14. January 2021 - Report
How can independent consultants support in Private Equity?
A recent Bain report shows another great year for PE. The buyout deal value has increased significantly in the last decade and more than doubled from $249bn (2010) to $551bn (2019). But the report also clearly shows that the market environment is getting harder as asset prices soar and 10-year public market returns match PE returns for the first time. That shows that PE firms need to ensure to invest into the right targets and creating value in their portfolio companies more than ever.
Private Equity firms have to tackle various tasks during the entire cycle from acquisition to exit. Often enough, very specific expertise and experience is required that might not be available in-house but that will play a more and more important role for a successful business. On-demand expertise can help Private Equity companies to use the best talent at a reasonable cost. It allows for quickly assembling a world-class team to work on a specific opportunity. PE clients often use subject matter experts to deep-dive into specific sectors and industries and some go significantly beyond this by hiring consultants to support on the entire due diligence (DD) process. Our own survey with more than 400 executives around the world revealed that over 85% of PE firms are already using external independent consultants or subject matter experts in their daily work. Nearly 70% indicated that they will use those resources even more often in the future.
External resources can help PE clients in various ways. They can support from a 1-hour expert call, e.g., when it comes to a specific sector expertise, to a multi-months on-the-ground engagement directly complementing or even replacing an internal team. Engagement areas can be in the pre-deal phase but likewise in supporting the portfolio company and helping to create value.
The process of evaluating and closing a new private equity deal has different and organized steps. The overall deal can happen fast but it requires a very thorough analysis of the potential investment target. Specific sector expertise and analysis is surely required. Consultants and subject matter experts can support in different fields:
- Market analysis
- Competitor analysis
- Due diligence (DD)
- Deep insight through an industry expert
- Business analytics
For example, in the due diligence phase expertpowerhouse does support its PE clients with experienced consultants that have done many commercial DDs beforehand. Through expertpowerhouse, our PE client engaged Michael U., an experienced former BCG consultant and MBA. He had deep scientific and healthcare industry knowledge and was experienced in conducting due diligences for private equity firms investing in the healthcare sector.
Another kind of engagement that many PE clients require are discussions with subject matter experts in a specific field or sector. Our clients reach out in this case with very specific requests, e.g., nutrition experts for an investigation in food supplements as part of a market analysis.
Portfolio company development and optimization:
Every PE firm should aim at creating value in their portfolio companies. This can be done in many ways, from operational improvements, strategic changes, growth initiatives to cost reduction measures and many more. Exemplary fields where our consultants can support are given below:
- Interim and transitional roles
- Supervisory/Advisory Board topics and roles
- Transitional roles
- 100-day plan
- Integration planning and implementation
- PMO support
- Corporate development, M&A and integrations
- Growth strategy and expansion
- Performance improvement
- Transformations and turnarounds
- Product strategy
- Special projects (e.g., ERP implementation, cloud migration, cyber security)
An example is a PE-owned, European telecommunication infrastructure provider: the PE firm contacted us to support improving the overall business and providing an interim-CEO that would also address issues with the company culture. Our expert Bill M., a seasoned CEO with significant experience in the field, was a great match for this challenging task and performed on all deliverables far above expectations. A major transformation and cost cutting engagement was supported by our consultant Allen B., who has a background as a strategy consultant and restructuring expert. He helped to turn-around the client in less than 6 months. Likewise, one of our PE clients in the Middle East asked for consulting support in developing a growth strategy for one of their portfolio companies active in the steel structure sector. Our profile was an experienced consultant with significant expertise in the construction and building materials sector that helped to define a growth strategy followed by the implementation.
expertpowerhouse can support PE clients along the entire value chain and in all key activities in a fast and easy way.