Navigating the Journey: From Diligence to Exit in Private Equity

I recently had the great pleasure of facilitating a roundtable discussion about the ideal go-to-market transformation, with a group of experienced PE operating partners who have viewed the PE process - from diligence to exit — through every possible facet. This discussion took place during the?PEI Operating Partners Forum in San Francisco .

Our guests during the conversation included Zorian Rotenberg , from Charlesbank Capital Partners,?Prerak Vohra ?from Goldman Sachs,?Elizabeth Dresdale ?from Incline Equity Partners, and?Sam Jones from KKR Capstone. Each has employed various strategies to assess and transform businesses. They were kind enough to share some of key considerations from diligence to exit and delve into the go-to-market strategies they’ve used to foster success.

Assessing Companies during the Diligence Phase

Assessing a go-to-market strategy, our panel shared, must be undertaken at the outset of the diligence phase. Just as you carefully evaluate potential investments to gauge their viability and growth potential, you must understand how they are approaching - and being received by — the marketplace.

This involves examining the various components of the company's sales and marketing approach, such as outbound and inside sales, marketing and sales alignment, and recorded activity and quota attainment levels. The goal should be to uncover any fundamental gaps and areas for improvement within the go-to-market motion, and curative steps — for example, making better use of Salesforce, updating sales messaging architecture, or bringing in a change agent to boost the overall effectiveness of the company's sales processes.

Finally, insights gathering should be in high gear at this phase, said our panel. These insights should go beyond benchmarks and provide additional value to the investment. PE firms can uncover valuable information by analyzing metrics like quota attainment, team structure, and sales messaging. For example, the absence of a well-defined target customer profile represents a potential area for improvement. Understanding these nuances allows PE firms to identify opportunities to optimize sales processes, enhance messaging, and improve win rates.

Prioritizing Focus Areas

After completing the diligence process, the panelists recommend that PE firms should employ a punch list to help prioritize certain areas for transformation and growth. Pricing typically becomes the first common area of focus, with firms exploring ways to optimize pricing structures and bundle offerings. The goal, our panelists shared, is to strike a balance between founder-friendly pricing models and sustainable pricing strategies that drive revenue growth.

Another priority is the transformation of roles and responsibilities within the organization as it matures. Standardization and coordination become essential as companies grow, necessitating clear structures and processes. Rep productivity is also a key consideration, with the need to focus on enablement to ensure consistent messaging and skill development among the sales team.

During the onboarding process, as you invest time in preparing the company for future growth, the panelists recommend building the necessary infrastructure and rescaling the talent within the organization. As you assess the existing talent pool, often led by the founder or head of sales, you’ll need to determine how to align their capabilities with the growth plans. In some cases, external partners will be engaged to provide expertise and support in areas such as pricing strategy. Additionally, firms should build a bench of commercial executives who can contribute to the company's growth and ensure a smooth transition of leadership, if needed.

The journey from diligence to exit in private equity investing involves a meticulous evaluation of companies' go-to-market strategies. PE firms focus on understanding the dynamics of sales and marketing processes, identifying gaps and improvement opportunities, and prioritizing key areas for transformation and growth. By leveraging unique insights and rescaling talent, PE firms can set up companies from the beginning to achieve market-leading positions, contributing to their portfolio companies’ success and long-term value creation.

By Slade Kobran , Managing Partner, Private Equity

Originally published on the PE Blog