As Seen in CFO Studio Magazine Q3 2015 Issue

By Ed Schultz Partner, Highlands Business Group

HOW TO OPTIMIZE WORKING WITH PRIVATE EQUITY FIRMS

You have the opportunity to work with a private equity group (PEG), probably through the acquisition of your present company, or working on an interim assignment with the portfolio company. Congratulations, you are part of a $4 trillion worldwide industry! What is the best way to succeed with your new owners?

1 Get Their Measure

Understand the backgrounds of most PEG investors, and how it influences their attitudes and behaviors toward their portfolio companies. PEG partners and principals are typically finance or business generalists with backgrounds from other financial companies, such as investment banks, and/or they have grown other companies successfully and have decided to get into PEGs. While they may understand accounting, they see business strategy first and are not as concerned with the debits and credits much of the time. When they want to delve into the financial or other areas you are responsible for, they will need guidance.

2 Realize Their Stress Levels

It is important to remember that PEG executives answer to other members of their organization, such as their firm’s leadership. Additionally, their industry is quite competitive and returns are the only measure that their ultimate owners (who could be limited partners attached to other financial institutions or pension funds) review. Try to appreciate their pressures.

3 Know What They Are Looking for

Try to absorb as many due diligence and other reports as practicable to understand what the PEG partners have learned. Discuss these reports with them, as well as their goals for your company. As the economy changes and their portfolio evolves, their attitude toward your company may as well, and you need to understand the new landscape. Communicate frequently and learn.

4 Support Their Needs

PEGs are heavily into the details as they usually actively participate in not only board-level business, but also in the upper-level management of the company and will also deep dive at times. Some or all of the team that you encounter, particularly more junior members, will be analyzing and modeling. After you have added your own practical expertise to the combined efforts, try to incorporate their work into your planning so everyone is on the same path.

5 Help With Course Correction

Plans often go awry. Remembering the PEG’s own internal and external hierarchy, realize that a sudden negative variance in results can cause sleepless nights and additional work for all. This is where your experience and strong communication skills can be invaluable in improving the relationship between the PEG and your management. As the PEG looks for answers and corrective action, your efforts, insights, and creativity can go a long way in supporting their needs, and can improve the situation for the entire team.

Following these rules will put you on the road to success with your PEG owners.