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How to Speed Up Your ​​Private Equity Deals for Significant Savings

4 Min Read

Private equity firms pour substantial time, effort and money into optimizing deals. By dedicating the same energy toward optimizing the dealmaking process, firms can make the journey quicker and more cost-effective, ultimately saving them resources and delivering better results. 

On average, firms spent 46 days on due diligence per deal in 2022, according to a recent report from Apex Leaders. Deals are taking longer as the COVID-19 pandemic eases with a sudden increase in demand leaving advisors, accountants, attorneys and bankers with busier schedules. Shorten your firm’s timeline for closing private equity deals by implementing proven tactics. 

Optimize Your Process by Understanding How ​​Private Equity Deals Work

To identify opportunities for efficiency, firms must first understand the importance of each step in the dealmaking process. There are time-saving strategies available throughout the journey. 

So how do private equity deals work? The steps in the dealmaking process include: 

  • Deal sourcing: Researching, analyzing and networking and other efforts to evaluate an investment opportunity. 
  • Confidential information: Firms sign non-disclosure agreements to receive a company’s financials, projections, structure and more. 
  • Due diligence: Additional research occurs to determine whether a potential investment is likely to produce the targeted return on investment. 
  • Investment proposal: A proposition is provided to the PE firm’s internal committee for review and approval. 
  • LOI: The PE firm submits a bid to the company, including a purchase price range, value creation strategy and other details. 
  • Review records: After receiving more records from the company, PE firms often conduct additional due diligence. 
  • Estimate financial performance: PE firms estimate future financial performance with an operating model. 
  • Preliminary Investment Memorandum: This document lays out the investment opportunity in more detail for the PE firm’s internal committee. 
  • Tie up loose ends: More due diligence is conducted by the PE firm and negotiations will begin with financial institutions. 
  • Final Investment Memorandum: Other details gathered in later due diligence, along with a valuation, are presented to the PE firm’s internal committee. 
  • Final bid: The PE firm presents a final offer to the company for consideration. 
  • Close the deal: Contracts and transaction documents are signed. 

Your firm should analyze time spent on each step of the dealmaking process. If there are delays or bottlenecks in certain stages, your firm should identify ways to speed up those parts of the process. This may require implementing technology, adjusting responsibilities or hiring outside assistance, among other solutions. Making initial investments to speed up the process will pay off with quicker dealmaking, leading your firm to close more and better deals. 

Resist the Urge to Skimp on Due Diligence Efforts

Seeing a step-by-step overview of the dealmaking process makes it clear that due diligence plays a crucial role throughout the journey. This ongoing research empowers your firm to make informed business decisions with confidence. 

When examining how to close deals faster, it may be tempting to lessen due diligence efforts to save time in your dealmaking journey. However, keeping in-depth due diligence as part of your process saves time in the long run. 

Due diligence allows your firm to fully understand a potential investment, preventing unforeseen hurdles, obstacles or concerns down the line that break apart or draw out your deals. Thoroughly gathering key documents, financial information and future projections early in the process will allow your firm to say “yes” or “no” more quickly on a potential deal. 

Rather than slashing due diligence, your firm should consider dedicating enough resources to make it worthwhile for your deal process. It may be taking longer than necessary if your team is not provided with adequate tools to conduct research and interviews. Make sure your team has the technology, tools and outside help they need to succeed in due diligence.

Refine Your ​​Private Equity Deal Terms to Avoid Delays

Make sure your ​​investment deal structure is clear, convincing and competitive. This will make it easier for your internal committees, stakeholders and sellers to understand the many facets of the deal. You’ll avoid confusion, questions or misunderstandings that can hold up the process. 

Having straightforward private equity deal terms will also make it easier for sellers to quickly identify how your firm will drive value for profitable results. Any efforts on your end that save the seller’s time will not go unnoticed. In today’s private equity market, all parties are looking for streamlined processes that save time and money. 

Plus, solid deal terms can prevent miscommunication or misunderstandings that can ruin otherwise promising opportunities. Spend time upfront refining your ​​private equity deal terms so you can save time later. 

Keep Your Efforts Organized for Ultimate Efficiency

The dealmaking process can be overwhelming, especially since most firms are juggling many opportunities at once. It is integral to maintain organization throughout the process to avoid missing items, repetitive efforts or mistakes, all of which cost time and money. 

Some firms utilize their own project management software to assist with organization. If going this route, make sure your private equity firm fully vets the software before adopting it. It should be easy-to-use, functional and offer timely customer support. 

Many firms outsource research efforts to maximize efficiency, including partnering with Apex Leaders. Our expert team saves firms time and money by optimizing the dealmaking process from start to finish. By utilizing our proven bespoke research process, we swiftly identify relevant research and advisors to speed up the process for our clients. 

Source Expertise from Relevant Advisors, not Expert Networks

One of the smartest ways to maximize due diligence is to connect with industry advisors who possess hyper-relevant experience to the deal your firm is evaluating. Advisors have existing sector knowledge that can help you save time on irrelevant networking, unnecessary research or problematic ​​private equity deals. 

Consider partnering with a firm that specializes in custom-recruited advisors for your specific needs, including Apex Leaders. Trusting our team to vet advisors allows your team to save valuable time that can be spent identifying or closing other deals. You’ll avoid significant time spent parsing through lengthy expert network databases or having calls with advisors without relevant expertise. 

Advisors can also help you position yourself as a competitive buyer with prospective sellers—helping you stand out among other bids as the preferred option. They can also connect you with other people in their network who may be ​​helpful in other dealmaking ventures.  Unlike traditional expert networks, Apex Leaders allows our clients to maintain their relationships with these advisors in their own network.

Close Your ​​Private Equity Deals Faster with Apex Leaders

Call or Contact us today to partner with Apex Leaders for help optimizing your dealmaking process. We’ll empower your firm to make swift decisions with smart direction on ​​private equity deals.