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Private Equity Insights Q2 2024

Q2 2024

The big picture: At the midway point in 2024, the M&A and IPO markets continue to show encouraging signs, albeit with slower movement than many PE firms might want. Ongoing economic and geopolitical uncertainty, combined with persistently high interest rates remain roadblocks in the market, underscoring the need for PE leadership to pursue opportunities to optimize and enhance the performance of their portfolio companies. 

In our latest issue of Private Equity Insights, we offer guidance on how private equity can leverage procurement to unlock value and drive performance improvements. We also look at the growing role of AI in finance and how the board can sharpen its focus on M&A due diligence. Other topics include the board’s role in talent management and the results of our latest VISION survey on the future of government.

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Robust procurement and supply chain management play a strategic role as pivotal drivers of value creation and operational excellence.

Why it matters: A strategic procurement function can help firms unlock value and drive performance improvements to achieve the most value out of the supply base at the lowest total cost of ownership.

How it works: Steps to implement a strategic procurement program include conducting a spend analysis, developing and executing a sourcing wave plan, managing suppliers across the lifecycle, monitoring and managing risks, focusing on operational efficiency, and leaning into data-driven decision-making.

The bottom line: Reducing costs and driving profitability continue to be top priorities for boards and management teams. Every dollar saved drops to the bottom line.

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Whether an acquisition is a stand-alone, complementary entity or an integration, the due diligence process is undergoing a paradigm shift due to the higher cost of funding and the impact of failed transactions. Boards should expect a more aggressive focus on due diligence.

What you need to know: Traditional due diligence has given way to a risk-based approach that considers the higher cost of capital and potential issues that could frustrate the combined entity’s achievement of the value expected from the acquisition. This shift in due diligence is toward a deeper dive into several areas through more focused questions.

In this issue of Board Perspectives, we address six areas of interest during due diligence:

  • Supply chain resilience
  • Talent pipeline and retention
  • Environmental, social and governance (ESG) issues
  • Cybersecurity and data privacy
  • Compliance with laws and regulations
  • Integration effectiveness

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Finance leaders are actively prioritizing practical AI use cases that deliver near- and long-term value. And the reason is simple: the benefits of deploying AI to strengthen specific activities are proving to be well worth the investment.

Why it matters: This information is important for CFOs and finance teams to make informed decisions and drive positive change in their organizations using AI tools.

The potential of AI can be unlocked by leveraging existing resources and upskilling teams. By doing so, CFOs can drive progress on their AI journeys and achieve tangible results.

What’s key: AI models can advance the analytics used to facilitate decisions and preparedness.

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Acute talent shortages across numerous industries underscore the risks emanating from outdated, reactionary approaches to managing people, succession and culture. The question arises, what is the board’s role in forging a 21st-century approach to managing talent?

Building a strategy around employee expectations: Changing times have led to fleeting employee loyalty, as talented individuals have more options than ever before with greater transparency into available opportunities. The demand for specialized talent is high, as organizations face nontraditional competitors such as digital side hustles. These and other factors have empowered the workforce and elevated expectations for meaningful work, opportunities for growth, more flexibility and work-life balance, and shared values with their employer.

What needs to change: The recruitment of a transient, multigenerational workforce no longer ends with onboarding. Success in the 21st century stems from creating, implementing and communicating a talent strategy that is aligned with the business strategy and focused on providing an exceptional employee experience. These dynamics place talent and succession front and center on the board’s agenda.

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In 2024, global business leaders have plenty to worry about, including how government actions may impact their bottom-line business performance.

By the numbers: In a global Future of Government survey conducted by Protiviti and the University of Oxford, the overwhelming majority of executives —97% — say they have some level of concern about the ability of the government to impact their business over the next decade. And more than half (56%) classify that concern as substantial or extreme.

Other notable findings: Half of global business leaders say they expect government to have a positive impact on their business over the next decade, while 18% think it would have a negative impact. Business leaders are looking to the government to pull levers leading to a healthy economy in their region: 80% say they expect the government to have some level of involvement in controlling economic growth, unemployment and inflation with the management of demand and money. When we asked executives what role, if any, government should play in regulating emerging technologies that can disrupt democracies, such as AI and deepfakes, 82% said believe government has a role, and 53% said that role should be substantial.

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