Part I Technology Value Creation from the Perspective of a PE Tech Operating Partner: The importance of “value preservation” vs “value creation”.

Technology value creation?in PE is often considered only an “enabler” of other key business processes that is hard to measurable in real EBITDA dollars. For example, implementing a new pricing strategy could result in a significant increase in revenue, margins, and EBITDA growth. The question has always been how much of that value is attributable to technology. In short is hard to quantify but the fact remains that without a modern, highly efficient tech stack, data security, data insights, and complementary human capital capabilities, a clear vision to enable the new sales strategy, sales operations, market segmentation, etc. would not be able to come to life. Increasingly, technology has become critical because it has a direct and measurable impact on a company's?EBITDA, operational efficiency, scalability, and overall enterprise value. In a competitive and fast-changing market, leveraging technology is no longer optional; it is key to driving profitability, optimizing costs, and enhancing growth potential. Here is how I would categorize technology enablement regarding value impacts:

Technology value creation in private equity is a key component of the overall value creation process in support of the investment theme. In simple terms:

Direct Value Impact + Indirect Value impact + Value Preservation= Impact on EV

By investing in digital transformation, PE firms unlock growth potential, reduce operational costs, and improve the long-term viability of their portfolio companies, driving higher valuation multiples and successful exits.

When and How should a technology operating partner engage in the Value Creation Process?

Now that we have laid out the case for technology value creation and in which ways impacts can be made in support of the investment thesis, the question is now how and when does a technology operating partner get involved.

I have had the opportunity to speak a several #PEI event, and I have consistently echoed this message: “Technology Value Creation starts in Due Diligence.”

For this to happen, let me lay out a high-level technology journey and some key pre-requisites for success:

1)?????? When should the deal team get the technology operating partner involved? Here I believe having a seat at the table to gain visibility of the potential business during a Management Presentation (MP) is of immense value. One, the management team gets to know the entire Operations team and two, it gives me an opportunity to at least ask 2-3 key questions, as the CIM often does not provide a lot of insights.

2)?????? Due Diligence is not just for risk identification anymore but rather the first step in value creation. With experience, as a tech operating partner, I can identify 3-5 key big rock themes (playbooks) that immediately can laid out as a basis for post close planning purposes.

3)?????? During the first one hundred days focus on understanding the technology leadership needs, implementing a cyber program, and addressing any key operational risk items identified during Due Diligence.

4)?????? Once the initial strategy session with all operations partners and deal team has been completed, then focus on an IT strategy and roadmap. It is critical to align that to the investment thesis when identifying potential projects to execute. This includes a plan for M&A integration.

5)?????? Next, ensure delivery governance is in place to monitor progress of all approved initiatives to ensure incremental earned value is achieved.

6)?????? Finally, get ready for sell side due diligence. This will be a separate topic at a later stage.

In conclusion, a great end to end technology value creation experience started with early involvement in the investment cycle with deal team partnership, close collaboration with other operating partners and management teams, and finally a technology strategy that both directly and indirectly enables value while setting the company up for growth and agility.

Look for Part II: Technology Value Creation from the Perspective of a Portfolio Company CIO