Catalant's PE Pulse
It’s been quite a week, hasn’t it? The SVB bank collapse and resulting fallout are causing significant turbulence in financial and capital markets. Our partners and clients are thinking through the short, medium, and long-term implications for their firms. We're seeing immediate needs for rebuilding financial operations and bridging near-term cash issues while re-evaluating existing debt facilities. Additionally, we’re starting to hear expectations of M&A opportunities on the not-too-distant horizon as some companies struggle to find capital.
With that, we’re excited to bring you PE Pulse – a digest of recent articles and trends from the field that provide insight into where peers in private equity are focused.
Perspectives on Current Events
Wait and see or start afresh?
As Mariana Temkin at PitchBook points out, companies with debt from SVB aren’t out of the woods yet. While deposits have been guaranteed, there are still questions about whether the bank’s new buyer (or buyers, as it may shake out to be) will honor a loan’s original terms. With immediate existential concerns like making payroll, some companies aren’t ready to revisit the subject of debt yet. Many companies currently need support rebuilding financial operations and treasury management systems, but may soon start to explore refinancing options with new, stable loan providers.
Broader Trends in Private Equity
Demand for independent consultants grows
In a volatile market, acting quickly to mitigate risk and ensure that portfolio companies are well positioned to weather economic uncertainty is paramount. But volatility brings opportunity to savvy investors who are able to identify undervalued assets where they see an opportunity to put their playbook to work. As a result, we’re seeing a growing demand for highly-experienced independent consultants as a key resource for private equity firms. The ability to execute precision engagements, flex up and down on demand, and run at more deals are just a few of the reasons we hear from our PE community.
Firms seek Experts for carve-out work
As carve-outs continue to gain momentum, private equity firms remain waiting in the wings. Nimble, operationally focused private equity firms have an advantage in handling these complex deals. They also tend to lean on independent consultants who are uniquely poised to support realizing value from untapped potential. Independent consultants are plugging in on a variety of needs, from operating model transitions to fresh-start accounting and cost take-out initiatives to standing-up new processes.
Recent Projects in PE
Here's a glimpse into some of the work that firms and portfolio companies are leveraging Catalant Experts for:
Integration support for new acquisition
PROBLEM: A private equity-backed food manufacturer needed a PM for additional bandwidth to support the integration of a new acquisition.
ACTION: The company hired an Expert who had founded a management consulting firm specializing in strategic transformations, post-merger integrations, and carve outs.
RESULT: The Expert worked directly with the VP of Integration, aligning stakeholders and providing executional support. The integration was executed ahead of schedule.
SKU rationalization for consumer products firm
PROBLEM: A private equity-backed consumer products company needed support on SKU rationalization to manage inventory, optimize distribution, and support a shift to online sales. The company had grown through M&A and didn't consolidate SKUs as they grew, leading to tens of thousands of SKUs, significant complexity, and an inability to understand customer demand.
ACTION: The firm hired an independent consultant with deep expertise in data science to consolidate disparate data sources and derive cost savings through SKU reduction. The Expert had done this type of exercise before and provided data analysis and complex rationalization to help solve the problem.
RESULT: By consolidating SKUs and integrating all data into a single source of truth, the company was able to better analyze cost to carry and contribution margin across all SKUs. The Expert was able to identify opportunities to eliminate substantial cost and provide corresponding recommendations that included both distribution center changes and opportunities for product optimizations.
PM for technology implementation across brands
PROBLEM: A private equity-backed company with several brands needed to standardize recruiting and hiring employees across franchises and wanted to implement a new applicant tracking system across all brands.
ACTION: The firm hired an independent consultant known for accelerating transformations to lead the implementation and strategically project manage and stakeholder manage the transition process across the dozens of franchises, with each brand requiring a slightly different approach.
RESULT: A more streamlined employee recruitment and retention system improved the onboarding process, which led to each brand being able to meet the increased customer demand they were previously struggling to keep up with.
Expert Spotlight
Our virtual inventory of highly skilled independent consultants mobilizes quickly to apply relevant expertise to a specific problem, finding solutions fast. This gives private equity firms a tool to solve a new generation of challenges. Take a look at three Experts who support our private equity community, and log in here to explore the Expert Marketplace further.
This is Catalant’s PE Pulse – a digest of recent articles and trends to help our private equity community understand what their peers are focused on and how to leverage independent consulting to prepare for the challenges ahead. In times of crisis when speed and precise expertise are needed, private equity firms turn to independent consultants and subject-matter experts to keep pace. If we can be of immediate assistance to you or portfolio companies, please let us know.