Creating Value in PE Portfolio Companies - 10 take aways from Capital Roundtable Operating Partners Conference

    10 Take-aways from Capital Roundtable Operating Partners Conference, May 11, 2017, on "HOW PE OPERATING PARTNERS ARE REACTING TO RAPID CHANGE: Best Practices for Creating Value in PE Portfolio Companies".
    1. When private equity firms were surveyed about specialist operating assets they were most keen to bring on, the top 3 of 10 in rank order were
      1. finance
      2. talent
      3. procurement
    2. Operating partners are more generalists than specialists—more like an ER doc. Great at triage, diagnosis, stabilization, and then referral to the right specialist resources if/when/where needed
    3. There is a difference between "operating partners" & "operating resources." Operating partners typically have fund carry, and are typically incentivized to find and focus on the highest impact value creation activities across the entire portfolio.  "Operating resources" are narrower in focus, and typically focused on specific portfolio companies with specific needs or challenges.
    4. The 1099 is becoming more prevalent among operating partners/resources and their relationship to their private equity fund.  More signs of industry moving to the "gig economy".
    5. One operating partner's lesson learned—"...spent too much time on the micro, and NOT enough on the macro" (e.g. for profit education industry)
    6. Punching up the challenges for PE when newly acquired leadership doesn't have prior experience being investor-owned. For example, a recounting of an CEO's response after being instructed by new controlling PE investors that he needed to go to the debt market was "Where is the debt market?" [thought it was a literal physical place]
    7. "It is important to spend more time on the who and how rather than what in the first 100 day plan."
    8. Best practice: Spend more time finding outside board directors for portfolio businesses. Finding creative ways to "force-multiply" is critical with what always feels like limited operating team capacity.
    9. Best practice: Simplicity will always win. Establish 3 primary operating goals and take a proactive approach to limiting the scope and preventing its natural expansion. Zombie initiatives tend to have a way of creeping back in and widening scope.
    10. It is always more valuable to focus time, energy and resources on taking a 2x to 5x than .2x to 1.0x.

    Did you attend the Capital Roundtable Operating Partners Conference or are you interested in learning more about how we help the PE sector?

    Explore Our Private Equity Expertise

    -by Clark Waterfall on May 15, 2017 7:54:53 AM
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