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Kearney: Improve margins and ensure a successful exit with an operational improvement plan
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Kearney: Improve margins and ensure a successful exit with an operational improvement plan

As valuation multiples reach all-time highs and interest rates are expected to increase, PE funds must continue to focus on expanding the revenue and margins of their portfolio companies.

As leveraged buyout valuation multiples continue to rise and with high-yield interest rates nearing an all-time low in 2020, more private equity (PE) buyers are looking to acquire well-managed businesses with strong growth potential that can still offer an upside in terms of margins (see figure 1). In fact, our analysis of about 1,800 leveraged buyout exits suggests that revenue and margin growth are becoming more important to generating high returns (see figure 2).

Growing multiples and shrinking interest rates are making operational improvement more important for private equity funds

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