Rapid value-creation strategies
Leading private equity firms share common IT methodologies and goals
In an increasingly competitive business landscape, private equity operating partners face the daunting task of carving every last ounce of growth, optimization, and value from their portfolio. Pressure to perform is dissected from every angle, driving leaders to look at technology for a rapid value-creation strategy.
In our discussions with leading private equity firms, common methodologies arise:
- Ensuring tech investments are implemented successfully and providing value swiftly
- Aligning to legacy technology footprint with future-state investments
- Establishing benchmarks and KPIs aligned to core financial and operational goals
Savvy leaders leverage digital transformation to identify opportunities to optimize business processes, reduce costs, and drive operational efficiency. They look to develop a playbook of repeatable technology transformations that yield measurable, sustainable results.
In years past, operating partners would painstakingly apply broad digital strategies that included ERP transformation that typically resulted in multi-year implementations subject to cost overruns.
In this new decade, high-performing firms are consistently looking to identify specific areas of the business that will improve earnings and can be deployed in weeks, not months.
Examples after the pandemic include freeing up operating capital through a supply chain management strategy, and managing physical assets to proactively avoid failures or downtime. In addition, applying functional and industry experience to these business challenges through reliance on technology partners can provide unique abilities and drives tangible results.
Technology is evolving at a breakneck pace. Trusted relationships—forged over time and experience with industry-specific expertise—can bring resources to bear that would not otherwise be available to the portfolio.
Top-performing executives have a collection of strong partnerships across key business functions. They look to drive rapid value-creation strategies early in their investment lifecycle, investigating business challenges and end-state outcomes alongside trusted partners.
“Operating partners typically do not want to engage in a dialog about ripping and replacing a portfolio company’s ERP or core system,” notes Michael Janes from Infor’s Private Equity Relations Team. “As an extension of the operating team, we do an in-depth analysis to identify areas where we can partner to drive sustainable and tangible business results in the short term.”
It is important to gather insights from associates, partners, vendors, and other stakeholders in order to align with a 100-day plan. This maximizes the firm’s ability to achieve those sustainable results.
Infor has noted that successful value-creation strategies share several commonalities:
- Deploy within 3 to 6 months
- Minimum disruption to the organization
- Yields tangible and measurable results
- Helps achieve revenue improvements and operational efficiency
With the need to focus on a tangible growth plan, it is critical that these value-creation initiatives support the overall goals of the organization.
In this series, we will examine several common optimization opportunities, highlighting key areas of consideration for rapid value-creation strategies, including:
- Freeing up operating capital through supply chain optimization
- Improving margins by streamlining logistics with real-time visibility
- Creating a culture of data-driven decision making by democratizing insights
- Reducing return merchandise authorization (RMA) and accelerating sales cycles by providing a digital path to conversion
- Private equity
- North America