Are M&A experts competent in running businesses?

Hi Yeonlin,

Thanks for the prompt.
I think a PE scenario is very different than a strategic acquisition. The size/type of the transaction (growth equity, buyout, etc) will play a role… if the deal is large enough, the acquiring PE firm could also decide to bring in external leadership with a proven track record of success in the same (or similar industry). In terms of understanding the business, those who work in the business/industry will have a much deeper understanding than any PE firm could obtain. I’ve seen deals where top PE firms have bought businesses where they’ve been sold a bag of goods that look shiny at initial glance (based on market dynamics, trends, etc) and also from a PE modelling perspective, but those within the company understand that there are gaps/headwinds with core/key technologies. This is why due diligence is so important to ensure value can be obtained. Overall, my sense is that PE companies are great at what they do (find good opportunities to create value quickly), but from a long term perspective, some short term actions (completed to generate immediate value) can significantly inhibit future business success.

All the best!

Craig

I generally feel that to be an M&A expert one should first have experience running businesses. So good M&A professional should be more than competent to run businesses.