Private Equities - Addressing challenges in Value Creation

The days when private equity was associated with mere financial engineering are long gone. These days, most people recognise that private equity creates value through underlying business and operational improvement that leads to value creation.

In recent years, many Private Equity firms have set-up in house teams of operational specialists, evolving from the traditional investment banking and strategy consulting backgrounds. 

This has paved way to a healthier, and frequently more collaborative approach between CEOs and Private Equity operational teams, where CEOs welcome the intervention and help from the firms.

Where are CEOs looking for support from PE firms?

According to a study from ATKearney, out of fourteen different choices, "Business and Growth Strategy" is the area where CEOs are asking for more support from PE firms.

This is not surprising at all.

The Gartner 2018 CEO Survey looked at responses from 460 CEOs and C-level business executives to pinpoint goals and concerns from the C-suite. Respondents ranked "Growth" as a top priority.

But are Private Equity firms prepared to deliver support on "Growth" to CEOs?

Over the last few years, with the acceleration of digital as the major source of disruption and transformation across industries, growth is becoming more complex. 

With digital audiences, digital transactions, digitally enabled products and digital collaborations, acquiring customers and maximising their lifetime value in a business efficient way involves the orchestration of a number of different practices and areas of expertise.

With CEOs looking for deeper structural sources of growth, and to develop disciplined ways to exploit digital opportunities to grow their business, Private Equity firms must evolve their skills in four different areas:

• People and Culture - Traditionally Private Equity firms focus on more operational and immediate value creation areas. However, the right "culture" can not only have an impact on the value of the asset, but on the collaboration with the CEOs. According to Gartner, "Culture" thirty-seven percent of CEOs are looking to make significant or deep culture changes by 2020. When considering CEOs of companies with digital initiatives, the number rises to 42%. 
• Marketing and Sales - Sales is becoming more and more integrated with marketing, where significant progress on technology enabled automated lead generation, nurturing and conversion as been made. These teams now need to have deep expertise in all things organic and paid traffic and digital influence, articulated acquisition funnels, attribution models and relationship management. 
• Data and Technology - The last few years have seen the emergence of "growth stacks" as different pieces of technology that drive client acquisition, servicing and retention. These generate and integrate data from and with a number of different internal and external sources. Private Equity firms need to help the investments implement and make the most of their stacks and data.
• Content and Communications - Long gone are the days of the "campaigns" as a way to drive growth. To be competitive, companies now have to develop different levels of communications, addressing different moments of the customer acquisition funnel, articulating different benefits to different audiences. Content engines are required to fuel the growth needs, and most Private Equity firms need to increase their ability to intervene in this area.

Evolving skills in all these areas required to effectively drive growth, might result challenging for Private Equity firms. Different investments may require different skills and approaches and very quickly firms may need to grow their teams significantly if they want to be effective. 

A fast and more cost effective alternative - the one we believe in - to drive value creation in investments is to partner with growth specialist firms, covering the four critical areas, and who can focus on growth outcomes to quickly align to the investment business goals. This approach will better help CEOs while keeping the firm's headcount and costs under control.

Nuno Santos - MD, We Accelerate Growth

Originally published at www.weaccelerategrowth.com