Private Equity Blog

Operating Partners: Creating Value and Driving Organic Growth

Posted by Slade Kobran

Operating Partners have a tough job! 

  • Many firms are still trying to figure out their Operating Partner strategy
  • They don’t always have input into the deal parameters yet are called-upon to see that the Value Creation Plan fulfill the investment thesis
  • They don’t always have a full seat at the table with the deal partners and may not reap the same type of rewards
  • They are often in the position of working with management teams who are skeptical of their input and not always quick to accept help
  • They are often spread thin across multiple portfolio companies with limited resources

These dynamics were on full display at two events I attended recently – The PEI Operating Partners Forum and ACG’s M&A East.  While Operating Partners were in abundance at the first event, the second was dominated by deal professionals and board advisors.  Surprisingly, much of the messaging was very similar.

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PEI 2018 Operating Partners Forum Recap: Growth Guidance Role Becoming More Strategic

Posted by Art Saxby

The two key messages from the PEI Operating Partner forum came through loud and clear this year:

  • Every PE firm needs an Operating Partner strategy. The structures vary, but LPs now insist that someone is covering the role.
  • As the Operating Partner role has become more strategic for PE firms, the focus of the role has matured from cost cutting to sales effectiveness and now onto supporting and driving commercialization and Big M strategic Marketing.

I have attended 5 of the last 6 PEI Operating Partner Forums.  During that time, I have seen the role of Operating Partner change significantly.  When I first started attending, Operating Partners (OPs) were evolving from cost-focused executives in residence to starting to work with Deal Teams on Value Creation Plans.  At that time, being involved in fund raising and participating in LP meetings was an aspiration.

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The CMO Download: Sharon Spooler

Posted by The Chief Outsider

As part of an ongoing series at this blog, we’re speaking with fractional CMOs to discuss their philosophy and experiences creating value for their clients. This week, we sat down with Chief Outsiders’ Sharon Spooler.

Given the high prices of assets, growth is a top priority for private equity GPs. This has them looking long and hard at marketing tactics, which can feel like the real nuts and bolts of increasing sales, but without a well-informed strategy, there’s no guarantee those tactics will do any good. 

It’s a lesson that Sharon Spooler learned before joining Chief Outsiders, and that insight-driven marketing is key to how she, and the rest of her firm, view their discipline.

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Portfolio Matters: 5 Reasons Growth Stalls

Posted by The Chief Outsider

For private equity firms managing small and mid-cap companies there are five common reasons that growth gets stuck in first gear. But that doesn’t mean it has to stay there.

Given the high prices of assets these days, GPs need full-fledged growth at portfolio companies to generate the returns that will bring LPs back for the next fund. So we sat down with David Vroom of Chief Outsiders to discuss the five most common challenges small and mid-cap companies have with growth.

Vroom speaks from experience, having interacted with hundreds of such companies over his career as a CMO. Since joining Chief Outsiders, he’s dealt with over a hundred PE firms as well, helping them spark the kind of the growth that can be all too hard to generate at these enterprises. Here are the 5 most common challenges he’s seen.

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3 Keys for Increasing Odds of M&A Success

Posted by Clay Spitz

Solid due diligence on ALL aspects of the business and a fast start on value creation are needed to reach the end-point of a strong ROI for the investors at exit

Recently, I was visiting with a colleague from my days at Waste Management Inc. (WM) reminiscing about a major industry roll-up of which we were a part. Waste Management had decided to create value for shareholders by acquiring and consolidating companies in the very fragmented pest control and lawn care business, creating new national players in the industry.

We were part of the acquisition team – several of us having been owners of acquired companies, plus a long-time WM executive.  In two years, our team directed the acquisition and consolidation of over 150 companies, resulting in a roll-up of about $200 million in annual home services revenue.  The entire consolidation was eventually sold to ServiceMaster, owner of Terminix. Fast forward to current days, when many of the old problems with M&A are the same, but there’s a new twist.  In the world of Private Equity, today’s sky-high valuations require making even smarter decisions when buying a company.  Solid due diligence on ALL aspects of the business and a fast start on value creation are needed to reach the end-point of a strong ROI for the investors at exit.

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