Resource · Version 1.1 · October 2026
Private Equity Best Practice Guide & Strategic Ideas
A strategic framework for a private investment firm, family office and acquisition platform. Private equity should be built as an institutional investment business, not simply as a company that buys shares in other companies.
- Jobs of the platform
- 4
- Jobs of the platform
- acquire, improve, protect, realise
- Principles
- 12
- Principles
- the rules the firm runs on
- Strategic ideas
- 12
- Strategic ideas
- prioritised now / next / later
- Roadmap
- 36 mo
- Roadmap
- foundation → build → scale
Executive summary
The four jobs of a private equity platform
The objective is to acquire attractive businesses, improve their performance, protect capital, and realise value through a disciplined exit strategy.
Acquire well
A clear strategy, proprietary deal flow and disciplined underwriting. Most returns are decided by what you buy and what you pay.
Improve performance
A written value creation plan for every company, an operating team to deliver it, and a board that holds management to it.
Protect capital
Downside-first underwriting, prudent leverage, concentration limits, strong governance and early-warning monitoring.
Realise value
An exit thesis at entry, exit readiness from Day 1, and the discipline to sell — or to hold deliberately as permanent capital.
Principal’s view
The family’s competitive advantages are patience, reputation and network. An institutional process turns those into repeatable results — and protects them from a single bad decision.
Twelve principles
The rules the firm runs on
- 01Strategy before deals: say no to anything outside the written policy.
- 02Underwrite the downside first; the upside takes care of itself.
- 03Pay for what the business is, not for what you will make it.
- 04Every acquisition has a value creation plan before signing.
- 05Management is the investment: back, build or replace — decide early.
- 06Cash is the only real KPI over the long run.
- 07Leverage is a tool, never a strategy.
- 08Governance protects capital better than legal clauses do.
- 09Diversify by sector, size and vintage; concentrate by conviction.
- 10Know the exit before you enter.
- 11Measure honestly: realised cash (DPI) beats paper returns.
- 12Build the institution: process, people and data outlast any single deal.
How it fits
This guide
How to build and run the investment business: strategy, capital, organisation, value creation, risk and exits.
How it fits
M&A Workbook
How to execute one transaction: screening, valuation, due diligence, IC, SPA, closing and the 100-day plan.
Open →How it fits
DealForge
The operating system in four layers — research, deals, portfolio and governance — where the guide is implemented.
Open →Chapter 1 · The operating model
What “institutional” means in practice
An investment firm has its own customers (capital providers), products (strategies), production process (origination to exit) and people. Design it deliberately rather than letting it grow around deals.
| Dimension | Informal investor | Institutional platform |
|---|---|---|
| Strategy | Opportunistic; deals come from relationships | Written investment policy, target sectors, theses and limits |
| Process | Decisions by one person on instinct | Stage gates, standard analysis, an IC with recorded votes |
| People | Family members and friends of the founder | Professional deal, operating and finance teams with aligned incentives |
| Ownership | Passive shareholder waiting for dividends | Active owner with a value creation plan, board seats and KPIs |
| Risk | Concentrated, leveraged, undocumented | Portfolio limits, leverage policy, covenants, stress tests |
| Reporting | Annual accounts, if any | Quarterly valuation and performance reporting to standards |
| Exit | “We will see” | Exit routes defined at entry; readiness tracked from Day 1 |
| Data | Spreadsheets in email | One operating system with an audit trail (DealForge) |
The six building blocks
Strategy
Where we invest, how we win, what we will not do — written in an Investment Policy Statement.
Capital
Whose money, on what terms, for how long, in which vehicles, with what liquidity reserve.
People
Deal, operating, finance and governance roles; incentives aligned with long-term returns.
Process
Origination, underwriting, IC, execution, ownership and exit — with gates and standards.
Governance
Decision rights, IC charter, conflicts policy, board practice in portfolio companies.
Data & technology
One record of deals, models, risks and portfolio KPIs; reporting to standards.
The Investment Policy Statement — the constitution of the business
Approved by the family council and reviewed annually. Without it, every deal becomes a new debate about strategy. It covers:
Chapter 2 · Strategy & positioning
Be known for something specific
A strategy is a set of choices that tells the team which deals to chase and which to ignore. The best firms are known for a sector, a type of situation or a way of creating value — and their deal flow follows.
Control buyout
Majority or full ownership of a mature, cash-generating business
Key risks: Overpaying; leverage; management gaps
Buy-and-build
A platform company plus smaller bolt-ons in a fragmented sector
Key risks: Integration overload; paying up for bolt-ons
Growth equity
A stake to fund the expansion of a growing company
Key risks: Execution; minority protections
Succession capital
Buy from founders without successors, often staged
Key risks: Key-person dependence; informal practices
Corporate carve-out
A non-core division of a conglomerate
Key risks: Separation complexity; shared services
Special situations
Refinancing, restructuring, disputes — buying complexity at a discount
Key risks: Legal and turnaround risk
Structured / private credit
Preferred equity, convertibles or loans to mid-market companies
Key risks: Credit losses; enforcement
Co-investment
Alongside a lead sponsor or other family offices
Key risks: Dependence on the lead’s judgement
Recommended positioning
Invest the family’s patient capital with fund-grade discipline, organised around sector platforms that compound through bolt-ons and shared capabilities.
Combine the strengths of a family office (speed, discretion, long horizon), a PE fund (professional discipline) and an acquisition platform (synergies, integration capability). Open selected deals to co-investors; decide case by case whether to hold permanently or exit.
Choosing sectors
Score each sector on attractiveness (growth above GDP, fragmentation, resilient margins, clear exit buyers, manageable regulation) and on your right to win (existing companies, founder network, operating partners, integration ability, reputation). Invest where both are high.
Themes worth testing in Indonesia
- Founder succession in first-generation mid-sized firms
- Consolidation of logistics & cold chain, clinics, education and facility services
- Downstream processing closer to the end customer
- Digitisation: B2B software, payments, data and cybersecurity for SMEs
- Healthy consumption: healthcare access, wellness, branded food
- Energy efficiency and transition services for industry
Starting hypotheses — each must be validated with market data, mapped targets and a written thesis.
Chapter 3 · Capital, vehicles & economics
Capital is the raw material
Where capital comes from, how long it stays, what it costs and how it is shared decide which strategies are possible — and how resilient the firm is when markets turn.
Pacing
Commit a steady amount per year across vintages, not all capital in one cycle.
15–25%
Liquidity reserve for follow-ons, bolt-ons, earn-outs and covenant cures.
Cash yield
Model distributions, not only IRR — dividends fund family needs and new deals.
Leverage policy — prudent levels
- Senior debt / EBITDA at entry
- 2.0–3.5× for stable businesses
- Interest cover
- > 3.0× base case · > 2.0× downside
- Covenant headroom
- At least 25–30% in the base case
- Currency
- Borrow in the currency of the cash flows
- Maturity
- No major maturity in the first three years
- Recourse
- At the company or SPV — never guaranteed by the family holding
Leverage is a tool, never a strategy.
Fund-style economics, adapted for a family
- Management feeMarket: ~1.5–2.0% of commitments
- Annual operating budget for the team
- Carried interestMarket: ~20% of profits
- Team profit-share pool, 10–20% of gains above hurdle
- HurdleMarket: ~8% a year to investors
- Linked to the family’s cost of capital
- GP commitmentMarket: ~1–3% of the fund
- Team co-invests personal money in each deal
- WaterfallMarket: Whole-fund or deal-by-deal
- Whole-portfolio with vesting and clawback
Worked waterfall: 8% hurdle, 20% carry, full catch-up
Investors put in 100 and receive 180 after five years. They first get their 100 back plus 46.9 of preferred return; the team then catches up and splits the rest, earning 16 of the 80 profit (20%). Had the portfolio returned only 140, the team would receive nothing.
Chapter 4 · Organisation & governance
Make good decisions likely and bad decisions visible
Private equity is a people business on both sides of the table: the team that invests and the managers who run the companies.
Core roles
- CIO / Managing Partner — strategy, IC, team leadership
- Deal team — one team per 2–3 active deals
- Operating partners — lead value creation from the first acquisition
- CFO — valuation, portfolio reporting, treasury, audit
- Legal & compliance, investor relations, data & technology
- Independent IC members — challenge and credibility from the first IC
Investment Committee charter
- Principal (chair), CIO, senior deal professionals and at least one independent member
- Quorum: majority including the chair and one independent
- Conflicts declared at every meeting; conflicted members do not vote
- Memo and model version three working days in advance
- Approve / approve with conditions / decline — with written reasons
- Any price above the walk-away returns to the IC
Governing portfolio companies
- Investor majority on the board in control deals, plus an independent
- Audit & risk and remuneration committees
- Monthly flash report; board quarterly (monthly in the first 6–12 months)
- Reserved matters: budget, capex, debt, M&A, key hires, related parties, dividends
Management incentives
- Management equity plan: typically 5–15% of equity, vesting over the hold
- Performance ratchets above e.g. 2.5× and 3.0× money multiple
- Good-leaver / bad-leaver terms
- Annual bonus tied to EBITDA, cash conversion and strategic milestones
- With founders: honour commitments to staff, give a real transition role
Delegation of authority runs from deal lead to CIO, IC and family council by decision and amount. Nobody approves their own request, and IC-level approvals need two signatures.
Chapter 5 · Value creation
Make the company better
Buying cheaply and adding leverage are no longer enough. Durable returns come from growing revenue, improving margins, converting more profit into cash, and building a business the next owner will pay more for.
Worked value bridge — equity value, Rp bn
Illustrative · money multiple ≈ 2.2×
Revenue 480 → 810, EBITDA 72 (15%) → 146 (18%), net debt 170 → 40. The example deliberately assumes a lower exit multiple: conservative underwriting means the deal works on operational improvement alone. Multiple expansion is upside, never the plan.
The value creation plan
Drafted in DD · approved by the IC · owned by the CEO · monitored by the board
- Three to six initiatives, each with an owner, budget, milestones and EBITDA or cash impact
- The 100-day plan: governance, quick wins, people, reporting
- A KPI dashboard with monthly plan vs actual
- A capital plan: capex, bolt-ons, debt, dividends
- An exit thesis: who will buy it, and what they will need to see
Operational levers
Buy-and-build in five steps
- 1.Choose a quality platform and pay fairly for it
- 2.Map 20–50 bolt-ons; approach owners early
- 3.Industrialise integration with a standard playbook
- 4.Keep price discipline — the arbitrage needs it
- 5.Pace: pause when KPIs slip
Chapter 6 · Capital protection
The first rule of compounding is to avoid permanent loss
Protecting capital is not avoiding risk. It means knowing which risks you take, sizing them, and having a plan before something goes wrong.
Downside-first underwriting
Model the bad case first
Revenue −15–25%, margin −3–5 points, exit multiple two turns lower. Does the company still pay its debt? Do we get our money back?
Margin of safety
The entry price should let the downside case return at least the capital invested.
Walk-away price
Standalone value plus only a share of synergies — decided before negotiation.
Kill criteria
Written before DD: tax irregularities, nominee ownership, a core licence at risk.
Portfolio limits (example policy)
- Single investment
- ≤ 15–20% of the allocation at cost
- Single sector
- ≤ 35–40% of invested capital
- Vintage
- ≤ 40% committed in any one year
- Leverage
- Portfolio net debt / EBITDA < 3.0×
- Currency
- FX debt only against FX revenue
- Minority stakes
- Only with board seat, information rights and vetoes
The risk map — and how each is mitigated
- Valuation
- Three-scenario models, walk-away, independent IC challenge
- Financial
- Leverage policy, headroom, maturity planning
- Operational
- Diligence, earn-outs, operating partners, monitoring
- People
- Management assessment, retention, succession plans
- Legal & regulatory
- Specialist diligence, CPs, indemnities, compliance calendar
- Integrity
- Background checks, controls, audit, whistleblowing, zero tolerance
- Cyber & data
- Cyber baseline in 100 days, backups, incident plan, insurance
- Macro & FX
- Stress tests, natural hedges, conservative debt
- ESG & reputation
- ESG diligence, action plans, board oversight
- Concentration
- Portfolio limits and pacing plan
Early-warning system
- EBITDA two months below plan, or 10% below in one month
- Cash conversion below 60%
- Covenant headroom below 15%
- Top customer at risk; key leader resigns
- Late monthly reporting — often the first sign
- 1Watch — deeper monthly review with the CEO
- 2Action plan — board-approved recovery plan, weekly cash forecast
- 3Intervention — operating partner on site, management change
- 4Restructuring — capital injection, refinancing, sale or wind-down
Chapter 7 · Exits & performance
A return is not earned until it is realised in cash
A disciplined exit strategy starts at entry, shapes the value creation plan, and is reviewed every year — including the deliberate decision to keep a great business for the long term.
Trade sale
Clear synergies for a larger player; often the highest price
Secondary to PE
A further growth plan another sponsor can fund
IPO (e.g. IDX)
Large, growing, well-governed company with a strong equity story
Partial sale
Bring in a partner while keeping control or upside
Dividend recap
Strong cash flows; return capital without selling
Management buyout
Management can finance a purchase
Permanent hold
Exceptional business — decided explicitly each year
Exit readiness from Day 1
- Three years of audited accounts by a reputable firm
- Clean tax position; licences, land and contracts transferable
- Simplified structure; related-party dealings documented
- ESG baseline; IT and data a buyer can rely on
- Management that runs the business without the investor
- Vendor due diligence and a data room before marketing
Annual hold-or-sell review
- Is the remaining value creation plan still large?
- Is the forward return from today’s value above the hurdle?
- Is the market paying well for this kind of company?
- Does the company still fit the portfolio and limits?
- Is management ready for a new owner?
IRR
Speed of returns; sensitive to timing
MOIC / TVPI
Total value ÷ invested
DPI
Cash returned ÷ paid-in — the cash truth
RVPI
What is still on paper
PME
Did we beat simply buying the index?
Fair value every quarter under the IPEV Valuation Guidelines, prepared by one person and approved by another, reviewed externally at least once a year. Quarterly reports follow the ILPA template if third-party capital is raised.
Chapter 8 · Strategic ideas
Twelve ideas for a family investment platform
Not all should be pursued at once. Choose three or four that fit the family’s strengths and test each with a one-page thesis and a pilot deal.
Idea 1 · Structure
Permanent capital with fund discipline
Hold great businesses long term, but measure them as a fund would — hurdle, value bridge, annual hold-or-sell review.
First step: Adopt the IPS and quarterly valuation policy.
Idea 2 · Sourcing
Succession capital programme
Be the preferred buyer for founders without successors: continuity of name and staff, staged exits, founder on the board.
First step: Map 100 founder-owned companies in target sectors.
Idea 3 · Strategy
Two or three sector platforms
Depth over breadth: one platform per chosen sector, each growing through bolt-ons with a shared integration playbook.
First step: Sector thesis and platform shortlist per sector.
Idea 10 · Technology
Data-driven deal and portfolio platform
Research, deals, portfolio and governance on one system with AI-assisted review — DealForge already covers all four layers.
First step: Record every deal, holding, mark and approval in DealForge.
Idea 5 · Value creation
Operating partner bench
Five to eight experienced executives, paid partly in equity, deployed into portfolio companies.
First step: Recruit two operating partners for the first platforms.
Idea 4 · Capital
Family co-investment club
Like-minded families co-invest deal by deal: larger tickets, shared diligence costs, while the family keeps the lead.
First step: Standard co-investment terms and a first pilot deal.
Idea 6 · Value creation
Group shared services & procurement
Joint purchasing, shared finance and IT, and a common cybersecurity baseline — at arm’s length.
First step: Spend analysis across current holdings.
Idea 9 · People
Leadership academy & talent pool
Train and rotate high-potential managers to build a bench of future CEOs and CFOs.
First step: Identify the top 20 managers in the portfolio.
Idea 11 · Value creation
Digital & AI enablement
Standard ERP, reporting, pricing analytics and selective AI lift margins and exit value.
First step: Digital maturity assessment in each company.
Idea 12 · Reputation
Governance and ESG as a brand
Be known as the owner that leaves companies better governed, safer and cleaner.
First step: Responsible investment policy and a 100-day ESG baseline.
Idea 7 · Sourcing
Corporate carve-out desk
Approach conglomerates about non-core units; complexity keeps prices reasonable.
First step: Separation playbook and a transitional-services template.
Idea 8 · Product
Structured equity & private credit sleeve
Preferred equity or secured loans for companies that don’t want to sell control.
First step: Credit policy and a small pilot allocation.
Priorities are a starting proposal for discussion with the principal and family council.
Chapter 9 · Implementation
A three-phase roadmap
Phase 1 · Months 0–6
Foundation
- IPS approved; target sectors and theses; pacing plan and liquidity reserve
- CIO and core deal team; IC charter with an independent member; conflicts policy
- DealForge live across all four layers; valuation policy; standard templates
Phase 2 · Months 6–18
Build
- First platform acquisitions; co-investment terms; debt relationships
- Two operating partners; CFO and reporting; management incentive template
- 100-day and value creation playbooks; quarterly valuation cycle; procurement pilot
Phase 3 · Months 18–36
Scale
- Bolt-on programme; co-investment club; consider structured credit or a third-party vehicle
- Leadership academy; succession plans for the investment team
- Portfolio data warehouse; first exits or hold decisions; independent valuation review
KPIs for the investment firm itself
- Origination
- Qualified opportunities per quarter; % proprietary
- Conversion
- Screened → NDA → LOI → closed ratios
- Speed
- Days from LOI to IC; LOI to closing
- Discipline
- % of deals closed at or below IC price; walk-aways
- Cost
- Dead-deal costs as % of capital deployed
- Returns
- Gross and net IRR, TVPI, DPI, PME vs index
- Value creation
- EBITDA growth vs plan; VCP initiatives on track
- Risk
- Companies on watch list; covenant headroom
- Governance
- IC records complete; audit findings closed
- People
- Key-role fill in portfolio; team retention
Chapter 10 · Templates
Four worksheets, four checklists
Fill-in pages in the PDF for the sector thesis, value creation plan, quarterly report and management assessment, plus checklists for the IPS, every investment decision, the first 100 days and the quarterly review.
- Worksheet ASector thesis on one page
- Worksheet BValue creation plan — one page
- Worksheet CQuarterly portfolio report
- Worksheet DManagement assessment — back, build or replace
- Checklist 1Investment Policy Statement
- Checklist 2Before every investment decision
- Checklist 3First 100 days of ownership
- Checklist 4Quarterly portfolio review
Get the full guide
Every chapter, worked example and template.
This guide sets out practices and ideas; it is not legal, tax, regulatory or investment advice. Fund structures, third-party fundraising, cross-border vehicles and tax positions require specialist advice. Market practices cited (fees, carry, hurdles, valuation and reporting standards) are typical ranges and change over time. Worked examples are illustrative.