Four High-Impact Value Realization Levers

Deal teams are heads down sourcing and evaluating the next wave of investments. Quality portfolio companies are being brought to market. Action is ramping, but we have yet to reach fever pitch.

As such, operating teams continue to shoulder up with their portfolio companies. They are working tirelessly to realize the impact promised early on during value creation planning.

Alexander Group recently surveyed our private equity community. We asked deal and operating partners to reflect on value creation efforts and share what made them successful or where there were gaps that prevented realization.

The research revealed high-impact value realization levers: Executive Alignment, Talent, Change Agents and Revenue Operations. Here is what the community shared:

Executive Alignment

“Change adoption requires clear alignment on goals and objectives and holding them (management) very accountable to achieve those goals.” – Private Equity Community Member

Whether you are in the first 100 days or preparing to exit, it’s critical to be on the same page with management. Set clear objectives and near-term measures of success. Fully scope value creation initiatives and ensure there is nothing lost in translation. Make sure people are assigned to initiatives and held accountable for outcomes. Confirm that high-priority initiatives are adequately funded. Carve out board meeting time for high-priority initiative progress reports.

Talent

“Ideally, we want someone who’s done it before, has been PE backed and done an exit or M&A, or have grown the company significantly, opened new geos or launched new products.” – Private Equity Community Member

Conduct formal or informal evaluations of the talent you have across the portfolio. While better at the beginning of the hold, it’s never too late. Deal teams can sell material progress on value creation initiatives. Maintain and nurture a network of talent from current and exited portfolio companies. Maintain a stable of “builders” and “runners.” Builders are people you can bring into organizations with foundational gaps. Runners are people you can plug into organizations ready to scale.

Change Agents

“This person drives the week over week project objectives, timelines, connecting the strategy to execution.” – Private Equity Community Member

Private equity firms, their management teams and partners are great at developing strategy and putting plans in place. Great value creation plans often fail at the point of execution. Initiatives are often handed to middle management without the skills or motivation to bring them to life.

Regardless of where you are in the hold, survey the middle of the organization. Find enterprising, entrepreneurial team members looking to advance their career. Bring in new talent with unique skill sets aligned to value creation initiatives. Task them with leading high-impact change. Fund them, build teams around them. Reward them with career advancement and incentives associated with the successful initiative completion.

Revenue Operations

“We’re a big believer in RevOps and see power in it. This is a gap we’d like to fill across the portfolio.” – Private Equity Community Member

Alexander Group’s Private Equity Community members cite Revenue Operations as a top-5 value creation initiative. Installing the people, process and technology needed to plan, direct and provide visibility into the commercial (marketing, sales, post-sales) organization pays for itself. Surprisingly, many executive teams prioritize quota carrying sellers over making foundational investments.

Prioritize investments in headcount and tools that help the commercial organization focus on the ideal customer profile and customer segments with the best unit economics. Install process and technology that enables the business to stimulate demand and nurture leads. Build data and reporting capabilities. Drive disciplined planning, pipeline management and forecasting.

Conclusion

Private equity firms will be distracted by a fever pitch of diligence and new portfolio company onboarding in the coming quarters. In the meantime, operating teams have a window to set value realization in motion where initiatives have yet to gain traction. Get your executive teams aligned on the action plan. Go hard after talent needed to deliver results. Empower your change agents. Invest in foundational revenue operations people, process and technology.