This Ain’t Your Daddy’s PE Firm!
There are some very interesting features in today’s Private Equity landscape that are having a real effect on the PE/Portfolio company relationship. Deal size continues to trend upwards. Valuations are higher than they have ever been. Fund raising is at an all time high. There is dry power to be had all over the place.
Basically, we are in a cut throat competitive marketplace with incredible competition for quality assets. One SaaS company CEO I spoke to last month fielded over 30 calls after thorough I-bank screening and held a management day with 7 Private Equity firms …ALL of which subsequently bid on the asset!
All the management day participants, without a single exception, promised some form of operating value as a part of the proposed ownership rhythm. Basically, gone are the days where a Private Equity firm would stroke a check, collect the distributions and wait for the exit. As CEO’s get picky in this seller’s market there is incredible pressure on cost take out as the PE firm’s number 1 EBITDA lever and less market fragmentation in many industry verticals generally means less roll up opportunities.
The message is everywhere, and it is loud and clear. To be successful in today’s market place, Private Equity needs to offer value to the portfolio company. There is no better place to start than the helping the CEO and the CRO pull the positive lever of revenue and driving adoption of commercial best practices across the entire portfolio. Why the entire portfolio? It’s really simple. Every time I get a PE firm’s portfolio companies together I see them learn from each other! I have seen B2B companies recognize a B2C demand generation strategy as relevant and easy to implement. I have seen a high growth tech firm see value in a manufacturing company’s funnel management technique. This cross portfolio learning binds the portfolio company in your firm’s vision, it beings a sense of purpose and being part of a greater whole.
But how do you create the environment and framework for leveraging commercial best practices and how do you maximize the chance for success in any cross-portfolio endeavor?
Firstly, you choose topics for discussion that has broad relevance and can be applied in most portcos.
Secondly, you ensure the appropriate venue (both physical and tech-supported for on-going communication) and you make the session interactive.
Finally, you achieve Interlock. You encourage portco’s to state timebound actions with a read-out rhythm.
The Right Topics Set The Tone!
Here is an agenda from a recent PE Portfolio company event:
SESSION #1 – Pipeline and Forecast
SESSION #2 – Quota Setting
SESSION #3 – Compensation Planning
SESSION #4 – Cross Sell/Upsell
I challenge my Private Equity friends to name me a portfolio company that could not use significant help in at least 3 out of the 4 topics covered! By the way, these are just suggestions, see this page for others.
Drilling down in to one of the topics, here is an example on how to make the content interesting, educational and easy to implement. Check out the screen shot below as a contextual cross portfolio exercise with multiple learnings and discussion points.
After discussion (always good to keep it interactive) around broad methods, drill down in to best practices that can be used by any portfolio company:
The Right Venue Is Crucial
Setting the right venue for best practice sharing is essential. Venue matters. Getting CEOs and CROs out of there usual surrounds helps creativity. Also, it really helps if the venue is neutral one. Your PE firm offices set a scene of being too directive. Using a portco’s office skews the expectation and balance of a collaborative meeting, it also puts undue pressure on one CEO or CRO to be the meeting host.
Consider using SBI’s executive briefing facility in Dallas, The Studio, as your meeting venue where the driving motto is “make your number”. Doing so will get you some world class meeting support and facilitation from leading experts in organic revenue growth.
Achieve Interlock With All Involved
Once you start the process of sharing commercial best practices there will be a lot of ideas and action items created. Create the framework to track the actions and interlock on deliverables by using a process such as RACI – Responsible, Accountable, Consulted, Informed.
A New Era in Private Equity
Private Equity firms are operating in a new environment. Portfolio companies have operating expectations that come with PE ownership. Unlock the power of organic revenue generation within your portfolio by sharing and leveraging best practices. Amplify that power by engaging SBI to help.
For other sales best practices, leverage the Indirect Sales Best Practices Tool. This too will help you:
- Utilize a list of indirect sales best practices.
- Find out what each best practice might incent.
- Find out how each best practice can “Create a win.”
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