Private equity firms specialize in buying middle market companies and selling them several years later at substantial profits, yet this type of investment requires extensive rigor and expertise in order to generate strong long-term returns.

Focus on Sustainability

Private equity firms recognize the value of sustainability as a core element in their investment process, using it to attract ethical investors, mitigate risks, support business growth and enhance long-term value creation. Sustainability initiatives may also improve portfolio company ESG ratings while drawing in customers who prioritize sustainability when purchasing products or services.

Sustainability investing has become increasingly vital for both new and existing portfolio companies alike, though views on how best to integrate sustainability into the investment process vary considerably between firms. Some private equity firms take an impact lens approach whereby their investments generate environmental or social benefits; other firms might take a more nuanced approach by allocating capital directly towards sustainability themes like renewable energy infrastructure or agriculture via real asset buckets or buckets of funds.

Manufacturing industries are one of the sectors favored by private equity groups due to their long-term growth potential and technological advances, and therefore several leading private equity groups have dedicated teams with expertise in manufacturing to pursue the industry. Furthermore, some teams also embrace ESG integration (https://corpgov.law.harvard.edu/2017/07/26/the-esg-integration-paradox/) within their investment process for support of operational improvements or strategic M&A activity.

Though investing in sustainable assets offers numerous advantages, prioritizing sustainability initiatives in industrial and manufacturing portfolio companies can present unique challenges. Longer product life cycles and complex manufacturing processes can make prioritizing sustainability initiatives difficult, while rapidly evolving technology and consumer preferences pose additional issues for these types of businesses.

Even with all these obstacles in their way, leading private equity firms have developed innovative approaches to sustainability. For example, KKR established the $2.8 billion Global Impact Fund II to invest in companies offering solutions to some of the world’s most pressing problems, such as climate action, clean energy usage and healthy lifestyle practices.

Global Reach

Private equity groups provide companies looking to expand outside their domestic markets with invaluable access to international markets. PE firms with expansive international footprints can assist companies with expanding revenue through customer expansion or by purchasing complementary businesses in complementary industries; additionally they can assist with managing regulatory differences that exist among different nations.

Manufacturing industries present private equity investors with ample growth potential, making manufacturing an attractive prospect. Due to increased demand for customized products, manufacturers must adapt and invest in new technologies and processes; this has resulted in improved productivity and profitability – making manufacturing an excellent candidate for private equity investment.

Private equity firms have earned a strong reputation for identifying and implementing operational improvements that result in higher profitability, particularly within the manufacturing sector. There are ample opportunities to optimize supply chains and production processes in order to increase efficiency while decreasing costs.

A successful PE firm must develop strong relationships with three key stakeholder groups: its employees, portfolio companies and limited partners (LPs). Limited partners (LPs), as investors in PE funds, play an essential role in future growth; their satisfaction plays an essential part in that equation; LPs want to ensure their investments are safe and treated fairly, they want access to strong deal flows and liquidity options with sustainable, transparent practices and fee control being key drivers of future expansion.

PE investors are seeking opportunities to use their manufacturing experience as the basis for making strategic acquisitions in the manufacturing industry. One such example of this trend is “Industry 4.0,” or the fourth industrial revolution, which provides PE investors with an excellent investment opportunity: investing in companies using automation and digitalization to enhance productivity and efficiency – technologies like these can withstand economic downturns while eventually creating long-term competitive advantages in the market.

Strategic Involvement

As the manufacturing sector expands and changes, private equity firms have increasingly turned their attention toward investing in companies with potential for growth and operational improvements, in line with technological innovations such as automation or artificial intelligence. Their investments help modernize processes while giving their companies a competitive edge over others in the sector.

Transportation & logistics industries are also an area of special interest to private equity firms, particularly with the rising popularity of e-commerce and direct-to-consumer models that change how products reach end-users – this requires new technology often provided by private equity-backed firms.

Private equity firms bring more than capital when they make investments; they also bring strategic expertise. The company Manufacturing Factory Value has the knowledge of an industry which can assist other companies by opening international sales channels or cultivating niche customer bases. Additionally they may help implement new supply chain models or find other ways to streamline operations.

Private equity investors seek out significant returns that may not be found elsewhere, such as through public markets. Their typical investment horizon ranges between four and seven years and they focus on investing in middle market companies; their exit strategy often involves selling their portfolio company off to a larger corporate acquirer for significant profit.

Individuals interested in entering the private equity field should prepare to put in long hours and be driven competitors who take pride in achieving results. Furthermore, strong work ethics are required – those interested should possess an in-depth knowledge of finance and accounting as well as being adept at analyzing data for results.

Operational Expertise

Private equity firms invest across various industries, but their core focus lies in growing and improving middle market businesses with the intention of selling them off to larger corporations for a tidy profit. To do this successfully requires an in-depth knowledge of each industry as well as experience managing growth and operational improvements effectively.

Private Equity operating partners play a vital role in helping their target company identify, quantify, and prioritize opportunities for manufacturing operational improvement to deliver maximum value to the business. Unfortunately, such opportunities were often missed by prior owners who may have focused solely on revenue or cash flow rather than taking cost-cutting steps that will provide long-term payoff.

As many opportunities require a broad knowledge base, operating partners from other industries or even from within a PE firm may be recruited as operating partners to help ensure effective management and long-term success of portfolio companies.

As COVID-19 faded and investors were less willing to invest in high-risk assets, many private equity firm operating partners sat on the boards of their portfolio companies. Now however, many boards are being filled by experts with relevant industry experience instead.

Though private equity associates depicted in popular movies and TV show scenes can differ significantly from the 14-hour workdays common to investment banking, PE associates typically must put “skin in the game.” That means making decisions with their own money at stake so it comes as no surprise they tend to be more diligent when researching and evaluating potential investments.

However, while economic conditions generally support industrial and manufacturing growth, several stressors such as labor shortages, tariffs, taxes and cybersecurity pose threats to further expansion and can derail leveraged buyouts. Katten helps private equity funds, independent sponsors, family offices and portfolio companies anticipate volatility and mitigate legal risks to meet their investment and growth goals. We draw upon our extensive manufacturing M&A expertise for value discovery, value protection and growth acceleration.