Saxony Partners Private Equity Solutions
Saxony Partners helps private equity clients gain operational improvements through digital initiatives and transformations.
Our work with private equity companies spans the full lifecycle, from acquisition to exit. We help our clients realize the full value associated with digital transformation and data strategy. And speaking of data – we help our clients do more with their data in order to achieve superior value for both their firm and their portfolio companies. This leads to higher value exits and better returns for your limited partners.
The Impact of Technology on the Private Equity Sector
Private equity has come a long way from its early days of “boot-strap” deals. Now the industry is defined by fast-paced, complex transactions which collectively boasts dry powder of over $1 trillion.
The private equity business model has also experienced, in our opinion at least, a healthy change. No longer is it enough to simply rely on financial engineering, new management, or buying depressed assets to facilitate the healthy returns expected from LPs. Rather, this is the era of active asset management. As Paul Gompers of the Harvard Business School recently wrote:
“Going forward, operational improvements are likely to be the most important source of future returns in private equity…these advantages are sustainable and unlikely to be competed away in the future.”
At Saxony Partners, our goal is to use data and technology to help private equity clients achieve these critical operational improvements. Our relationship with private equity clients commonly starts with due diligence, continues through the initial acquisition, and culminates in the ongoing value addition process.
The Due Diligence Stage
We believe in the old adage measure twice and cut once – and nowhere is this more applicable than in the due diligence stage.
We begin by addressing three questions from a data and technology perspective.
What are the technical debt and legacy implications of the company’s existing tech landscape?
Where are the major needle-moving areas of value enhancement?
Are the right people in the right seat?
We help companies answer these imperative questions by rolling up our sleeves, assessing the environment, and discovering the answers in the data. Only then do we move forward into the next stage – post-acquisition.
Without first having a clear technology picture, effective post acquisition alignment becomes challenging. Ideally, potential landmines are flagged here, and plans for proper valuation, strategy development, and remediation efforts can begin in earnest.
The Post-Acquisition Stage
The first 100 days after acquisition are critical for private equity portfolio companies. This is when management standards are recalibrated, KPI’s and metrics set, and strategy laid out.
Management will set new priorities and move assertively to establish a new cadence. A strong CIO focused on empowering the business through technology is crucial. Having fulfilled the interim CIO role during the acquisition phase, we have a unique perspective into the critical nature of this position and the long-lasting impacts the right executive can achieve.
While longer-term digital initiatives are rarely launched in this phase, efforts towards tech rationalizations, legacy debt, and technology spend are frequently explored to clear out and establish a foundation to build upon.
It’s during this mission-critical stage, we can provide strategic, interim, and technology leadership. People, process, and technology should get buttoned up during this stage.
Ongoing Value Initiatives
During ownership of the portfolio company, the focus should be on two critical areas: reporting and value-adding initiatives.
Reporting: Ideally, reporting should be as near real-time as possible. This allows both management of the portfolio company and the PE partners relevant visibility into performance metrics. Many general partners still struggle with getting clean data in an insightful, easy-to-read format. With high-quality reporting metrics and analytics, a firm can make better decisions and course correct quickly if need be.
Value-add initiatives: Value-add initiatives involve the implementation of data strategies, application development and integrations, and process optimization and automation. This is, admittedly, a heavier lift.
Nevertheless, when this is done correctly, value-add initiatives can significantly move the needle for a firm, delivering the differentiators needed to extract the maximum value from a portfolio company.
Saxony works with our clients to develop the strategy and business priorities that will help the firm adapt to market changes, return objectives, and holding periods. Successful strategies used by our clients include add-on acquisitions, carve-outs, and early exits.
Support for these initiatives comes in the form of “drop-ship” due diligence, compliance and risk assessments, system integrations, as well as strategic reporting initiatives.
If your private equity firm is hoping to improve portfolio performance, pursue technology due diligence, and gain insights from a strategic partner, our team of experts can help. Reach out to us on LinkedIn or fill out our contact form.