The Importance of Operational Due Diligence

Operational due diligence is becoming essential for private equity firms as the landscape of returns shifts. With previous reliance on multiple expansion and revenue growth becoming less viable, focusing on operational efficiencies is crucial for future profitability. Firms must understand that EBITDA margins have not only stagnated but have often declined, indicating a need for rigorous operational analysis. This shift emphasizes the necessity for private equity teams to evaluate margin improvement thoroughly to sustain returns over the next decade.