VIEWPOINT2023

IN TURBULENT TIMES,GO FOR THE TOP LINE
Investing in growth toenable sustainable returns
AUTHORSWith interest rates and competition increasing,a value creation model relying on traditional
cost-efficiency measures to improve profitability

Jonas Fagerlund
Alan Martinovich

cannot alone maximize an investment portfolio’s

Rebecka Axelsson Wadman

value growth. Leading private equity (PE) funds are

Florent Nanse

emphasizing underwriting for top-line growth inparallel, which provides both higher return potential
and a more attractive, sustainable story for future
investors. In this Viewpoint, we detail the options
for achieving growth during turbulent times.

Jack Kuczmanski
Robert Siniakowicz

ARTHUR D. LITTLE

VIEWPOINT

WHAT THE FUTURE MAY
HOLD FOR PRIVATE EQUIT Y
The PE industry, known for its focus on efficiency
improvements and EBITDA growth, has expanded
dramatically in the past decade, tripling assets
under management (AUM) from US $2 trillion
to $6 trillion between 2010 and 2020. By 2025,
AUM is expected to double again, eclipsing$12 trillion. PE firms control companies that
employ millions of people across a range ofindustries and often have majority control overtheir portfolio companies. With cooperation fromthe portfolio company executive team, they canquickly implement change and drive multiple
value-growth initiatives. Unlike quarterly driven
publicly listed entities, PEs are not hampered byshort-term negative developments.

the share price of Kraft Heinz had dropped over
40% compared to its value before the PE buyout.
Cost cutting is an important and appropriate tool,
but great PE firms combine growth orientation
with cost efficiencies and seek to develop
sustainable business models.

THE P OWER OF THE VALUECRE ATION–DRIVEN PE FIRM
We believe a company should take advantageof turbulent times. A more uncertain external
environment often offers opportunities forcompanies with a strong strategic growth planand, therefore, may be more rewarding than astable environment. The following three examples
outline the mechanics of how prioritizing top-line
growth results in the greatest returns.

While rapid expansion is likely to continue in thenear term, the PE industry faces challenges. A

Scenario A: Low interest rates

company’s valuation and long-term viability isand cost-cutting method

determined with profitability and growth potential
in mind, highlighting the importance of balancing
short-term cost-efficiency improvements withefforts to sustain long-term revenue growth.
History has shown that neglecting a portfolio
company’s top line may jeopardize value. The 2015
Kraft Heinz deal by Berkshire Hathaway and 3G
Capital is a well-known example of a failed cost
efficiency–centered PE transaction. The goal
was to acquire Kraft Foods and merge it with H.J.
Heinz Company, in a deal valued at approximately$50 billion and causing layoffs of roughly 10% of
their collective staff. However, layoffs and plant
reductions cost the combined entity substantial
expertise and human capital. These losses
likely contributed to lowering the Kraft Heinz
Company’s market position. Controversial legal
investigations also destroyed value.
A 2019 Wall Street Journal analysis found that
PE managers and company management
neglected the potential of existing organic
growth opportunities, which compromised theposition of strength that existed before the deal.
In the weeks following the layoffs, the Kraft
Heinz stock price fell significantly. By 2018–2019,

IN TURBULENT TIMES, GO FOR THE TOP LINE

The leveraged buyout (LBO) is a common
investment strategy for PE firms. In an LBO,
a PE firm uses both debt and equity to acquirea business. For example, a PE firm buys a target
company at a valuation of 10x EBITDA of $100 for$1,000, financed by 60% debt and 40% equity.
During its ownership, the PE firm first uses cost
efficiencies to increase the portfolio company’s
annual absolute EBITDA by $9. Later, the resultsof its new cost efficiencies grow the company’s
top line (revenue) by 3% per annum. The cost
efficiencies enabled the growth, but the portfolio
company did not make further investments instrategic top-line growth initiatives.
Assuming the same entry and exit multiples,the business would be valued at $1,216 upon
exit. In a five-year window for exit and a 4%
annual interest rate on the loan, the PE firm cancomplete approximately $450 worth of principal
repayments due to available cash at the end ofeach year, generating an internal rate of return(IRR) of 22% and multiple on invested capital(MOIC) of 2.66 on this deal. Figure 1 illustrates
Scenario A.

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ARTHUR D. LITTLE

VIEWPOINT

Scenario B: High interest rates

environment, which reflects the increased costand cost-cutting methodof borrowing and the decreased investor risk
appetite. Therefore, in this deal, the PE firm

But how does this strategy function in a high-completes roughly $350 of principal repaymentsinterest-rate environment? When rates are high,on its debt obligation because it has available

the approach in Scenario A, which emphasizes

cash at the end of each year, generating an

cost cutting, is not solid enough to employ.

IRR of 16% and a MOIC of 2.13 (see Figure 2).

Assuming the Scenario A elements remain

Compared to Scenario A, the deal in Scenario

constant, cost cutting here produces an absolute

B has an equal risk level but generates a lower

improvement in EBITDA of $9 and opens room for

return due to the challenging macroeconomy.

3% annual revenue growth. In a higher-interest-

The 16% IRR in Scenario B may be deemed

rate environment, more money must service

acceptable in some cases. However, it’s crucial

the debt (with an annual interest rate of 7%)

to recognize that this represents the base case;and cannot be used to pay down the principal.

investors would likely be dissatisfied if the base

Additionally, one must factor in a conservative

case materialized. This is concerning based onexit multiple dropping to a point below the entry

the risk associated with this specific transaction.

multiple due to a sustained,
high-interest-rate
Figure 1. Cost-cutting
strategy,
assuming low interest rate

Figure 1. Cost-cutting strategy, assuming low interest rate
EBITDA — Entry vs. exit

Enterprise value @ 10x EBITDA — Entry vs. exit

1.22x

1.22x

$121.55
21.55$100
Modest margin
improvement,
driven by
cost-cutting &limited growth$1,215.51$1,000
400

2.66x

600

PE firm’s returnis growth inequity value;
IRR 22%

100

Entry

Exit

Base

4% interest rate

Assume enterprisevalue grows at samerate as EBITDA

Time horizon = 5 years

Entry(10 x $100)

Margin improvement

1,062.42

153.09

Entry multiple =Exit
exit multiple(10 x $121.55)
of 10x EBITDA

Debt (principal)
EquityFigure 2. Cost-cutting strategy with highinterest
rates onSource: Arthur D. Little
debt

Figure 2. Cost-cutting strategy with high interest rates on debt
EBITDA — Entry vs. exit

Source: Arthur D. Little
Time horizon = 5 years

1.22x

7% interest rate
1.22x

$121.55
21.55$100
Modest margin
improvement,
often driven
by cost cutting

Entry
Base

Enterprise value @ 10x EBITDA — Entry vs. exit
Assume enterprisevalue grows at samerate as EBITDA

400

2.43x

600

PE firm’s returnis reduced
due to higher
rates; IRR 19%

100

Exit
Margin improvement$1,215.51$1,000Entry(10 x $100)

972.42243.09

Entry multiple =Exit
exit multiple(10 x $121.55)
of 10x EBITDA
Debt (principal)

EquitySource: Arthur D. Little

IN TURBULENT TIMES, GO FOR THE TOP LINE

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ARTHUR D. LITTLE

VIEWPOINT

Additionally, neither Scenario A nor Scenario B

by growth investments initiated in year 1, with aexhibits any intentional efforts to drive top-line

magnitude of 6% of annual EBITDA (see Figure 3).

growth, which highlights the portfolio company’s

Using this method, EBITDA will increase fromvulnerability and potential to underperform in$100 to $135.60 by the end of year five, resulting

a rising-interest-rate environment. Scenario

in an exit enterprise value of $1220.40, a value

C will demonstrate how strategic investments

larger than Scenario A ($1,215.51) and Scenario B

in top-line growth contribute to resilience($1,093.96). The compounding growth in EBITDA

and prosperity, even in the face of turbulent

gives the portfolio company a higher exit value,economies, preventing the damage seen

and the PE firm can turbocharge its returns,

in Scenario B and positioning the portfolio

even when faced with challenging high-interest

company for a more compelling exit strategy.

payments. The return on this deal is robust, withan IRR of 20% and a MOIC of 2.45.

Scenario C: High interest rates anda top-line revenue-growth method

In all three scenarios, cost reductions andWhen purchasing a portfolio company, a PE firm’s

as cost cutting and revenue growth are notefficiency improvements factor into the equation

best option is to develop a strategy centeredmutually exclusive; when incorporated, they build

around reducing costs while purposefully investinga stronger equity story. In any deal, efficiency issome cost savings in top-line growth initiatives.

vital to position the company for future success,In this scenario’s high-interest-rate environment,

but the focus is the main difference among thethe upside of boosting revenue over the course of

three scenarios. Table 1 offers a visual of all three

the holding period will outweigh the incremental

scenarios and their relevant information.

costs of increased interest payments. The PE

In Scenarios A and B, the PE firm zeros in on

firm still takes on a cost-cutting program incost cutting and identifies relatively few growth

this scenario, but it focuses on deploying cuts

opportunities. In Scenario C, the PE firm opens

to repurpose company assets toward growth

opportunities through cost savings to build

initiatives. During this five-year deal, the PE

momentum, investing savings in growth efforts

firm strategically reduces costs by $4.5 per year,

and placing bets within key strategic areas toenhancing EBITDA through conservative yettactical cuts. In year 2, the firm achieves revenue
growth of 5% and 10% annually for the remaining

turbocharge the company’s exit value. Scenario
C also highlights a successful growth story andprovides a strong signal to future acquirers, evenFigure 3. Investing
portfolio
company
three yearsinin theholding period,
which is driventop-line growth

in a turbulent, high-interest-rate environment.

Figure 3. Investing in portfolio company top-line growth
EBITDA — Entry vs. exit

Enterprise value @ 10x EBITDA — Entry vs. exit

1.44x$144.1644.16$100
Significant
marginimprovement
through focus on
topline growth
Entry
Base

7% interest rate

Assume enterprisevalue grows at samerate as EBITDA

Time horizon = 5 years$1,000
400

100
600
Exit

Margin improvement (revenue growth)$1441.58

1.44x

Entry
(10 x $100)

3.11x
PE firm generates
large returns
despite highinterest rates;
IRR 25%

1,242.05

199.53

Exit
Entry multiple =exit multiple (10 x $144.16)of 10x EBITDA
Debt (principal)

EquitySource: Arthur D. Little

IN TURBULENT TIMES, GO FOR THE TOP LINE

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ARTHUR D. LITTLE

VIEWPOINT

Table 1. Review of key factors and their performance acrossscenarios
Table 1. Review of key factors and their performance across scenarios
SCENARIO ASCENARIO B

SCENARIO C

EBITDA upon entry

$100

$100

$100

Valuation multiple (entry)

10

10

10

10

9

9

Enterprise value upon entry$1,000$1,000$1,000Debt (% of financing)

60%

60%

60%

Equity (% of financing)

40%

40%

40%

Interest rate

4%

7%

7%

Valuation multiple (exit)

EBITDA upon exit

$121.55$121.55$135.60

Enterprise value upon exit

$1,215.51$1,093.96$1,220.40

MOIC upon exit

2.66

2.13

2.45

IRR

22%

16%

20%

Source: Arthur D. Little

These scenarios and strategies are theoreticaland therefore oversimplified. In reality, PE firms
Source: Arthur D. Little

are likely to utilize a particular overall strategy
over the course of the holding period. However,

ENSURING SUS TAINABLE
TOP- LINE GROW TH &VALUE CRE ATION

they can still adjust this strategy when it appears

PE firms can consider several growth levers,

advantageous, while still considering risk factors

both pre- and post-deal, when planning forand the company’s profitability and positioning.

robust returns. By undertaking growth due

Although a strategy centered around revenue

diligence, firms can implement plans focused

growth may have potential beyond cost savings,
this approach may pose a challenge and incura higher risk, which may discourage PE firms
from investing in revenue-growth opportunities.
Though this is a valid concern, it should not
detract from the opportunity at hand. Rather,
the opportunity warrants a more disciplined due
diligence effort during the pre-investment phase.
This determines the business case viability of thecompany and identifies a growth-acceleration
strategy during the holding period, which ensuressustainable top-line growth and value creation.

on growth acceleration, sustainability as a lever,and operational-efficiency improvements. With
the right execution, these levers can create
substantial value.
Growth due diligence: Anticipate
the potential
Value creation begins pre-deal, during the due
diligence process. In this period, a PE firm must
anticipate the future growth potential of theirtarget. This information will allow them to startbuilding the foundation for a pre-investment

A sustainable growth story is crucial for a

growth strategy.

successful exit, as future investors will be looking

There are two crucial points to predict future

to invest in profitable companies that still haveroom to expand. Striking a balance between
current profitability and growth-acceleration
potential will communicate strength in thecompany’s business case and show interested
buyers a higher exit valuation.

growth:1. The relative market share position, both now
and over time. The PE firm needs awarenessof the industry’s competitive dynamics,
market shares, and competitor strengths andweaknesses in order to develop a robust view of
how the target fits into this picture.

IN TURBULENT TIMES, GO FOR THE TOP LINE

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ARTHUR D. LITTLE

VIEWPOINT

2. The ability of the target to meetcustomer purchasing needs relative to its
competition. If the target provides somethingscalable that customers want, the PE firm’s
strategic guidance, operational expertise,and capital access will multiply the value

DEFINING THE GROW TH
S T R AT E G Y E A R LY I S
E S P E C I A L LY I M P O R TA N T
FOR TIME-SENSITIVEINVESTMENTS

the company creates while in the portfolio.
Asking the right questions as part of a successful

It is particularly valuable to assess growth

due diligence process will get to the bottom of

potential through pre-deal due diligence tothe above two points. These questions include:

embed growth into every aspect of the post-- Who is the current customer base, and how

deal investment lifecycle. Through this early

does the target’s growth strategy address

specific customer segments of opportunity?
Do they plan to grow with existing customers,
grow share of wallet from existing customers,
or grow with new customers?

- What is the company’s relative market shareposition, and what are the implications on its
ability to build growth momentum?

- What are the customer base’s purchasing

criteria for the company’s products, and how
well does the company address these criteria
today against its competitors?

- How scalable is the target’s customer-growthstrategy, and does it look beyond their existingcustomer base?

- How high are the barriers to entry forcompetitors to access the company’s existingcustomer base?

- Is the target company leveraging advanced
technologies and/or software to enable
greater growth than the competition?

- How strong is human capital within thecompany and its management team?

- Once the deal closes, what processes can thePE firm monitor to facilitate growth initiatives
identified in the deal cycle?

- What unique growth and development

opportunities could the PE firm provide thetarget company, using the firm’s strategic
guidance, operational expertise, and access tocapital in the context of the above questions?

alignment, the portfolio company management
team will understand which levers to pull andcreate actionable, measurable goals for theinvestment’s holding period. Defining the growthstrategy early is especially important for timesensitive investments that need to realize areturn within a few years.
Growth acceleration of portfolio companies
Implementing a robust growth program
immediately is key. During the holding period,
this program should build a robust growth story
for a value-accretive exit. This challenging task
can be simplified by organizing it into three
critical activities:
1. Using detailed accounting to understandhistoric sources of growth.
2. Expanding growth opportunities andtightening the link between innovationand growth objectives.
3. Managing the risk associated with organic
growth by:- Building sufficient initiative diversification
into the plan

- Taking a portfolio approach to managing
growth initiatives- Deploying a standardized approach tode-risking growth initiatives

To thoroughly understand the origin of growth,companies should prepare an accounting analysis
that lays out the growth profile of the market
they operate in and the sources of growth fortheir business.

IN TURBULENT TIMES, GO FOR THE TOP LINE

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ARTHUR D. LITTLE

VIEWPOINTM A P P I N G I N N OVAT I O N
LEVERS CAN HELPI D E N T I F Y A P P R O X I M AT E LY
5 0 U N TA P P E D G R O W T H
CONCEPTS

Mapping innovation levers can help
identify approximately 50 untapped growthconcepts, as seen in Figure 5. The next step
is choosing concepts. The success rate is low
during execution, and the outcome is often
unpredictable with an impact that may vary by
85% or more from its expected result.

Figure 4 highlights six growth sources. If thePE firms should help their portfolio companies

company is not constantly innovating its product,

mitigate the risks by diversifying their growthchannel, and adjacent market strategy, growth

opportunities. They should collaborate to manage

accounting will sound the alarm and inspire

the individual risk of their growth initiatives

a shift. Next, map innovation levers to eachby undertaking about 15-20 new initiatives.

growth objective. Innovation levers are tangible

Figure 4. Sources of revenue growth analysis
improvements that have potential to strengthen
the business and enable more innovation.

Figure 4. Sources of revenue growth analysis
Growth sources

A Have we been positioned in

the fastest-growing segments?

Untapped growth areas
0

1

105

0

5

100

9
15
5

Priorperiod
revenuesA
Marketgrowth

1
Churn

2
3
4
Grow wallet
New
New
share
customers products

5
Newchannels

6
New
segments

Currentperiod
revenues

1

How much business have welost & why?

2

Have we succeeded in expanding
customer relationships?

3

Are we good at winning
new customers?

4

Have we monetized our
new product launches?

5

What is our record of recruiting& ramping up new partners?

6

Have we been able to enteradjacent segments?

Figure 5. Aligning innovation with growth objectives

Source: Arthur D. Little

Figure 5. Aligning innovation with growth objectives
Source:SANITIZED
Arthur D. Little
CASE EXAMPLE

1

2

3

4

5

6

Reduce churnGrow customer
wallet share

Win new
customers

Grow newproducts

Build newchannels

Target new
segments

Innovation levers• Maintenance productinnovation• Product feature
integration• Productco-development

Improved
price/TCO• Loyalty incentives• Long-term supply
agreements• Volume-based pricing

Enhance service/experience• Warranty programs• Dedicated support• Ownership/possession
cost solutions• Supply chain solutions

Deliver results• Uptime/performancefinancial guarantees• Re-kit programs• Loaner programs• Diagnostic services• Productivity solutions• Troubleshooting services• Engineering services• Advisory services

Improve sales
productivity• Key acct. retention
playbooks & tools• Key opinion leader
mgmt.

• Key account mgt.
programs• Assisted selling
programs

Better productImprove channel
productivity• Partner performance• Partner selling
management programs
competency programs• Partner incentive
programs• Product-variant innovation • Rapid-cycle productinnovation/refreshes• OEM strategic partnering• Beta client programs
prog.
• Supplier strategic
partnership programs• Remarketing• Value-based pricing• Disposal services• Residual value programs• Refurb programs• Usage-based pricing• Product trial/
testing programs• Leasing services• Rental services• Product exclusivity• Product white labeling• Indirect channel design& architecture• Develop online
self-help channels• Auto-replenish
solutions• Value-selling programs• Lead-generation programs• Sales training• Partner onboarding& recruiting programs• Co-marketing programs

Source: Arthur D. Little

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ARTHUR D. LITTLE

VIEWPOINT

These initiatives focus on the core business andand value they provide. Firms that score well

double down on high market share segments,

on ESG achieve higher exit multiples than lesswhile addressing new segments, channels, andmature peers.

products. Figure 6 shows this portfolio approach

Customer preferences and expectations haveto innovation.

changed. General partners (GPs) note that

Some or most of the 15-20 initiatives will fail. But

buyers expect the portfolio company to include

the ones that find immense success will drive thea sustainability growth story at exit. According tocompany forward in both core and adjacent areas.

the 2022 New York University (NYU) Stern School

Given the elevated risk of initiative failure, growthplans must chart a path well above the company’s
revenue goal — at least 25%. This goal must be set
from the top down to ensure teams have enoughof Business Sustainable Market Share Index,
sustainably marketed products grew 2x times
faster than non-sustainably marketed products
and reached a five-year CAGR of 9.43% versus
4.98% for conventional counterparts. NYU’s Stern

ambition to achieve it.

Center for Sustainable Business also found thatsustainability-marketed products enjoy a nearly

Sustainability as a growth lever

28% premium, on average.

In a business context, sustainability is defined as

Sustainability is linked with increased employee

reducing environmental impact and achieving
operational efficiencies while considering the needsof all stakeholders. It also acts as a value creation

retention and greater ability to attract workers;
this trend is especially relevant for younger
generations who will soon comprise the majority

lever, by generating new growth opportunities andof the workforce. Companies with sustainability

making sustainable cost improvements.

action plans have higher employee-satisfaction

Sustainability is often viewed as a complianceratings than those without. One study, shared as

issue or a box for a PE general partner to check,part of a LinkedIn series about the business case forrather than a lever that can unlock value. However,sustainability, found that morale was 55% better in

research from S&P Global cites the heightenedcompanies with strong sustainability programs.

importance of environmental, social, andFigure 6. The
impactof a realized
2-year growth initiative —governance(ESG) evaluations
and the advantages
initial vs. expanded growth portfolio
Figure 6. The impact of a realized 2-year growth initiative — initial vs. expanded growth portfolio
BeforeAfter

3 initiatives centered on
extension & adjacencies

18 initiatives focused on core business centered on growing aftermarket services,
addressing underpenetrated segments, double down on high market share segments

Growth investments: $50m

Growth investments: $52 m

New productinnovation

Improve sales
productivity

Improve channel
productivity

High market
share segment

-100%

-40%

-87%

-88%

-100%

New
channel+17%+10%

New productinnovation

-100%

+16%
+20%

-100%

Geo B/Segment T
New units-60%

Geo B/Segment B
New units

+40%

-65%

Geo D/Segment C
New units

+160%
-90%

Services &solutions+6%High market share segments+13%

Geo C/Segment C
New units

$100M

New
channelGeo B/Segment B
New units

$200M

-90%
-65%

-60%

Initial growth portfolio (planned revenues)

Expanded growth portfolio (planned revenues)

Global/all segments
New software

Global/Segment A
New product

Global/Segment A
OEM partnership

Geo A/Segment E
Aftermarket kit to other customer

Geo A/Segment E
Aftermarket kit to top customer

Geo E/Segment T
New unit

Geo A/Segment T
New customer: Municipal fleet

Geo A/Segment T
Wallet share: Municipal fleet

Geo A/Segment T
Wallet share: Private fleet

Geo A/Segment T
New customer: Private fleet

Geo B/Segment A
New units

GlobalNew vehicle in niche segment

SANITIZEDCASE EXAMPLE

Geo A/Segment E
New units to top customer

Global/all segments
New software

Global/Segment A
New product

Global/Segment A
OEM partnership$0M

Realized revenues

Source: Arthur D. Little
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ARTHUR D. LITTLE

VIEWPOINT

FA I L I N G T O A D D R E S S
S U S TA I N A B I L I T Y A N D
ESG RISKS LEADS TOSIGNIFICANT LOSSES

According to a release from the company’s
newsroom, global car rental agency Hertz
filed for Chapter 11 bankruptcy in 2020, citing
COVID-19’s impact on the travel industry.
Hertz’s 2021 acquisition by Knighthead CapitalManagement, Certares, and Apollo Capital

Climate risk has an impact as well; the US has

Management offers an example of a successful

experienced a dramatic increase in annual

operational program built to improve growthdisasters costing $1 billion or more. Failing toprospects despite turbulent times.

address sustainability and ESG risks leads tosignificant losses.

This investor group brought in $5.9 billion incapital to help Hertz reduce 80% of its corporate

Given the increasing importance of sustainability,

debt and significantly enhance liquidity to fundGPs would do well to incorporate a sustainability

operations and future growth. Not only didlens within their investment processes, from due

this investment fund future growth, but it also

diligence to exit. Identifying the most material

resulted in direct operational improvements.

issues at the start of the holding period shows

Hertz rightsized its global fleet and location

the asset owner how to define which metrics tofootprint and sold its fleet-leasing business.

track from the beginning. In turn, the asset owner

It also shifted its portfolio to concentrate on

captures the sustainability growth story over thegrowing neighborhood rental locations to meet

lifetime of the investment, instead of scramblingchanging demand. The company emerged frombefore a sale to create a credible growth story

bankruptcy with an improved operating model,that retroactively pieces together disparate

well-equipped to capture value in the hot US

ESG and sustainability-related initiatives.

car rental market.

We know firms that score well on ESG are

As PE firms develop their operational programs,

typically linked to higher valuations, so why

they should ask themselves the following three

isn’t sustainability a focus at the beginning ofquestions:the holding period? GPs leave value on the table
when viewing ESG and sustainability as risks to be
mitigated or boxes to check to satisfy their limited
partners. Unlocking sustainability growth levers
from the beginning of the holding period can help
GPs build value within their portfolio companies.
Operational-efficiency improvementsthat usher in growth
PE firms should build operational programs to
improve the long-term growth prospects of theirportfolio companies. These programs often include
cost-efficiency measures, particularly in high-

1. How will this operational program transformthe portfolio company into a high-efficiency
entity that can execute the growth strategy
the PE fund has laid out?
2. If the PE firm looks to cut costs at theportfolio company, how will this decision
impact growth and productivity?
3. What is the long-term strategy to improve
efficiency? Going forward, what potential
roadblocks can be addressed today to enable
cost savings and performance improvements
tomorrow?

interest-rate environments where cash on hand isimportant. But a value creation strategy should bein effect as the cost-efficiency programs should
free up cash for value-creating investments.

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ARTHUR D. LITTLE

VIEWPOINT

CONCLUSION

N AV I G AT I N G A N U N C E R TA I N ,CHANGING WORLDI T I S V I TA L T O
FOCUS ON GROW TH

In a world of increasing competition, fewer investment opportunities,
and high interest rates, it is vital to focus on growth. Investor
requirements and consumer expectations have changed; making
growth the core of the investment lifecycle allows the investor toprioritize the correct value drivers and build real long-term value.
Here are the primary takeaways:
1

The PE industry’s future includes expansion and several
challenges ahead.

2

Macroeconomic pressures often cause turbulent times for PE
firms and require a heightened level of awareness and discipline.

3

Three different scenarios reveal how top-line results leadto optimal returns.

4

The view of sustainability and ESG is shifting from an obligation
to a means of creating value.

5

Operational improvements are an initial expense, but they
improve long-term prospects despite turbulent times.

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ARTHUR D. LITTLE

VIEWPOINTNOTESIN TURBULENT TIMES, GO FOR THE TOP LINE

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