Why PE Operating Partners Need an Agile Business Strategy￼
Learn why Private Equity Operating Partners should leverage an agile business strategy and how it can help improve ROI.
One question we hear from our operating partner clients is, “How can we capture the benefits of enterprise agility to effectively execute our value creation initiatives across the portfolio?”
Enterprises today are facing a radically altered business environment and being forced to reconsider how they operate. Agile business problem solving — a digitally-enabled capability that allows executives to rapidly turn their ongoing strategic ideation into concrete, high-impact actions — is becoming a business-critical capability.
While project-oriented work and leveraging external talent for value creation is not a new concept in Private Equity, doing this effectively and at speed across dozens of portfolio companies is a challenge. Adopting an agile business strategy will enable your team to effectively leverage external talent at scale and equip your portfolio companies with the resources necessary to execute their most strategic initiatives.
The Challenge: Post-Close Execution at Speed
Private equity value creation plans prioritize strategic initiatives and cross-functional work streams that are required to grow or transform the business and realize the asset’s full potential. However, the company often lacks the talent and specific skill sets necessary to execute on these workstreams, leaving a gap between strategy and execution. On top of this, speed and efficiency are critical and oftentimes the work done immediately after an acquisition has the most impact.
As an Operating Partner, you are tasked with overseeing work that likely spans multiple companies or functions and is inherently project-based. In many cases, you don’t have the time it takes to hire a full-time resource, and often brand name consulting firms do not bring the operational experience needed for execution-focused work. You need a flexible, right-sized solution that empowers executives and enables you to access the best people possible for explicit workstreams laid out in your value creation plan.
Best Areas for Operating Partners to Implement an Agile Strategy
After seeing thousands of projects on the Catalant platform and observing the PE firms and portfolio companies who have successfully adopted an agile business strategy methodology, we have found that these areas are best suited for flexible talent solutions: independent consultants, functional experts, and bespoke teams.
1. Project Management
The demand for project management professionals has been steadily increasing in recent years as more companies adopt agile business methodologies and work becomes more project oriented. We are seeing this trend in practice at Catalant — enterprises and PE firms alike have been increasing their total spend on project managers over the last year.
Given the nature of Private Equity value creation plans — several strategic initiatives, detailed action plans, and multiple stakeholders — project management is a critical skill set to ensure execution and performance are on track.
Rather than hiring a full-stack consulting team, parachute in on-demand project managers who can quickly begin providing value across a number of projects such as:
- Standing up a PMO office to establish a project management capability in the future.
- Supporting the integration of an acquisition.
- Managing systems implementations.
- Filling a “chief-of-staff” role when an executive needs a smart, capable, and organized resource to help progress various initiatives.
2. Mergers and Acquisitions
Mergers, acquisitions, divestitures — and their transaction values — are all on the rise. Carve-outs in particular are set up for a standout year with record levels of dry powder within PE and corporates refocusing on their core growth businesses and paying down debt. As a result, corporate development teams are tight on bandwidth as they balance multiple deals and faster timelines given the competitive nature of the market.
By bringing on independent resources for M&A support, you can quickly flex up your portfolio company’s corporate development team during periods of increased deal activity. Whether it is needing to spin up due diligence ahead of an add-on acquisition in a short period of time or accessing a PE associate-level resource to support M&A execution work streams (modeling, working with data rooms, etc.), an independent resource gives you the ability to add capacity without the costs associated with hiring an FTE.
3. Go-to-Market Strategy and Execution
Gone are the days of deal structuring and cost-cutting being the core value driver within portfolio companies. Growth-oriented commercial initiatives will drive outperformance, but oftentimes these areas have been under-invested in and the company lacks the talent and capabilities to drive change. Further, these types of roles are hard to hire for (i.e., sales operations, sales and marketing analytics, etc.), so growth-oriented work streams often land on someone else’s plate or get overlooked.
Identifying performance-focused consultants who can support go-to-market strategy and execution workstreams such as conducting market research and customer segmentation, running a sales and marketing efficiency analysis, or managing sales planning and reporting, can help you fill gaps in talent until you’re able to identify permanent resources and lay the foundation for data-driven growth.
4. Office of the CFO Support
Oftentimes if a portfolio company has never been sponsor-owned, they are not familiar with the financial reporting standards of the PE industry. Independent financial consultants are able to support finance needs most common in a 100-day plan — creating dashboards and implementing new reporting mechanisms, processes improvement, and increasing automation within the finance function.
Additionally, within finance more than any other function, we see operating partners getting pulled in to fill temporary gaps in leadership — this is not a scalable solution and diverts focus away from higher level, strategic initiatives that an operating partner is best positioned to support. Having access to a strong bench of interim CFO resources – independent operators with prior C-Suite experience within PE-backed companies – can be a huge asset when a portfolio company is unexpectedly faced with a senior-level gap in the finance function.
Invest in Agility to Get Better Results Faster at Your Portfolio Companies
An agile strategy and the use of Catalant’s platform — which helps your team hire highly-skilled, independent consultants who are ready to manage the various projects at your portfolio companies — will allow your firm to improve time to value and ROI.