A PE Professional's Blueprint for Winning the First 100 Days

The TL;DR

What happens in the first 100 days sets the trajectory for a new private equity investment. When executed well–which I’ll share an approach for doing in this article–momentum builds. When executed poorly, momentum can be lost and valuable time can be wasted.

The most effective private equity value creators recognize this, and are disciplined about taking the steps needed to win the first 100 days.?

But the First 100 can sometimes feel overwhelming. Especially when you don't have a game plan.

Committed to starting strong in the First 100, but don’t have a blueprint for doing so? Focus on nailing the 5 S’s:?

• Approach change with a SENSE OF URGENCY.
• Forge a STRONG RELATIONSHIP with management.
• Create a SHARED UNDERSTANDING of where the business is today.
• Get everyone—board, management, and org—moving in the SAME DIRECTION.
• Ensure you get the right team—a SOLID TEAM—on the field.

A few quarters ago, a PE client of mine, who we'll call Phil, posted a deal announcement for a portfolio company exit. So I gave him a call to congratulate him.?

“Congrats! How’d the deal turn out?”?

My excitement crashed head-on into a wall of disappointment.?

“Eh, it was more or less a dud,” Phil said, crestfallen.

The sad trombone sounded.?

“Bummer. What went wrong?”?

“Basically, we moved too slowly to figure out the right things to focus on to grow… and make sure we had the right team in place to get it done,” he said. "We spent too much time spinning our wheels. I guess hindsight’s 20/20.”?

I offered one of those “I know the feeling” kind of nods as a gesture of solidarity. I went on to explain to Phil that I’d been in his shoes before. See, earlier in my own private equity career, I made many of the same mistakes in deals I was leading:?

• Failing to get everyone aligned on a laser-focused set of value creation initiatives
• Being slow to get the right team into place to make it happen
• Totally overlooking the cultural and change management aspects of bringing the value creation plan to life

I gradually learned as my career progressed: early-career Dan and current-day Phil aren’t the only ones who have struggled to capitalize on this critical first 100 day period. Case-in-point:?

• 92% of PE professionals said that waiting too long to take action on known talent issues had resulted in portfolio company underperformance.?(Bain & Company)

• 57% of deal-makers say that cultural issues that weren’t addressed effectively early on ended up hampering value creation down the line.?(PWC)

• 4 out of 5 PE investors say they need to improve their value creation planning practices. (PWC)

Phil's port-co snafus, my own early-career deal blunders, and these stats illustrate two important points:?

1. Many costly port-co issues stem from a failure to take the right actions early in the hold period.?
2. And this usually happens because PE investors don’t have a repeatable blueprint for avoiding these pitfalls and winning the first 100 days.

Sound familiar? Keep reading.?

WHY THE FIRST 100 MATTERS... AND HOW TO SQUANDER IT

You’ve probably heard the saying, “You don’t get a second chance to make a first impression.”

Well likewise, in a private equity deal, you don’t get a second chance to get off to a strong start post-closing.?

In PE, it is widely accepted that the First 100 is a critical period. What happens in the First 100 days can set the trajectory for a new investment. It’s kind of like flying from New York City to San Francisco. If you’re even just a few degrees off in the first 100 miles, it could mean ending up in Tijuana instead.?

But despite the fact that most PE professionals recognize the importance of the First 100, too often, we see investors squander the opportunity the First 100 presents. There are 3 common but misguided approaches to the First 100 days that result in lost time, missed opportunity, and elevated investment risk:?

? The “Set It and Forget It” Approach. Remember those old Ron Popeil commercials? The ones where he urges Showtime Rotisserie owners to “set it and forget it!” That’s good advice if you’re into slow-cooking chicken, but terrible advice for PE investors in the Value Creation Era. Unless your newly acquired company is on a tear—absolutely crushing it—doing nothing in the First 100 is a terrible strategy.?

? The “Death by Checklist” Approach. A rookie mistake I used to make early in my PE career: thinking that "winning" in the F100 was about diligently tying up all those administrative loose ends from the deal. Purchase accounting. Legal docs. Financial reporting. We’d toss it all into a templatized post-closing checklist, ship it over to management, and unknowingly bog them down in administivia.

Make no mistake: these things are important to get buttoned up. But for the most part, the things on this checklist aren’t directly value-generating. In the First 100, you want management’s brain cells firing on how they’re going to create equity value, not overwhelmed with checking boxes on an administrative task list.

? The “Do No Harm” Approach. I’ve heard some investors (especially common in the EtA space) advocate a “do no harm” approach to the First 100. “Let’s not rock the boat,” some will say. “Don’t upset the apple cart,” others analogize.

To be clear, I’d never advocate the opposite: to knowingly do harm. But I’ve found that too often, in the quest to do no harm, investors fail to take decisive action and make difficult but necessary change quickly. (See the earlier stats. Womp.) This "do no harm" mantra becomes a way to rationalize inaction.?

Bottom line: It is much tougher to win the hold period if you don't win the First 100.?And these approaches aren't going to get the job done.

So look in the mirror: does your firm have a blueprint for starting strong and winning the first 100??

If not, the bad news is: this puts your firm at risk of slower value creation, missed opportunity, and ultimately, weaker returns.?

But the good news is: gotcha covered.?

In our work with PE-backed companies guiding them through the first 100 days—which you can learn more about here—we emphasize nailing 5 key things. I refer to them as the 5 S’s, since every business framework needs clever alliteration, eh?

THE 5 S’S FOR WINNING THE FIRST 100 DAYS

#1. Approach change with a SENSE OF URGENCY.

Unless the company you’ve just acquired is absolutely, unequivocally crushing it (in which case you're probably best served to do no harm and avoid messing it up), change will be required to realize your value creation goals.

It is a universal law of private equity physics.?Growth and progress don't happen without change—sometimes significant change.

And to orchestrate the type of change that’s needed to go from where the company is today to where you need it to be to achieve a wildly successful exit, remember this:?

Contrary to popular belief, a recently acquired company is at its most change-ready the day the deal closes.

Why?

Employees are most receptive to change at the time of the deal. Even though some are fearful of it, many of them expect it. And if you don’t make change where change is needed, people quickly go back to the way things were.?

It’s kind of like how a cannonball has maximum velocity the moment it is shot out of the cannon, before resistance from air and gravity start to slow it down.?

Studies have shown that PE firms have the greatest likelihood of implementing change successfully immediately after the deal closes.

So when it comes to using this critical period to enact the type of people, strategic, cultural change needed to get on with your value creation agenda—move with a sense of urgency.

Doing so requires that you’ve done the right level of due diligence, and translated those findings into a post-close action plan before you close the deal.??

The simple truth is that in an IRR-driven asset class like private equity, time is money. The faster you take the steps needed to get value creation cranking–starting within the First 100–the better the returns are likely to be.?So move with a sense of urgency on two specific things:?

• Identifying and focusing the team on achieving quick value creation wins. This demonstrates to management the importance of moving with speed, helps them build momentum early in the new partnership, and provides a psychological boost for the team.?

• Taking action on issue areas identified in due diligence. Talent gaps, cultural issues, capabilities gaps. These things are best acted upon as quickly as possible post-closing... before people go back to the way things were. (This assumes, of course, that you have done a thorough job of due diligence—including talent & cultural due diligence—and developed a post-closing plan.)

#2. Forge a STRONG RELATIONSHIP with management.

Tony Robbins has a great line that's always stuck with me:

"The quality of your life is the quality of your relationships."

Translated and adapted to fit our discussion: "The quality of a PE professional's life is the quality of their relationships with management."

The importance of strong relationships is obvious to any private equity professional with half a brain. Don't need an MBA to understand that success in PE ultimately comes down to relationships. It's tough to succeed if LPs don’t want to back you, bankers don’t want to show deals to you, employees don’t want to work for you, and management doesn’t want to work with you.

Among these relationships, the strength and health of a board/CEO/management team relationship is one of the strongest determining factors of overall success in an investor-backed business.?It affects everything else.

But strong relationships between investors and management don’t magically materialize. PE professionals should assume that a great relationship will blossom organically over time. As my wife will gladly tell you, there’s a lot I do not know about relationships, but if there’s one thing I do know:

Building strong, trust-based relationships requires intentionality.?

There are 3 actionable things PE firms should be intentional about to build strong, trust-based relationships with management faster:?

1. Understanding each other—at a human level. Understand each others’ motivations, goals, hot buttons, work styles, careabouts, and values.?A strong relationship must be rooted in an understanding of the human beings who comprise it.
2. Understanding expectations. Expectation setting is a two-way street. What do your new partners expect of you? And what do you expect of them? What are the expectations regarding what you’ll communicate, how you’ll communicate, and how often you’ll communicate? Post-closing frustration most often arises from the failure to set clear expectations upfront.?
3. Understanding where we stand (relative to those expectations). At any given moment, you want to be able to gauge: Where do we stand relative to those expectations? How do we know if our relationship is in a good spot, or not? And what will we do to get it back on track if it isn’t? You will hit bumps in the road, so its worth being proactive about discussing upfront: How will we navigate disagreement, conflict, and challenges together as partners? When we veer off course, how will we get the relationship back on track??

#3 - Create a SHARED UNDERSTANDING of where the business is today.

Sit down with your management and discuss your views–and their own–on where the business is today. Lay your cards on the table. Fill the pool of shared knowledge with your learnings from due diligence, and management's views from the inside.

Use this intel to paint an objective, fact-based, data-driven picture of the current state of play—together. Where is the company winning? Where is the company losing? What are the risks? What are the opportunities??(This sometimes requires the help of functional SMEs from the outside, and/or using diagnostic tools like Entromy.)

Share your conclusions about where the business is today. Ask for management's appraisal. Identify areas of agreement and disagreement. Wrestle with the latter.

Do this before talking about the future. It is tough for Google Maps to tell you how to get to your destination if you aren't clear on where you are right now. In the same way, it is tough to solidify a vision and value creation plan for a newly-acquired company if you aren’t on the same page with management about where you’re starting from.?

Questions to guide this level-setting discussion:?

• Where did we come from? It is important to understand and appreciate the context of how the business and team ended up here.?

• Where are we now? Use your market analysis, competitive analysis, trend analysis, and financial analysis from due diligence to paint an objective, fact-based picture of the current realities.

• What’s working today that we can continue to leverage in the future? One of the fastest paths to success is to do more of what’s already working.?To double down on the bright spots.

• What’s getting in the way of success? The gaps, the risks, the blind spots, and the issue areas. Every company’s got ‘em. And its tough to do anything about them if they aren’t surfaced and examined.?

• What do the indicators and anecdotes tell us about the overall health of the business?

• As we shift our focus to the future, how change-ready is the organization??

#4 - Get everyone—board, management, and org—moving in the SAME DIRECTION.

Have you ever tried to drive a car when the alignment is out of whack? When the tires are pulling in different directions? Sometimes leading a board can feel a bit like this.

When management and the board are pulling in different directions, it makes it really difficult to go fast in the early days, and far in the long-run.?

Like a car with alignment issues, best case scenario, misalignment of the sort requires a lot of the board’s effort (and emotional energy) to keep the thing on the road. Worst case scenario, a misaligned team can end up running the business into a ditch.?

When a leadership team and the board are out of sync in this way, there can be a steep price to pay. Wasted time. Missed opportunity. Frustration.?Even resentment.

Few things will create painful friction sooner–and guarantee failure faster–than misalignment between a board and their leadership team. It is for this reason that PE folks and leadership gurus about “alignment” all the time.

We know alignment is important, but aligned on what??

There are 3 simple, but essential questions to get everyone onto the same page on within the first 100 days.?

• Where are we going together? The vision for the business, and the desired outcome for the investment.?

• How will we get there? The strategy and value creation plan that will get you there.

• What needs to happen next? The near-term value creation priorities (next 12 - 18 months) that will move the company in that direction.?

In socializing these 3 questions with management pre-closing, and stacking hands on them in the First 100, you’ll ensure everyone is rowing in the same direction.

#5 - Ensure you get the right team—a SOLID TEAM—on the field.

Hate to break it to you, but the value creation plan you developed in the last S isn’t worth the paper it is written on without the right WHO in the right WHERE. The right people in the right roles.?

Given that people are the fundamental building blocks that make up the company you’re investing, it stands to reason that it will be tough to achieve your company’s vision or actualize your company’s strategy if you don’t have the right people in the right roles focused on the right things.?

Most PE folks understand this.

Despite that, research tells us that only 10% of companies intentionally align their strategy & value creation plan with their organization design. (HBR, 2022)

But Bain & Company’s 2021 Global Private Equity Report brings to light the importance of doing this:?

"[PE] firms with the highest success rates have something in common: they're highly disciplined about linking talent decisions to the explicit requirements laid out in the value creation plan."

Translation: the success of any VCP is closely linked to the talent that drives it.

This is why EVERY value creation plan needs a corresponding "people plan." They go together like peanut butter and jelly. If the value creation plan defines the WHAT and HOW, and the people plan defines the WHO.?

So in order to develop your people plan, first define the WHAT—the value creation initiatives you aligned on in the 4th S.?

Then, define the WHERE. The roles needed to power those value drivers, and the requirements in each of those roles.?

Finally, assess & act on the WHO. Assess the people you have today, which you'll do as part of organizational due diligence (sidenote: we can help with this). Then, compare that to the requirements in each of the critical roles. Where is there a tight fit? And where are there gaps?

To get the right, fit-for-purpose team onto the field, your people plan will reflect some combination of 5 actions:?

• Back. In cases where there’s strong alignment between the role requirements, and the skills and abilities of the person occupying that role.?

• Replace. In cases where the role exists today, but the person occupying that role doesn’t fit the requirements. If you can’t redeploy them, replace. Do so by firing with compassion and upgrading.?

• Unlock. In cases where person has high potential in the role, but the company has yet to fully unlock that potential. What specifically will you do to better equip or enable them so you can translate their talent into high performance? Mentorship? Exposure? Training? Coaching?

• Redeploy. In cases where the person occupying the role today is valuable, but mismatched to the the current role’s requirements. If there is a high-impact role that aligns with with their skills and abilities, redeploy.?

• Expand. In cases where a new role needs to be created to achieve the targeted outcomes, and you’ll hire from the outside to fill that role.?

Remember, 92% of PE professionals say that waiting too long to take action on leadership & talent issues has resulted in portfolio company underperformance (Bain & Company).

Don’t make this mistake.?Don't become a statistic.

Instead, use this approach to be proactive about ensuring you have a plan for getting the right team—a SOLID TEAM—onto the field. I do a deeper dive on exactly how to approach people planning in this workshop.?

WINNING THE FIRST 100 STARTS IN DUE DILIGENCE

In the same way that winning a football game starts in the locker room, winning the First 100 starts in due diligence. Your ability to get off to a fast, decisive, and momentum-generating start depends on:

• the depth of due diligence;
• the thoroughness of post-close planning; and
• the degree to which you've begun to align with management

...pre-closing.

So to put yourself in a position to come strong off the blocks in the First 100—and nail the 5 S's—it is important that you have:

• developed an initial draft of your value creation plan,
• developed an initial view of your people plan (back, replace, unlock, redeploy, expand)
• identified cultural shifts required to actualize your VCP
• identified capability gaps that need to get shored up
• identified quick wins, and have an action plan for pursuing.

May seem like a lot, but it is thorough due diligence and planning that allows you to shift into high gear quickly after the close. Leaning on outside partners (like us) can help. Speaking of...

3 WAYS I CAN HELP YOU WIN THE FIRST 100

1. Organizational due diligence. We equip investors with the intel they need to make a smarter investment decision, and get off to a faster start in the F100. Focused on 4 key areas: leadership, talent, culture, and capabilities. Here's how we help.
2. FastStart First 100. Leading investors and management through the critical First 100 days. Helping investor-backed companies get aligned, build momentum, and start strong. Here's how.
3. Grab a copy of my book. Learn proven practices—winning moves—for accelerating value creation in private equity-backed B2B companies. Get it here.