How do alternative asset managers add value to companies they invest in and help them to improve performance?
According to a 2007 study by Ernst & Young, two-thirds of the earnings growth (before taxes, interest and capital expense) at PE-owned portfolio companies came from business expansion, with organic revenue growth being the most significant element. The investment firm must add new capabilities to the company it buys by adding new products, increase competitiveness by reducing waste and improving operations and grow revenues by entering new markets or finding new customers to make any money for itself or its investors. And it needs to develop, implement and successfully execute a compelling business strategy. The best alternative asset managers today deliver deep expertise in the sector in which the investment is being made; a performance culture that rewards entrepreneurialism and results; managerial and functional capabilities (IT, for example); and an ownership structure that allows even the toughest decisions to be made quickly. The Carlyle value-creation process often involves faci
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