To understand why Private Equity Groups (PEGs) have a hard time finding attractive investment opportunities, consider their investment model. The PEG has to be planning their exit from a potential investment before they make the investment. PEGs may hold an investment for 3-5 years. The PEG will plan to sell that portfolio company to another PEG or a strategic buyer. In the case of another PEG investor, the second PEG will also plan to hold the investment for 3-5 years. This means that the PEG needs to be confident the target company will likely be sustainable and competitive for 6-10 years into the future. In an age of rapid technological change, it is hard to predict the future.
What products do you use daily that you expect to be unchanged in 10 years? There’s the challenge for PEGs and sellers alike. To be an attractive long term investment opportunity, companies need to be sustainable and ready to innovate to competitive for years to come.образец мед справки