Private equity co-investing demands micro rigor and macro perspective

Successfully executing a co-investment strategy is relatively straightforward, but in no way is it easy to accomplish. Whereas direct investing involves the full range of private equity activities—from sourcing through exit planning, from firm strategy through all elements of executing value creation strategies—co-investing involves a more limited set of requirements. Robust sourcing and effective investment selection are the ingredients for success.

Rarely can co-investments be originated proactively; instead, a co-investment program is largely reactive, dependent on external private equity relationships for opportunities to participate in attractive transactions. Getting the decision right on a co-investment opportunity—participate or pass—is crucial. After all, once a co-investor commits, the outcome resides almost entirely in the hands of company management teams and their private equity sponsors.

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