PEI Operational Excellence Special Commentary – Gary Hoover

Today’s high multiples and economic uncertainty decrease the margin of error and make operational improvement and effectiveness even more critical.

Every private equity deal today has some measure of operational value factored into the investment thesis. For manufacturing companies – especially those that have already gone through one or more buyouts – the easy gains have been realized. That leaves more complex and challenging opportunities. These deals require ownership with deeper expertise to quickly grow both revenue and EBITDA.

We were invited by Private Equity International to provide an expert commentary in their 2018 Operational Excellence Special Issue. In this article, Gary Hoover, who leads TBMs Private Equity Practice, reviews how to accelerate value creation, along with three main opportunities for growing EBITDA that we quantify and prioritize during the operational due diligence process:

One-time cost savings
Performance gains that deliver long-term margin improvements
Daily Management Effectiveness (management system)

To learn more, download the article now.

Frequently Asked Questions

Why is operational due diligence especially important during recession planning?

Operational due diligence is especially important during recession planning because economic pressure exposes execution weaknesses quickly. The article explains that recessions reduce margin for error, making unreliable processes, weak leadership behaviors, and poor visibility far more costly. Thorough operational due diligence helps private equity firms and leaders understand whether a business can stabilize, adapt, and perform under stress rather than relying on optimistic assumptions.

How does recession planning change the focus of operational due diligence?

Recession planning shifts operational due diligence from growth potential to execution resilience. The article highlights that during uncertain economic conditions, the key question is not how fast a company can grow, but how well it can manage volatility, protect cash, and sustain performance. Due diligence must assess management systems, decision speed, productivity discipline, and leadership capability to determine whether value creation plans are realistic in a downturn.

How does strong operational due diligence improve private equity value creation in a recession?

Strong operational due diligence improves value creation by enabling faster, more focused action after close. The article emphasizes that identifying execution gaps early allows private equity firms to prioritize stabilization, productivity improvement, and management discipline immediately. This reduces downside risk, preserves EBITDA, and positions portfolio companies to recover faster and outperform peers as conditions improve—even in prolonged or uneven recessions.