How private equity GPs tend to shift value creation from categories like Revenue Growth and EBITDA Growth into Multiple Expansion.
Module Category: Analysis Tactics and Techniques
Key Concept: Properly formatting the data that goes into value creation models is as important as using the right equations. GPs tend have certain biases that influence value creation models in predictable ways. Correcting these mistakes make value creation models more accurate and robust, and also tends to shift equity value into categories that are more frequently associated with investment manager “skill” or “value-add”.