How it works
While it is important to evaluate the assumptions that drive the business model, understanding the drivers behind the numbers is even more important. Accelerating value creation requires a strong understanding of the current state of people, process, systems and profitability.
Investment in Direct-to-consumer (DTC) sales has never been more critical for the consumer packaged goods industry (CPG). According to recent studies, approximately 79% of Americans now shop online, on the internet, or their phones, up from just 22% back in 2000.
Capital has increased exponentially (find a stat) with more new investors entering the market seeking high-growth and start-up DTC companies. It is a sellers’ market!
The highly competitive deal market has shifted the private equity industry’s emphasis away from financial engineering, placing pressure on firms to drive operational value growth in their portfolio companies. This requires a comprehensive DTC operating view of a business to compliment the financial engineering before and after investment to maximize the return on investment.
On the other side of the table sellers are not only looking for the right financial deal, they want to make sure they are leaving their “baby” in the right hands to continue to grow it. According to a recent survey of investors and mid-market executives by CohnReznick, selecting the right buyer with the right fit was just as important to them as negotiating a favorable transaction when selling a controlling interest in their company.
Investors Must Differentiate
Sellers are seeing investors best positioned to introduce industry-specific intellectual capital and expertise that will be in the best interest of the company and shareholders. In today's sellers' market, the most differentiated and well positioned investor wins the bid. It has never been more critical for private equity firms to differentiate themselves with more than money. The more specialized a firm can be, the better the ability to add value and win the battle as Buyer of choice.