Private Equity Deal Lifecycle: Post-Acquisition

The CIO’s role coupled with technology deliverables highlight the post-acquisition phase of the private equity deal lifecycle.

For private equity firms, the post-acquisition phase of the deal lifecycle is where the strategy developed during the due diligence stage is implemented. The success of this implementation is directly tied to how clearly you were able to define that strategy.

In short, post-acquisition is where the rubber meets the road.

“Once you deploy capital at the private equity level, the investment clock starts ticking,” said Jeff Wilson, Founder and CEO at Saxony Partners. “The faster you can implement your investment strategy, the better your returns are going to be.”

If you’ve really done your homework in due diligence, then you should realize a faster return on your investment post-close. You can hit the ground running sooner so that you can realize your investment plan and strategy faster, optimizing your returns along the way.

Below are a few key considerations and expectations for success in private equity post-acquisition.

Assessing the Role of the CIO

As technology continues to play a larger role in the way companies operate, perhaps no one person is more integral to success in post-acquisition than the firm’s Chief Information Officer. It is absolutely critical that you have the right person in the right seat at the right time.

In the due diligence phase, two critical questions were (1) what does the business want to accomplish, and (2) how sturdy is the relationship between the business and the IT organization. In post-acquisition, those questions are combined and centered on the person in charge of that IT operation.

“One of the key things to consider is whether or not your organization has the right CIO to implement this strategy,” said Michael Martin, Vice President of the Financial Services practice at Saxony Partners. “In our experience, sometimes clients do, and sometimes they do not. The wrong CIO can impede the plan going forward from the due diligence stage; that’s not an uncommon story.”

Wilson agrees and provides additional context.

“The CIO needs to mirror whatever the company strategy is,” Wilson said. “If the company strategy is to maintain the status quo, then the CIO should be focused on operational excellence, efficiencies, and return-on-investment with technology spend. If the company is in high growth mode and in a position where they need to innovate in a number of areas, then the CIO needs to be a visionary – someone who can take new approaches to solving old problems.”

Saxony’s deep industry and technology experience uniquely equip us to offer non-biased assessments of IT structure and the CIO’s role.

These assessments are a standard feature of our approach to post-acquisition. We talk to the CIO’s key stakeholders and customers to gauge how effective they believe the IT department is in supporting the business needs and vision. We also assess how effective the firm has been in delivering on its technology plans over the years. Saxony’s experts can measure a firm’s technology strategy against those who are similar in size and scope.

Post-Acquisition Technology Deliverables

Technology, of course, can play an outsize role as strategy implementation moves forward. Specific deliverables vary depending upon the asset being acquired, but there are some general rules of thumb.

If a troubled asset is in play, the focus is typically on technology rationalizations, as well as addressing legacy debt and technology spend. But if the asset is in growth mode, then the focus often shifts to doubling down on technology infrastructure or spending in order to perpetuate or accelerate that growth.

Regardless of the current state of the asset, there’s always an opportunity to shore up the fundamental technology components.

“In this stage, you often see a focus on ‘blocking and tackling,’” Wilson said. “A lot of companies need investments in decision-making platforms – data warehouses, in other words. There are many companies out there that still have not gone through the work of stitching together disparate systems and creating a reporting platform so that they are able to get management reports done quickly and cheaply.”

Beyond ‘blocking and tackling,’ many firms are also doubling down on more advanced technology deliverables such as cloud architecture and other digital initiatives. And recent news related to data breaches and ransomware attacks have increased demand for technology security and data privacy solutions.

From Strategy to Implementation

Having a trusted partner that can both create a strategy and work with you to build the deliverables and drive implementation of that strategy can make all the difference in determining speed-to-value.

Martin and his team have seen what happens when firms hire a partner that specializes in either strategy or implementation – but not both.

“We’ve seen instances where consultants come in with a PowerPoint full of deliverables and to-dos related to the strategy they helped define, but when the presentation is over, they tap out,” Martin said. “It’s because they are just strategy creators, not implementors.

“So now the company has to find an implementation partner to execute on the strategy. That’s a real roll of the dice, because the wrong implementation partner can really make things difficult for you. Quite frankly, we at Saxony have been called in to clean up in the wake of these situations.”

Saxony Partners – with our combination of deep industry and technology expertise – can be a differentiator for your firm throughout both the due diligence and post-acquisition stages of the private equity deal lifecycle.

“We pride ourselves on being able to both create and execute your strategy,” Wilson said. “We bring the right team to the table in order to ensure that, when we lay out a technology strategy, we can staff to it and ensure success. Not many firms can do both of those things and do them well.”