Comments on: Keeping a safe distance when advising investees

By: Basic Golf Etiquette | Discount Golf Equipments

Basic Golf Etiquette | Discount Golf Equipments — Thu, 08 Oct 2009 13:02:30 +0000

[...] Keeping a safe distance when advising investees [...]

By: The Private Equiteer

The Private Equiteer — Mon, 05 Oct 2009 22:47:51 +0000

Thanks for the note Jacoline. I just wonder how independent the research is given McKinsey is a strategic consulting firm and is reporting on the benefits of strategic consulting (albeit via PE firms). Also, I wonder how many respondents said “we don’t do strategy”. My uneducated/uninformed guess would be 99% said they “did strategy”. (Am I being cynical today?)

By: The Private Equiteer

The Private Equiteer — Mon, 05 Oct 2009 22:44:19 +0000

Mr Market Maven: You assume two things a) private equiteers want independent and unbiased DD information, and b) private equiteers want to be associated with deceptive practices.

Much of the time, the person leading DD is the person trying to get the deal across the line, ergo, they are perfectly happy with interviewing pre-selected and pre-prepped customers/suppliers/etc. We justify this practice as information gathering, but really it’s as pointless as calling references on a potential employee’s resume.

More importantly though, we can’t be linked to deceptive conduct. Forgetting the legal ramifications, it’s just not cool. Probably best (or at least more palpable) to site face-to-face with a key person and have a frank conversation. I agree that the info you could get by being deceptive would likely be more useful, but there are lines…

By: Jacoline Loewen

Jacoline Loewen — Mon, 05 Oct 2009 10:51:54 +0000

Staying a distance from the investee company is good advice. Although McKinsey & Company’s recent study on the top 25% preforming private equity funds report they all did strategy, that is not actually jumping in and doing the day-to-day work.

By: Market Maven

Market Maven — Sat, 03 Oct 2009 21:14:09 +0000

I was working for a boutique market due diligence company in Silver Spring, MD and routinely solicited proprietary market information from employees of competitor-companies. I would identify current or recent employees of a target competitor company from listings in job search portals such as Monster and Hot jobs. Then, I would call on them, portraying myself as a recruiter or a human resource consultant whose client is looking to hire a qualified individual in their particular industry. Over a period of two to three weeks, I can build up enough trust with my target to gain information about his company’s sales, growth, market/segment focus, tactics, strategies and new product/services to begin drafting a report on the target company. Missing information on a competitor can be supplemented or estimated from information from other competitors or customers as well as intuitive guesses. The truth is that our information gathering process is one part science and two parts art-deception-guesses. Most of our private equity clients are much more interested in getting a third party – somewhat more objective report to substantiate their acquisition initiatives than on truly understanding key customer-supplier relationship or competitive threats and risks to the underlying business. Therefore, just keeping a safe distance is no panacea for gaining true and accurate market intelligence or good due diligence.

By: vlade

vlade — Thu, 01 Oct 2009 07:22:41 +0000

It’s not really any different from other management – the urge to jump in and fix things on many different levels. Of course as a PE you probably feel more pain as “it’s wasting my money!”.
For some people, delgating is the hardest thing on earth.