These points-of-view reaffirm that our skill-sets and substantiated competencies well fit the rapidly evolving landscape within private equity, as summarized below from industry sources as Thomson Reuters; Standard & Poors; Bloomburg; Mergermarket; Bain and Company; PEW Center 2010, among others and recently described by Harris Williams and Company at our conference, with all sources pointing to key areas where NanoPhrades can and does deliver the required differentiation:
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• PEG key positioning improvements to drive differentiated returns.
  • Consider investment strategies across industries, geographies, and asset classes.
    • Diversification is not the turn-key solution for success – GPs must evaluate the economic attractiveness and competitive intensity of each particular opportunity, and then assess the group’s ability to leverage its in-house industry knowledge and relationship network to land on the ideal investment.
    • Sector specialization as a route to developing proprietary insights and industry insider networks.
  • Develop a well-honed and evidenced investment strategy to generate fund raising, as opposed to touting exaggerated claims of fund and deal performance to attract LP interest.
  • Standardize and assess the need for sourcing of certain investor relations across the firm.
    • At the same time, private equity groups need a strategic architect to build the investment processes so that sourcing, due diligence, post-close value creation, and exit are all conducted in the same way across all geographies and asset classes.
  • Tighten team cohesiveness within private equity groups.
  • Develop observable capabilities to add value across the entire investment life cycle from deal sourcing to exit.
    • Repeatable formula, post-acquisition value creation, etc.
  • Enhance due diligence processes. Buyout fund performance is strongly correlated to the “quality of the buy.”
  • Promote activist ownership through early post-acquisition work to add value.
  • Work with management of portfolio companies to develop high-value initiatives, mobilize common functions and resources across portfolio companies, and develop an incentive system that holds management accountable and rewards key players for performance.

• From a certain perspective, the economic downturn has shifted the balance of power between GPs and LPs.
  • GPs are motivated to demonstrate successful exits to return cash to LPs, bolster time-sensitive IRRs, and substantiate subsequent fund raisings.
  • In the near term, LPs can command:
    • Better reporting
    • Thorough due diligence
    • Negotiation of upcoming terms and conditions of new fund commitments
    • Sharing or elimination of transaction and monitoring fees
    • Trimming management fees
    • Key-man clauses
    • No-fault divorce clauses
  • LPs are putting their capital to work in an advantageous time in the deal cycle – when acquisition prices are most attractive and growth prospects are brightest coming out of a downturn.

• LPs are likely to modify their approach to private equity in a number of ways.
  • More thought will be given to portfolio construction, investment criteria, risk appetite, due diligence, governance procedures, and in-house skills and team experience.
  • LPs will lend more merit to diversification across fund types and geographies.
  • Affinity to private equity groups with specialized industry or operational expertise.
  • Re-evaluation of GP network to maintain a stable core and weed out underperformers.
  • Demand increased discipline and due diligence.
  • Quantify ratio of fund returns attributable to leverage or added operating value.
  • Scrutinize team stability, how the firm is managed, succession protocol, incentive structure, how key decisions are made, and how the firm funds its own commitments.
  • Evaluation of private equity groups and GPs by standardized criteria and verifiable performance metrics.
  • Identification of GPdemonstrable capabilities:
    • Repeatable formula
    • Post-acquisition value creation attributable to private equity group resources
    • Effectiveness of due diligence process
    • Proven model for recruiting, retaining, and motivating strong management teams