1. How Private Equity
Firms Gauge Your
Company’s Health
By Saul Meyer

2. How Private Equity Firms Gauge
Your Company’s Health
In 2011, there were more than 40,000 mergers
and acquisitions recorded worldwide, according
to a survey conducted by Thomson Financial’s
Institute of Mergers, Acquisitions, and Alliances.
A merger or acquisition can be an exciting time
for a company, with the hopes of expanding and
increasing business. Below are some of the
factors that private equity firms analyze to
determine the fiscal fitness of a company prior to
a merger or acquisition.

3. Cash Flow
When considering whether or not to make an
acquisition, private equity managers very closely
analyze the earnings of the business before
interest, taxes, depreciation, and amortization,
commonly referred to as EBITDA. This valuation
process is key to whether or not the potential
buyers can eventually make money on their
purchase.

4. Expenses
Private equity firms will also examine a
company’s expenditures and and the
policies in place to control and minimize
expenses.

5. Product Analysis
Private equity managers will conduct
comprehensive product analyses to
determine the true profit margins of each
product. If the company is in the service
industry, private equity firms will analyze
how contracts are negotiated to ensure
that contracts not only increase revenue
but are also profitable.

6. About the Author
Saul Meyer earned his MBA and JD from
the University of Texas in Austin. He is the
owner of the Dallas-based Balam Group, a
company that focuses on sound
investment opportunities, including those
in real estate.

7. About the Author
Saul Meyer earned his MBA and JD from
the University of Texas in Austin. He is the
owner of the Dallas-based Balam Group, a
company that focuses on sound
investment opportunities, including those
in real estate.