Do we need to include a bucket 'Capabilities' in terms of finance, expertise, in the structure for cases when a PE firm wants to acquire a company?

First, I suggest dropping the "buckets" approach. That is boiling the ocean.

Second, you have to approach problems not from generic POV, but try to solve the specific problem at hand. You are asking about a framework for a problem as generic as "PE wants to acquire a company". To solve a problem... you need to know what the problem is. And to know that, one needs to know 1) Context; 2) Objective / Specific Question requiring a recommendation; 3) Success Metrics

Third, you have to consider what would be a real life interaction between a client and a consulting firm. In this case, if a PE approaches you and asks "should I buy this company", would you reply "well, first I need to understand whether you actually have financial capabilities or the financial expertise to do it!". I believe the conversation would end immediately and they would look for another advisor. 

Moreover, we're discussing strategy here - and the question of "capabilities" very often is misunderstood as a matter of operational capabilities - which goes into the realm of implementation. To make a parallelism... it's like asking if one should practice for a marathon and someone replying that the may not have some tennis shoes. They may have them or not, but it's completely irrelevant for the question at hand. First you decide whether you should run the marathon. Then, if the answer is yes, you discuss the execution, i.e., you go and buy a pair of shoes. Whether you have them or not is not driving the answer.

Same applies here. First you decide on whether it is a good idea. Then you discuss how to executive and overcome any existing limitations. 

Exception being... if they upfront mention a limitation they have. E.g. "we don't want to buy companies above a $500M valuation." Ok, then you test that. Not in a "bucket", but as a specific analysis / driver!

Of course, you may be thinking instead of having expertise in order to find synergies and quantify them. Ok, but in that case, what you have is not a "capabilities" bucket. You have a specific assessment to quantify synergies (do you see know why "generic buckets" don't work? They don't really show how you solve a problem, they do not provide clarity to the interviewer, and they just suggest you will boil the ocean and explore a ton of topics before getting into an answer.)

Hi!

In a PE acquisition case, the first step is to recognize the type of case: it’s a Go/No-Go decision. The client’s core question is: Should we acquire this company?

For this, the structure flows from the decision logic of three conditions:

1. Will acquiring this target help us achieve our objective? (usually of financial nature - so we need to translate it into a concrete criterion)
2. Can we implement? (capabilities, financing, integration feasibility)
3. Can we manage the corresponding risks? (market risk, operational risk, strategic risk, regulatory risk)

Now to your question on “Capabilities”: yes, but with precision.

• For a strategic acquirer (e.g., corporate M&A), capabilities usually mean operational expertise, technology, distribution, etc.
• For a PE firm, the “capabilities” lens is narrower but still crucial: do we have the financial capacity to fund the deal and follow-on investments, and the operational expertise (via portfolio synergies, management playbooks, advisors) to actually unlock the value?

So yes, you should include “Capabilities,” but not as a generic bucket. It belongs in the second condition: implementation feasibility. Without it, the decision logic misses one of the three core decision filters.

In short: in PE acquisitions, “Capabilities” matter less as a stand-alone driver of the target’s attractiveness, and more as a check on whether the PE sponsor can realistically capture the value after acquisition.

Hope this helps!
Sidi

___________________

Dr. Sidi S. Koné

Former Senior Engagement Manager & Interviewer at McKinsey | Former Senior Consultant at BCG | Co-Founder of The MBB Offer Machine™

Hi there,

Not necessarily. It can be helpful if the case is asking you to evaluate the PE firm's ability to add value post-acquisition, but if the case is more about whether the target itself is attractive then it's not an immediate area for you to explore. If you do include it, you can put it under “value creation” bucket. So I’d treat it as optional depending on the case focus.

Hi,

Yes, it’s sometimes relevant to include a “Capabilities” or “Feasibility” bucket in a PE acquisition case, but the focus depends on context. In most PE due diligence cases, the main buckets are Market Attractiveness, Target Company Performance, Financials/Valuation, and Risks. Capabilities (management strength, operational expertise, integration ability) often sit under Risks or Feasibility.

If the case is framed as a pure investment decision, you can cover capabilities as part of management quality and execution risk. If it’s framed more like a strategic buyer case, then making it a standalone bucket makes sense. The key is not the label but showing that you’ve thought about whether the company can actually deliver on the value creation plan after acquisition.

I'm against doing anything by default just because a case theoretically fits in one category or another.

A great structure is a tailored one. That's what the interviewers look for. They want to see that you can think through that problem in an original manner and that you can communicate it well. 

When you start deploying typical approaches they spot it easily and it rather counts against you. 

However, assessing fit, and as part of that capabilities, is indeed an important component when advising a PE on acquiring a target. 

Best,
Cristian

Hey :)

Yes, it’s often useful to include a “capabilities” or “operational strengths” bucket in a PE acquisition case, covering things like management expertise, financial systems, and operational know-how. It complements the usual market, financials, and risks buckets, and shows you’re thinking beyond just the numbers.

best, Alessa :)