a must.

Why Due Diligence Matters

Not surprisingly, this is essential for investors. By one estimate, those who do at least 20 hours of it see a 500% increase in the likelihood of earning a return.

That’s because most investment opportunities look promising on the surface. If they didn’t, they wouldn’t be offered. In most cases, it’s not until you finish reviewing the high-level information and dig deeper that you encounter issues that may raise concerns.

Consequently, it’s vital to set aside ample time for your due diligence. Rushing through it to meet a deadline is a recipe for disaster.

It’s also crucial to have a checklist. Performing due diligence is a little like casually surfing the internet. There are “rabbit holes” everywhere, making it easy to get lost in all the information and forget to check on key aspects of the investment. But with a clearly defined methodology, you can avoid those traps and stay focused on the job at hand. 

8 Essential Elements

The specific items on the checklist will vary depending on the investment. However, there are eight types of review that investors should conduct:

  1. Financial. Here you’re looking at things like cash flow, assets, debts, and projections.
  2. Workforce. Is the company adequately staffed? What’s being paid to employees in salaries, benefits, etc.?
  3. Intellectual property (IP). IP is a significant asset for some companies. Here you’re reviewing its patents, trademarks, copyrights, and brand in general.
  4. Market and operational. What is the company’s market share? Is there room for growth? Also, what are the company’s primary business risks and opportunities?
  5. Legal. Does the company have any legal liabilities that might affect your investment decision? Are there any licensing agreements or partnerships you should be aware of?
  6. Tax. In this area, you’re reviewing the company’s record on tax compliance and evaluating its tax returns.
  7. Regulatory. If the company is in a highly regulated industry, this type of due diligence is very important.
  8. Technological. What’s the status of the company’s IT infrastructure, cybersecurity, etc.?

Accelerating Your Due Diligence Checklist With the Right Platform 

Your due diligence checklist is the “roadmap” you follow to reach your decision about an investment. However, having a purpose-built solution for everything from organizing and sharing information to tracking interactions with stakeholders can make the process much more efficient and effective.

Altvia has three layers—data management and automation, intelligence, and secure engagement—that enable rapid, well-informed decisions. When leveraged in tandem with a detailed checklist, it gives users a significant competitive edge.

Contact us today to request a demo.

15 Steps to Fundraise a New PE/VC Fund

Posted on May 26, 2022 by - Fundraising Strategy

Raising your first fund can be one of the biggest challenges you face as a firm. From building a backing of strong connections to empowering LPs with data-driven insights, no detail can be overlooked. 

But, thanks to a recent guide released by TechCrunch, there are 15 steps the best firms follow when raising funds. We’ve summarized them here to help you tackle the challenge and lay the groundwork for a high-performing fundraise.

  1. Build Your Backing

    The more backed you are, the more investable you are. Before you begin soliciting your fund to LPs, network, network, and then network some more. The more people on your side, the more feedback you gather, and the more awareness you gain. This helps ensure your fund will have an interested audience, along with a network that can help make valuable connections before you launch.

  2. Set Up a Data-Driven Deck…

    Compile all of the information to support your pitch (a tool like Altvia can help by centralizing all alternative and traditional data across your industry and firm), and put together a strong marketing toolkit, complete with a data-backed pitch deck, website, and social media presence to prove your credibility.

  3. … a Data-Driven Digital Presence …

    Make sure your entire team has a professional digital presence, including an up-to-date LinkedIn profile, and leverage their following and shareability to spread awareness of the metrics you want to share (ie: the size of exit, number of people you managed, budget, etc.).

  4. … and a Data-Driven Due Diligence Process

    Set up a data-informed due diligence questionnaire for easy LP access, including details on return history, legal documents, a fund organization chart, portfolio construction model and one-pagers, and the resumes and case studies of key personnel and past investments.

  5. Provide Answers to FAQs

    No matter how unique your fund is, chances are you’ll have some commonly asked questions from LPs.

    Prepare answers in advance, and compile your FAQs into a single document so you can arm LPs with responses to the questions they care about most from the start.

  6. Self-Evaluate

    If your fund doesn’t stack up to the track record of successful first-time fundraises  (industry-standard strategies that have landed investors before, experienced founders, target AUM of >$50 million), you may want to reconsider your strategy.

    Be honest with yourself…can you really raise money from investors, or should you be focusing on family offices and/or high net worth individuals?

  7. Recruit Resources

    If your budget permits, recruiting additional resources can help accelerate and better operationalize your fundraise. Whether you leverage a part-time hire or AI/tech, additional help can empower you to then refocus time and effort on other areas of the business, while ensuring every aspect of your fundraising efforts have the time and attention to detail needed to succeed.

  8. Aggressively Maintain Your CRM

    The key to any successful private equity fundraise is organization and transparency within the firm. Arming every team member with access to your CRM, including transparency of interactions with potential investors in every stage of the pipeline, is critical to building and maintaining relationships.

  9. Tap into Your Network…

    Remember how important we said it is to network in Step #1? Now that you’re at a more active stage of your fundraise and have your data-driven resources together, it’s time to tap into the network you’ve built to solidify your backing.

    While you’ll likely receive a lot of “nos,” this is your chance to ask for feedback and referrals to grow your audience and reach new potential investors.

  10. … Including Your Digital Network

    In-person meetings are great, but organizing 50+ of them can be time-consuming, and ineffective use of your time. Incorporate a few virtual events in your networking strategy to help you exceed your reach and gain exposure to new people and opportunities you may not have had access to otherwise.

  11. Secure Speaking Slots

    Build up a database of investor-focused events, and contact organizers to secure speaking slots. Even if you’re just introducing a sponsor or keynote, you’ll be growing your presence among a captive audience, who could also be future investors.

  12. Control the Meeting Format

    Once a meeting with an LP is secured, make sure the time is productive for both parties. Begin by asking the LP if they’d like to go through the deck page-by-page, or if they’d prefer to jump in with initial questions.

    While discussing, pause regularly for questions and make sure the format is conversational; no one should speak for more than two minutes at a time without checking in for feedback or dialogue from the other party.

  13. Do Your Own Due Diligence

    While the LP will be running their own checks, you should also know as much about the prospective LP as possible to help your firm tailor the pitch, and know what to expect before entering a partnership.

  14. Keep Your Legal Counsel on Standby

    A lot of paperwork goes back and forth during onboarding, so make sure to have your legal counsel ready to review every document that comes your way before officially entering an agreement with an LP.
  15. Keep Up with Quarterly Reporting

    Finally, after your first close, quarterly reporting is mandatory. Within 45 days of the close of each quarter, provide detailed reports on key metrics for LPs to keep them in the loop (just be sure they are compliant with your Limited Partnership agreement). 

From centralizing your data for decks and reports to integrating a powerful CRM to fuel conversations during every stage of your deal funnel, Altvia’s PE/VC-designed software can help ensure a smooth and seamless fundraise.

To learn how we can help your firm throughout every step of your first fundraise, start a conversation with our team.

Fund Deck to Pitch LPs when Fundraising

Posted on May 10, 2022 by - Investor Relations & LP Experience

You’ve networked as much as possible, gathered and implemented feedback, and refined your approach—you’re ready to raise your first fund! But, before you can begin pitching LPs, you’ll need a solid deck on hand.

If you’re raising your first private equity fund, you may wonder, “what should be in that deck?”  To answer that question, we’ve put together a step-by-step checklist to help your firm assemble a fool-proof deck so you can effectively pitch LPs.

  1. Start by Setting the Stage

    Before diving into the details, it’s a good idea to start your private equity fundraising deck by setting the stage, areas, and locations of where you want to focus your investments.

    Are you focused on investing in pre-seed or series B? EdTech or VR? US only or EU? Answer those questions, and show why your focus has value. As an example, if you’re going after VR/AR, explain how the market is projected to grow in revenue over time and the big players that are pioneering growth.

    By setting the stage in the first few slides, you’ll make it clear to LPs whether or not you’re aligned with their business goals from the start.

  2. Say What You’re Looking For 

    Next, share exactly what your firm looks for in a future investment. Do you have clear guidelines when it comes to market potential and valuations? Are you looking for specifics in regard to team members and advisors? Are there clear exit opportunities – like a path to M&A or IPO – that you’re going after? Outline all of that for LPs to know first before diving into the rest of your deck.

  3. Share Your  Vision

    From core values and mission statements to commonalities between companies you choose to invest in, private equity fundraising places high importance on shared values and visions. Tell LPs precisely what they can expect from you so they can best determine how your brands’ align. 

    As an example, in Day One Ventures’ fund deck, they clearly outline what the “Day One Spirit” looks like at their firm, which includes:

    – Customer Obsession: Great Companies are built around their customer’s needs
    – Empathy: Great founders appreciate people and treat everyone daily
    – PR Worthy: The company should be at the point where PR and marketing will truly move the needle

    By sharing core values from the get-go, you can help LPs determine if you’re the right partner based on goals, ideals, and future visions.

  4. Layout Your Deal-Flow

    Once LPs have an idea of what a partnership could look like with your firm, it’s time to layout your deal flow in a way that’s easy to follow and comprehend at first glance.

    List out specifics, like the number of opportunities you receive each month, how many move forward to due diligence, and how many investments you close. It’s also helpful to include the channels in which you source your deals (organic inbound, network referrals, and co-investors) so LPs know what they’re up against.


    Image Source: Day One Ventures’ Fund Deck

  5. Prove Your Value

    VCs that don’t provide the right value and support can quickly become an unnecessary middleman. Show LPs the value you can add beyond a check by identifying key signs and effects to consider.

    If your firm is competitive in the deals you enter, list how, and the effects that can have on the LPs you partner with:

Image Source: Day One Ventures’ Fund Deck

  1. Show-Off Your High-Quality PR

    When looking to secure funding, LPs want to ensure they land an investor that not only understands the importance of PR, but can also help them level up their communications to attract new customers, add value for partners and investors, hire top talent, and more.

    If your firm excels in this area, show off a bit here, highlighting examples of press you’ve helped others with, including direct links to stories and features that have driven results.

  2. Outline the Onboarding

    LPs want to understand how you’ll help them during onboarding – and this is your chance to tell them what sets your offerings apart.

    From learning about business objectives and aligning them to core messaging to providing in-depth media pitching, share what your firm does to take an active role in helping your portfolio members grow.

  3. Focus on the Big Vision

    Finally, don’t forget to keep your long-term, “big vision” in mind. Why is your firm in business; what’s your end goal?

    Remind LPs of your core purpose so they have a clear understanding of who you are and why you do what you do. 

Organize Your Fundraise with Altvia

Getting your deck in a good spot is just the start to a successful first fundraise. Next, you need to quickly identify the right LPs to go after and communicate with them effectively throughout the funnel. Altvia can help.

From organizing a database of high-caliber contacts to providing transparency on tracking, conversions, and communications from deal-sourcing through to value-adding and reporting, Altvia’s software can help supercharge your efforts.

To learn more, get in touch with our team to start a conversation.