Lessons from Private Equity

Book Review | Lessons from Private Equity

This is the first book review on this blog but in the future, I will be adding more recommended books on private equity. I am currently reading a book on valuation and another on constructing a successful elevator pitch. I hope to develop a library of helpful private equity books on this site and I am working on putting together an e-book that will be available for free download as a complimentary resource for readers here.

Lessons from Private Equity Any Company Can Use is a smart, concise guide to restructuring and employing profit-maximizing practices applicable to any firm. The book is written in a simple language that does not require prior knowledge of private equity but uses the ideas that private equity firms use to extract value and promote efficiency.

Rather than a comprehensive book on private equity, Lessons from Private Equity is a memo to CEOs describing the basics of private equity and how the fundamental goals of private equity firms can be used to improve any company. The case studies used in this book illustrate the point that utilizing private equity methods for managing a firm has led many public companies to success. The Sealy Corporation and Nestlé are the most prominent examples referred to throughout the text as examples and indeed both these firms have demonstrated great business management skills in producing profits to public investors (Nestlé more so than Sealy in recent years).

The authors provide a step-by-step process for success:

1. Define the Full Potential: Use strategic due diligence to set a target "increased equity value."
2. Develop the Blueprint: Develop a plan for achieving that goal.
3. Accelerate Performance: Putting the plan into action by matching the blueprint to your company and overcoming obstacles to success.
   
4. Harness the Talent: Hiring the individuals that can make your company's blueprint a reality by either looking inside the company or seeking outside talent.
   
5. Make Equity Sweat: This is a fundamental aspect of private equity firms managing a company, relying on "managing working capital aggressively, disciplining capital expenditures, and working the balance sheet hard."
   
6. Foster a Results-Oriented Mind-Set: Take the private equity disciplines learned in the book and implement them permanently into your firm's culture and periodically reevaluate your company to ensure it is maintaining the formula for success.

The strength of Lessons from Private Equity lies primarily in its brevity (it is just over 100 pages long) and its straight-forward approach. The ideas put forward are not counter-intuitive, they rely on basic strategic due diligence to identify underperforming areas and people to establish a more effecient firm. This book is ideal for executives and young professionals hoping to reach the higher rungs of a company, but also applies to entrepreneurs managing small companies. Lessons from Private Equity is accurately priced low because of its short page-length but I found a great deal of value in this little book.

The authors of Lessons from Private Equity are Orit Gadiesh and Hugh MacArthur are both experts in improving management from the large private equity firm Bain Capital. Gadiesh serves as the chairman at Bain and has been listed on both Forbes' "The Hundred Most Powerful Women in the World" and the "Most Powerful Women in Business". MacArthur heads Bain's Global Private Equity business and advises private equity firms on strategic due diligence on targeted firms and improving performance of those companies.



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