19 12, 2018

3 Steps to Building a Successful Platform Play

By |2018-12-19T14:00:00+00:00December 19th, 2018|Operating Partners, Private Equity Value Creation|

With more than a trillion dollars of dry powder waiting to be put to work, buyers are eager to identify and close new deals in order to put capital to work. But as valuations have risen and EBITDA multiples have flattened, it has become essential that funds adopt a structured plan for implementing operational improvements and value creation at their portfolio companies.

Under these conditions, platform roll-ups have become an important tool in building portfolio value. But a platform is more than a collection of companies in the same general business. Building a successful platform requires rigorous planning and diligence and careful selection of add-on acquisitions based on deliberate and structured diligence and post-merger integration plans.

Conversely, without careful integration planning and implementation, a platform is no more valuable that the collection of assets that was acquired.

The Investment Thesis

Planning a platform starts after formulating an investment thesis. The thesis generally determines that value can be created in some largely fragmented industry by combining one or more of its players. It’s important to remember that […]

10 10, 2018

A New Formula for PE Deal Success – The Fractional CFO – Outliers LLC

By |2018-10-10T10:00:56+00:00October 10th, 2018|Operating Partners, Private Equity Value Creation|

The private equity formula is simple. PE investors expect their portfolio CEOs to drive positive, measurable changes that led to healthy exit options. In a majority of cases, however, that formula is being turned on its head, with the exits coming from the CEOs themselves (73% of them, to be exact) along with corresponding hits on costs, valuations, and plan goals.

Clearly, the formula needs to change, particularly in an era when mounting deal pressures and lengthening hold periods are creating a kind of perfect storm that could result in even more CEOs heading toward the exits.

How best to change the formula? By creating a targeted, tailored support structure that fully empowers and supports CEOs to lead their enterprises through their transformation plans – a structure that acts like a three-legged stool.

A Three-Legged Stool

Based on our years of experience in the PE arena, we believe today’s portfolio CEO needs targeted, tailored modes of support that, collectively, enable them to drive the kinds of enterprise transformation investors want.

You can think of this new […]

5 09, 2018

A New Formula for Creating PE Deal Value, Stability

By |2018-12-19T10:03:43+00:00September 5th, 2018|Operating Partners, Private Equity Value Creation|

The private equity formula is simple. PE investors expect their portfolio CEOs to drive positive, measurable changes that led to healthy exit options. In a majority of cases, however, that formula is being turned on its head, with the exits coming from the CEOs themselves (73% of them, to be exact) along with corresponding hits on costs, valuations, and plan goals.

Clearly, the formula needs to change, particularly in an era when mounting deal pressures and lengthening hold periods are creating a kind of perfect storm that could result in even more CEOs heading toward the exits.

How best to change the formula? By creating a targeted, tailored support structure that fully empowers and supports CEOs to lead their enterprises through their transformation plans – a structure that acts like a three-legged stool.

A Three-Legged Stool

Based on our years of experience in the PE arena, we believe today’s portfolio CEO needs targeted, tailored modes of support that, collectively, enable them to drive the kinds of enterprise transformation investors want.

You can think of this new […]

19 06, 2018

Building a Board that Works for Middle Market PE Firms

By |2018-06-05T10:03:09+00:00June 19th, 2018|Operating Partners, Private Equity Value Creation|

High asset prices have placed enormous pressures on middle market private equity management teams to execute ‘the plan.’ While we previously focused on how an Operating Partner can help prevent the epidemic in CEO turnover plaguing many such operations, in this post we want to talk about an equally important component of the equation: identifying and building an effective Board of Directors.

It goes without saying that the BoD is critical in ensuring investor returns. And while the nature of the BoD roles and where they should invest their time and energies are somewhat dependent on the circumstances of the deal and the nature of the value creation plan, there are four areas the BoD upon must focus on irrespective of the deal nature:

  • Governance
  • Plan Execution
  • Strategy Formulation
  • Human Capital Development

Each of these areas requires some time and attention to assure the prosperity of the firm.

However, at its most extreme (or worst), the BoD expends a disproportionate amount of effort on plan execution and governance. And while plan execution is clearly […]

4 04, 2018

How to Solve CEO Turnover in PE Companies

By |2018-08-07T10:48:36+00:00April 4th, 2018|Operating Partners, Private Equity Value Creation|

A majority of the CEOs tasked with transforming PE portfolio companies into lucrative exits are instead being replaced within the first two years of the investment, thereby putting both the reality of those plans and their timetables in real jeopardy. Meaning that solving CEO turnover in PE companies is critical to industry success.

That is the consensus of a recent PE industry survey, which also suggests that much of this executive churn could be avoided through a more intelligent approach to due diligence, planning and managing the relationship between the CEO and ownership.

To those of us with significant PE-CEO experience, what’s most surprising about the survey isn’t its results but rather that anyone should be surprised by them at all. Replacing a portfolio company CEO may be a necessary evil but the IRR implications for PE funds are significant.

The Risks of CEO Churn

Today’s high asset prices are placing increased pressures on PE investments, requiring focused, steadfast approaches to value creation that quite naturally depend on an effective CEO and leadership team. Which is why […]

26 03, 2018

Michael Hejtmanek Joins Mainsheet OP as Partner

By |2018-04-02T16:13:22+00:00March 26th, 2018|Operating Partners|

Mainsheet OP, which provides operating partner services, announced today that Michael Hejtmanek has joined the company as Partner. Hejtmanek, formerly of Hasselblad Inc., is a highly experienced chief executive with a track record of identifying and delivering value at privately-owned mid-market companies.

“I am delighted that Michael is joining Mainsheet OP and enabling growth in our fractional Operating Partner model,” said Simon Jones, founder and CEO of Mainsheet OP. “Michael has a proven track record as CEO of a privately owned international enterprise but, just as important, he clearly has the social intelligence skills required to deliver value as an Operating Partner for our clients.”

“Working across portfolio companies at several private equity firms is exactly the challenge I have been looking for,” said Hejtmanek. “The breadth and depth of exposure will give me the ability to provide best-in-class advisory services to Mainsheet OP’s client base – from providing investment theses and due diligence, to management advisory services throughout a portfolio company’s ownership lifecycle. I’m excited to be working with a renowned expert such as […]

15 06, 2017

Using Customer Focus to Simplify Operations

By |2018-06-05T10:15:19+00:00June 15th, 2017|Operating Partners|

Spend a few hours picking the brain of virtually any senior executive today and I can almost guarantee two of the topics that will come up: simplification and customer focus. What you are far less likely to hear, however, is the inherent synchronicity linking these two concepts.

To most executives, simplification is specific to an internal activity practiced by a project team. Conversely, customer focus is deemed an externally focused activity and usually the domain of marketing or sales. Why the missing link between these two all-important practices? From my experience, it’s usually a reflection of the little time senior executives spend with their customers and, by extension, the value they put on such efforts.

The point being, this is a significant area of value creation that most companies are ignoring.

Ask most customers or suppliers for their perception of your company, for their insights into how easy you are to engage or to do business with, and the insights you receive will invariably be more useful and actionable than any internal assessment or outside consulting […]

12 06, 2017

The Additive Manufacturing Revolution: Ready or Not

By |2018-06-05T10:14:12+00:00June 12th, 2017|Operating Partners|

My professional life began in earnest in the 1980s at the very same time that the Just-in-Time (JIT) revolution emanating out of Japan was really beginning to hit its stride. Borne out of the vaunted Toyota Production System, JIT rocked manufacturing industries large and small and gave rise to new modes of competition that remain as potent today as they were 30 years ago.

A cornerstone of JIT was ‘batch of one’ production, an innovation that resulted in low inventories, faster factory throughput, and for obvious reasons, stronger business results. Alliteratively speaking, JIT was a hit.

I offer this by way of explaining why I think we may be on the cusp of another major paradigm shift in the world of production, this time through a process known as Additive Manufacturing (AM).

Over the previous 5 years or so I watched as ‘the maker revolution’ sprang to life in garages and sheds and workshops around the world. I saw, too, how phenomena like ‘rapid prototyping’ were radically changing the design […]

6 01, 2017

The 7 Lessons to a Successful Product Launch

By |2018-06-05T10:13:57+00:00January 6th, 2017|Operating Partners|

Given just how important new product launches are to the value creation process, I thought it worth sharing seven of the most important lessons learned during my years in the trenches, as a CEO, and as a consultant.

To make things easier, I’ll use a recent success story to help illustrate these lessons – each of which played a significant role in the launch of a new platform.

Some background: the company in question already enjoyed broad-based adoption of its sophisticated electronics. But the rapid evolution of technology being what it is, a market disruption prompted the need for the wholesale reengineering and national field replacement of a complete product range on an extremely ambitious time table – the existing suite of products would be obsolete (non-functional) in 42 months.

Encompassing six products covering multiple end applications, closer inspection revealed a number of issues that had to be addressed, including:

  • The existing products were poorly designed and expensive to produce
  • The engineering team was overwhelmed with multiple projects and shifting priorities
  • The commercial team was increasingly […]
16 11, 2016

Listening to the ‘Leaners’: A Critical Lesson in Business Transformation Analysis

By |2018-06-05T10:13:40+00:00November 16th, 2016|Operating Partners|

Millions from both sides of the political aisle – including the pollsters and pundits who predicted a Clinton victory – are understandably flummoxed by the outcome of the recent presidential election. How did so many get it so wrong? And for our purposes, can any of these lessons extend to those of us in the business of private equity investing?

As it turns out, the answer to both of these questions lies less in the polling data political experts used to (incorrectly) predict the election’s results, and more in the habits of conventional thinking and biases through which they collected and viewed that data.

For starters, remember that not everyone was surprised. A small minority of voices were arguing that Clinton and the Democrats were trusting in long-held beliefs which led to a kind of blind optimism. In other words, the biases baked into their beliefs were sufficient to dispel any doubt – even from those critical voices who warned of problems.

Consider, for a moment, the words of a Philadelphia bartender, who warned that even […]

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