When Thoma Bravo acquired Coupa Software for $8.2 billion in February 2023, many questioned the timing. The spend-management platform was trading at a 40% discount from its 2021 peaks. The entire software sector was recalibrating after a steep post-pandemic valuation correction.
The thesis: Coupa led an underpenetrated $70 billion market, with 92% recurring revenue bringing defensive qualities to an uncertain economy. At 7x forward revenue – well below the 2021 peak of 24x – the entry multiple seemed reasonable.
But Thoma Bravo demonstrated the difference between buying a financial asset and building a growth platform. Within six months, the firm executed:
This deal supports a growing private equity consensus: especially in software buyouts, operational improvements drive outcomes more than entry multiples. Thoma Bravo acquired more than a company – they acquired a platform for process-driven value creation.
Key lesson: When recession fears create buying opportunities, firms with established execution strategies can generate returns through operating improvements, not just by financial structuring.
KKR’s 2018 purchase of Envision Healthcare is a story about leverage and unmodeled policy risk. The nearly $10 billion deal targeted physician-staffing services – a market that looked primed for growth but was ultimately vulnerable to regulation.
KKR’s plan: consolidate a giant market, expand physician networks, and benefit from population tailwinds. With $7.4 billion of debt, the bet depended on steady reimbursement and consistent cash flows.
Reality soon shifted. The No Surprises Act of 2022 capped out-of-network payments, erasing around 30% of Envision’s revenue. Meanwhile, wage inflation increased costs, and higher interest rates made the debt unsustainable. In May 2023, Envision filed for bankruptcy. KKR’s $3.3 billion in equity disappeared – lenders recouped around 40 cents per dollar.
The real lesson? This was not pure randomness – it was a failure to model and analyze policy risk. In highly regulated industries,
scenario planning and stress-testing assumptions against possible future regulations are essential.
Advent International’s time with Olaplex highlights both success and the risk of overestimating brand power. When Advent took the hair-care business public in 2021 at $21 per share, Olaplex owned 75% of the U.S. hair repair market with patented technology.
Advent expanded direct-to-consumer sales and launched new products. The early results delivered impressive margins. But by 2023, Olaplex shares had dropped 90%. Larger brands including L’Oréal and K18 launched alternatives, retailers faced excess stock, and consumers pivoted to cheaper options.
Advent’s early moves were smart, proving that premium brands can achieve strong margins – but only temporarily. What they miscalculated was how quickly competitors could copy innovation in fast-cycle consumer markets.
Takeaway: Patent protection rarely means lasting pricing power, especially with short innovation cycles and fierce competition.
CVC Capital Partners’ €4.5 billion carve-out purchase of Unilever’s Ekaterra (brands like Lipton and PG Tips) shows how classic private equity plays can mix with modern priorities.
CVC found opportunities in a $45 billion global tea market, especially premium organic and herbal products with ethical sourcing. Its plan included shedding non-priority brands in India and Nigeria, reformulating 60% of the lineup for “clean labels,” and signing up for regenerative agriculture on all core ingredients.
Within months, CVC reported 4.5% revenue growth and a 12% sales increase for premium product lines. ESG-linked value creation, now mandated by more than three-quarters of limited partners, provided justification for price premiums and made the business attractive to future buyers.
See more on successful carve-outs in finance and synergy realization in M&A.
Big picture: Carve-outs can release value from under-managed assets, especially when paired with sustainability strategies that carry weight for both consumers and investors.
Carlyle Group’s $4.2 billion acquisition of cybersecurity firm ManTech, then its merger with Novetta, demonstrates why defense-related companies continue to draw private equity interest. The U.S. defense budget hit $842 billion in 2023, with AI and cybersecurity accounting for a growing percentage.
Carlyle’s playbook involved removing $120 million in duplicative R&D, combining compliance functions, and cross-training the sales force across both technology platforms. The merger is forecast to drive a 25% EBITDA boost by 2025 through contract repricing and expanded cross-selling.
Defense sector demand is not in question. The challenges are on the labor side, as specialist talent becomes harder to retain. Still, recurring revenue, long-term contracts, and annual budget growth – all factors reinforce stability.
Check out these articles for more context on value creation strategies in buyouts and techniques for maximizing equity.
These five case studies share some clear takeaways for investors:
Each rule means more scrutiny and higher expectations at every stage, from due diligence to exit planning.
Firms earning above-average returns in this cycle will profile every investment across these four themes:
Software acquisitions will lean on “Rule of 40” and require more than 85% recurring revenue. Healthcare deals should avoid businesses dependent on out-of-network billing and must project interest coverage under higher rate environments. Consumer assets need deep IP with multi-year clinical claims and broad distribution strategies.
Miss one dimension, and you might get by – miss two, and you risk becoming another cautionary story. Lessons from these recent deals prove: today’s private equity requires both operational skill and a thorough, forward-looking assessment of risk.
