Due Diligence for Private Equity Investment in High Growth Business
Situation:
A private equity firm was looking to add a high growth enterprise professional services business to their portfolio. Concerned that their traditional due diligence techniques would not fully answer the question, “can this company continue to scale at the pace it is presenting?” the firm came to the Alexander Group.
Challenge:
The Alexander Group came in to evaluate if this business had the growth runway to support investment. The target business was hitting a critical phase of growth with a number of emerging sales strategies. However, there were concerns that the existing sales model was not developed enough to handle the multiple areas of focus. An inability to balance all sales objectives would drastically impact their ability to deliver the forecasted growth and ROI.
Solution:
The Alexander Group conducted a comprehensive due diligence assessment evaluating the target’s segmentation, coverage model, resource deployment, sales productivity and sales compensation programs. Key risks were identified that enabled the private equity firm to 1) get a much better confidence level to determine whether to invest in the target business and 2) determine the investment and focus required post-investment to enable the target to achieve their growth goals. AGI’s assessment indicated that while risks existed the sales model could support the growth plan with a number of targeted adjustments to segmentation, coverage and the sales compensation program.
Benefit:
The analysis led by the Alexander Group confirmed growth potential which led to the private equity purchase. Alexander Group’s sales model recommendations were adopted post-acquisition by the portfolio company and supported by the private equity firm. The reinvigorated sales organization has helped the company sustain its pace of revenue growth positioning the private equity firm for a successful exist in the future.
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