{"id":3552,"date":"2019-06-12T09:40:22","date_gmt":"2019-06-12T07:40:22","guid":{"rendered":"http:\/\/eneasmagazine.com\/en\/?p=3552"},"modified":"2020-10-01T12:16:27","modified_gmt":"2020-10-01T10:16:27","slug":"operational-value-creation","status":"publish","type":"post","link":"https:\/\/eneasmagazine.com\/en\/bussines\/private-equity-en\/operational-value-creation\/","title":{"rendered":"Operational value creation"},"content":{"rendered":"\t\t
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Despite its brief history, the return for venture capital investors has undergone many changes in recent decades. If the 80s have been marked by the use of financial leverage as the main source of returns with 50% of it deriving from that instrument while 20% came from the creation of value from operations, that evolves to a 50% coming from operations in the 2000s.<\/span><\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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These changes have been made possible due to the easier access to financing by investment vehicles as well as the harder to anticipate market movements environment.<\/span><\/p>\n

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The operational value creation come to stay not only for the private equity market but also for oll the companies as the main growth leverage.<\/span><\/p>\n

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The creation of operational value implemented by venture capital companies in its investments is based on the following principles:<\/span><\/p>\n

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Creation of value:<\/em><\/strong> the investment decision must be based on a business & strategic plan which shall indicate the growth levers of the company, as well as sources of cost reduction or improvement of capital efficiency (optimization of working capital, among others).<\/span><\/p>\n

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Creation of value:<\/em><\/strong> the investment decision must be based on a business & strategic plan which shall indicate the growth levers of the company, as well as sources of cost reduction or improvement of capital efficiency (optimization of working capital, among others).<\/span><\/p>\n

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Long-term vision:<\/em><\/strong> despite the opportunistic nature of the investments made by venture capital companies, it is necessary to have a long-term view to guide its actions for the longer term, including having clarity about what the following steps of the company by the timing of divesting.<\/span><\/p>\n

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Management:<\/em><\/strong> having the appropriate management team to execute the business & strategic plan is key to the creation of value. From the due diligence process, areas for improvement in the management of the company have to be identified. In addition to the human resources involved, corporate governance also plays a key role in facilitating critical decision making for the development of the company.<\/span><\/p>\n

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Incentives alignment:<\/em><\/strong> for management teams to be motivated towards the creation of value, it is common practice among venture capital companies to share some portion of the results with the management teams. The goals and objectives of management teams and investors have to go in the same direction.<\/span><\/p>\n

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Management tools:<\/em><\/strong> In addition to having properly qualified human resources, the invested entities must make usage of management tools such as a solid monthly reporting with the main KPIs of the business, IT systems that enables the obtention of fast and reliable information as well as other business specific tools that can positively impact the productivity or efficiency of the company. A quite positive change that took place has been the reduction of processing costs with the digital era, such as the implementation of ERP or marketing tools.<\/span><\/p>\n

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“The price is what you pay, the value is what you get”
<\/em><\/strong>(Warren Buffett)<\/em><\/span><\/p>\n<\/blockquote>\n

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Despite its brief history, the return for venture capital investors has undergone many changes in recent decades. If the 80s have been marked by the use of financial leverage as the main source of returns with 50% of it deriving from that instrument while 20% came from the creation of value from operations, that evolves […]<\/p>\n","protected":false},"author":1,"featured_media":3101,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[471],"tags":[378],"_links":{"self":[{"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/posts\/3552"}],"collection":[{"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/comments?post=3552"}],"version-history":[{"count":4,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/posts\/3552\/revisions"}],"predecessor-version":[{"id":7063,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/posts\/3552\/revisions\/7063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/media\/3101"}],"wp:attachment":[{"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/media?parent=3552"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/categories?post=3552"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eneasmagazine.com\/en\/wp-json\/wp\/v2\/tags?post=3552"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}