Hiding in Plain Sight: The Working Capital Premium

Private equity (PE) firms today face intense deal competition, high acquisition multiples, and elevated debt service costs, making it harder than ever to generate superior investment returns. To navigate these challenges, PE portfolio companies must prioritize high-impact, low-risk opportunities and create a competitive advantage that generates higher returns on capital than peer firms.

One effective strategy to consider is working capital optimization, which can create a one-time cash flow equal to 5%-9% of revenue while reducing costs and improving a company’s capital efficiency. This can drive a 10%-30% higher multiple on invested capital for a portfolio company’s PE owner, and this insight is validated by academic research.

How A&M Can Help

A&M’s Working Capital Transformation practice offers a unique approach by combining leading edge tools with working capital experts who can both provide advice and fill interim leadership roles in working capital-related business functions. This approach has generated more than $2 billion in cash flow across 50+ working capital engagements and has proven especially effective in challenging situations.

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