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Rehabilitating underperforming investments: tips for the financial investor

The past year has seen venture capital and private equity firms focus their attention on keeping struggling portfolio companies afloat rather than making new investments. Tony Mitchell of PricewaterhouseCoopers discusses this trend and warns firms to take a pragmatic approach when considering whether a distressed company can be turned around.

Typically, private equity firms will commit further funds to a flagging portfolio company rather than write it off completely. The management of these companies will often attribute their decline to external forces, such as declining markets and increased competition. Very few will admit internal problems. Private equity firms must discover the truth to ascertain whether a turnaround opportunity exists before reinvesting.

Copyright © 2003 PricewaterhouseCoopers

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Tony Mitchell is an associate director in PricewaterhouseCoopers' transaction services group in Hong Kong.

PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest professional services organisation. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world. For the Hong Kong office please visit www.pwchk.com