Private Equity Fund Archives

How BluWave helps PE shrink the world

August 25, 2021 Delaney Walker

This month, BluWave founder & CEO, Sean Mooney, had the opportunity to join Devin Matthews on ParkerGale’s Funcast podcast to discuss how BluWave helps PE shrink the world by connecting funds to the exact-fit resources they need when they need them. Sean and Devin discussed how BluWave was born out of a pain Sean experienced during his 20 years in private equity and is made to connect funds to the resources they need when they don’t know who to use or their go-to providers are sold out. They also went into detail on the types of service providers BluWave invites into their network: specialists, spin outs, and independents that have specific capabilities they have provided to past PE firms in niche industries.

Other topics you can hear discussed in the podcast include how PE is evolving as well as how COVID has accelerated the digital transformation.

Interested in listening to the whole podcast yourself? Click below.

Private Equity Interview with MiddleGround Capital founder Lauren Mulholland

March 18, 2021 Sean Mooney

What happens when a former New York investment banker and mother of two young children (with a third not far behind) decides to take a “measured risk?” First, she teams up with long-time colleagues John Stewart (no, not this one, this one) and Scot Duncan in Lexington, Kentucky; next, together they decide to build a franchise focused squarely on the middle market; and, certainly not last, in under three years they grow their private equity firm to a team of nearly 40 individuals, raise capital for three funds, and invest in ten companies within the industrial and manufacturing space. Mission accomplished? Hardly. She’s just getting started.

This is all in a day’s work for Lauren Mulholland, founding partner of MiddleGround Capital. Speaking with her was not only enlightening but inspiring, as she and her team have opened the aperture on what’s possible for private equity investment for the “missing middle.”

Katie Marchetti: What was the genesis of MiddleGround Capital, and what circumstances led you to that choice?

Lauren Mulholland: For me personally, it was an opportunity to be a leader of an organization from day one, and to build a team and culture I could be truly excited about—along with partners committed to a common vision. Scot, John, and I had all worked together for nine years and have complementary skill sets, so I had confidence in our collective ability to execute against our plan. Together we had experience across all aspects of the business: sourcing, execution, back office management, and portfolio operations.

In terms of the firm’s vision, we wanted to build a specialized franchise for the middle market. Most private equity firms start in the lower middle market and then move up-market as they raise bigger and bigger funds. But we are taking a different approach and have committed to our investors to keep our first three flagship funds under $700M. This allows us to stay focused on the middle market, where we see substantial opportunities to acquire privately-held businesses ripe for operational improvement

KM: I like to ask this question because it seems like a good way to understand someone’s thinking in short order. So, as an homage to Hemingway, what is your “six-word story”?

LM: Measure risk, but take your opportunities.

KM: What was the most challenging aspect of raising your first fund and getting those first three portfolio companies?

LM: Getting our first institutional investor was a huge milestone, but we closed three deals before we held a final close on the fund, and this fast-tracked the entire process. The more challenging part was wearing multiple hats at any given time and figuring how to be the most effective. One hour I would be focused on sourcing, the next hour fundraising, the next diligence—plus I was hiring people and constantly acquiring more office space, and this is an entirely different aspect of the business.

KM: Speaking of hiring, do you have a professional guiding mantra or principle for “why” you make the choices you do?

LM: I try to hire people that are smarter than I am but also have the right worth ethic. We seek out individuals who are proactive and entrepreneurial but have mastered certain skills. At the end of the day, we are a services firm in service to our Limited Partners, so it’s all about the “right fit” people.

KM: What is technology’s role in what you do, and for the future of PE in general?

LM: Having access to data is extremely important and gives us an edge, and I see this “data first” mindset being adopted industry-wide. As an example, we work with third parties to obtain data to help us prioritize our sourcing initiatives and optimize where we are spending our time. We have also invested in building out a dashboard using Microsoft BI, so we have comparable analytics on all of our portfolio companies available at our fingertips, enabling us to spot trends quicker and make better decisions. For our portcos specifically, we focus on upgrading them along the tech continuum, including helping them understand and embrace automation as the manufacturing industry goes through a transformational shift.

KM: Third-party resources are a substantial part of what you offer your portcos. Any best practices for how to source and engage with third-parties so everyone wins?

LM: We try to engage with key providers for each specific work area. In other words, “right fit experts” who have deep knowledge and functional expertise in a particular resource area. Beyond that, third-party service providers are an extension of our firm, so they have to be willing to understand our approach and our culture. This is where a firm like yours has been valuable, because, much like our approach, you have data that can easily map resources to our specific needs and even geographical areas. Finding these third–parties quickly is also extremely important.

KM: In ten years, where do you see the private equity industry? What has changed, for better or worse?

LM: I think private equity’s reputation needs to change, particularly with an increasing emphasis on ESG that many firms are putting in place. PE has historically been known as a white man’s world that utilizes high leverage to financially engineer a return and doesn’t invest in its companies or people. That story and reputation is an outdated perspective, and while convenient for media narratives and PE detractors, is not the reality.

At MiddleGround, we are working on a project right now to highlight change agents in the industry and bring to life some stories that talk about diversity, sector expertise, investing in businesses, growing jobs, and ESG efforts. My hope is that, as a community, the firms and professionals who share these shifting perspectives will come together and invest in redefining the brand of private equity. After all, if we expect our portfolio companies to continuously invest in themselves and their markets, we must be willing to do the same.

How to thrive with your lenders in 2021

January 5, 2021 Sean Mooney

As we roll up our sleeves and move full steam ahead into 2021, it is clear that many of the challenges of last year linger. In fact, many companies—particularly in the travel and hospitality sectors—still face unprecedented circumstances and continue to scramble from one problem to the next. This can often mean losing sight of long-term goals, and when it comes to your lenders and liquidity can quickly lead to major, even irrevocable, problems.

This is why companies should continue to proactively reach out to their lenders and other trusted partners during these times to enable them to become part of the solution. In my past experience as a private equity (PE) partner, I noticed that companies often waited until it was too late to contact their banks and others that could help. Their earnings had already retracted, their cash was depleted, and their options were constrained beyond repair. By the time they reached out, their lenders were often caught off guard and felt like they had no choice other than to go into crisis mode and do whatever they could to protect their loans. When this happens, owners of businesses are often left behind.

Companies need to play ahead and take action during times of crisis. If you don’t get ahead of events, they will get ahead of you. This mindset is not only critical for your internal operations, but also for your external partners – particularly your lenders. Bring your relationship bankers into the discussion early so they can help you help yourself. The sooner you get your relationship bankers involved, the more options they’ll have to maintain your equity, which is in all parties’ best interest.

Cultivate a proactive versus reactive mentality

After nearly 20 years in private equity, one of the most essential things I’ve learned during a crisis is that cash is king. If you’re not actively thinking ahead about your liquidity, it can evaporate in a moment’s notice and then your game is over. Your lenders are one of your most critical sources of liquidity during difficult times. If they feel like they are part of the solution, they will act with your (and their) best interests in mind and help you fund your operations. If they feel like you are constantly surprising or misleading them, they will clamp down and do whatever they can to salvage their loan with relatively little concern for your equity.

When I was in private equity, I developed a litmus test called the “three board meeting rule.” In the first meeting, someone says “I think there’s a problem” and the management team swears to resolve it. By the second meeting, little action is taken and someone more loudly says, “Okay, now there is really a problem.” During the third meeting, everyone is looking around at each other as things have gotten worse and worse and drastic actions then have to be taken. It pains me to admit that earlier in my career I was often the guy who waited until the third meeting. In retrospect, I never looked back on a decision and wished I took more time to address a critical need. We need to act between the first and second board meeting. Hope is not a strategy. The longer we wait, the fewer options we have.

According to a 2019 McKinsey report, companies that were more resilient during the Great Recession “prepared earlier, moved faster, and cut deeper when recessionary signs were emerging.” By the first quarter of 2008, these companies became nimble while their lower-performing peers were still adding costs. At the end of the day, crisis management is not all about cutting costs, though. It’s about maximizing cash. Cash is the fuel that gives you the options to stay afloat, repair your business, and course correct until the storm passes and calmer times return. Your relationship with your lender will play a meaningful role in your ability to maximize your cash resources.

Eliminating bias against perceived failure

Companies in crisis often have unhealthy internal dynamics that can prevent difficult but necessary decisions from being made. First, there can be a bias against taking action because that would require an admission of shortcomings. This leads to the diffusion of responsibility, which can cause a company to delay until it runs out of time and options. Second, companies’ leaders often convince themselves that they don’t need outside assistance – there’s a culture of autonomy that can develop when times are good, so these leaders insist that “we can fix it ourselves.” And third, even when companies recognize that they have a serious problem, they have meeting after meeting about it without taking concrete actions.

Partnering and building relationships across the board

In addition to cultivating strong relationships with lenders, do the same with other partners like private equity investors and third-party turnaround advisors.

Third party turnaround advisors have learned every lesson at least twice and can help you navigate your recovery with a much higher probability of success. Trusted outside advisors will cost you money, but they also bring a more objective perspective and institutional knowledge to the table, which can lead to more impartial and better-informed assessments of a company’s situation and how to deftly maneuver through challenges. Your lenders will also be comforted by you bringing outside assistance. In fact, if you don’t bring in your own advisor, they’ll likely eventually require you to use one of theirs.

Private equity investors are also a tremendous asset during difficult times. They bring capital, experience, and networks that will help you be more agile than your competition. Their portfolio companies typically view times of crisis through the lens of opportunity. PE investors have a powerful incentive to make sure their portfolio companies are doing everything they can to make the business as resilient as possible, especially in a crisis. Lenders view this affiliation and mindset positively and thus are more likely to step up for companies that are backed by PE investors than those that are not. This is why it’s no surprise that one of the reasons PE-backed companies perform better than their non-PE-backed peers amid economic contractions is their ability to take advantage of these relationships and secure capital more easily and affordably.

No matter what a company’s financial situation happens to be, the first step toward determining what needs to be done is an honest assessment of the challenges it faces. Then it’s critical to take informed action while working with your trusted partners to give you the greatest opportunity to survive and thrive.

The original version of this article appeared in CEOWorld Magazine in November, 2020.

An interview with the American Investment Council’s Drew Maloney

October 12, 2020 Sean Mooney

At a time when companies are in desperate need of capital (and every other form of support they can get), the private equity industry has assumed a larger role in the U.S. economy. That’s why now is a good time to take a closer look at private equity – how it functions, the ways in which it’s misunderstood, and how it can help companies get through one of the most difficult economic downturns in decades. Drew Maloney is the President and CEO of the American Investment Council (AIC), and we’re delighted that he was willing to speak with us about how his industry works, how PE firms are responding to COVID-19, and what other companies can learn from private equity.

Sean Mooney: What role does PE play in the U.S. economy?

Drew Maloney: Private equity plays a significant role in the economy – the industry invests in more than 30,000 companies in every state and district, directly employs 8 million workers, and provides capital, expertise, and supply chains to help companies grow and restructure. PE investments also provide significant returns to retirees throughout the country, making retirements more secure.

During economic distress like this one, flexible and patient capital is more important than ever for businesses to stay open and continue to employ their workers.

SM: What are the biggest misconceptions about the industry?

DM: At AIC, our primary mission is to educate policymakers about success stories. In the news cycle, conflict sells. But the majority of PE deals are successful. The fact is that private equity investors are deeply committed to the success of their portfolio companies. In addition to the reputational risk of failed investments, they’re required to have “skin of the game” and invest in the funds that they manage.

PE firms invest in businesses of all sizes, but particularly in the middle market. Many of these businesses don’t get the attention of the big splashy public companies, so the public doesn’t necessarily hear about the value that private equity is able to create in their portfolio companies. It’s incumbent on the industry to explain how we’re helping companies get through COVID-19 and making the economy stronger. We have to define ourselves or others will define us.

SM: How did the private equity industry perform during the Great Recession?

DM: PE-backed companies are better positioned to ride out a downturn – during the last recession, for example, they generated returns well above 10 percent per year. For one thing, they’re much more nimble, agile, and can move faster. For another, they have operational expertise, access to capital, and extensive networks, which eases the burden on managers and allows them to take the time to create lasting value. This is what I describe as long-term, patient capital.

SM: How is the PE industry responding to COVID-19?

DM: PE managers are working to save and strengthen the businesses in their portfolio. As liquidity dried up earlier this year, private equity managers made PIPE deals with public companies, invested in debt instruments in dislocated markets, and made equity investments in businesses that needed capital to ride out the pandemic. They also contributed to their communities, donating hospital beds, spearheading back to school initiatives, and providing resources to teachers and parents.

For example, we recently launched a new Back to School initiative because we know so many families are trying to navigate this unprecedented school year. If you visit our website, you can learn how private equity-backed companies are helping make school safer and more accessible for students, teachers, and parents.

SM: What can non-PE backed companies learn from the PE industry, particularly during COVID-19?

DM: First of all, they need to have the flexibility to react to a rapidly changing marketplace. They should always think ten years out and try to make decisions over the long term. It’s also important to avoid panicking – tap into your networks, develop a plan, and be prepared for an environment of uncertainty for the foreseeable future.

State of PE: An Interview with Huron Capital’s Gretchen Perkins

August 13, 2020 Sean Mooney

Private equity is a widely misunderstood industry – from the common belief that Private Equity firms snatch up companies just to strip them down and sell them to the lack of awareness about the pivotal role PE plays in the modern economy. Gretchen Perkins is a partner who focuses on business development at Huron Capital, and there’s nobody better to correct the mistaken assumptions about her industry and give us a glimpse into the current state of PE. Gretchen was kind enough to answer a few of our questions about the state of her industry, the effects of COVID-19 on her firm, and what she envisions for the future.

Sean Mooney: Tell me a bit about Huron Capital’s investment focus.

Gretchen Perkins: We’re a middle market PE firm that implements a buy and build strategy to grow businesses. We focus on business services, consumer goods, and specialized industrial companies in the United States and Canada. We have both a control buyout strategy and a non-control equity strategy.

SM: What are a few of the biggest myths about the PE industry?

GP: The single biggest myth about PE firms is that we buy companies and sell them in pieces to make our money. The PE industry is a significant job creator across the U.S. – over the past ten years, PE-backed businesses created more jobs and secured more sales than other companies. There’s a reason college endowments, pension funds, insurance companies, foundations, and nonprofits invest in PE – it has been the single leading asset class over the past 20 years. There are billions of dollars flowing into PE because of the returns and the fact that the industry creates more value and is less volatile than other investment vehicles.

Despite the perception that PE firms always take over and try to sell companies quickly, the PE industry plays a long-term game. Firms generally want business owners to stay and maintain equity in the business – they don’t just take over. We want to make the companies substantially better over time because it’s the best interest of both our firm and our stakeholders.

SM: What was your firm’s initial response to COVID-19?

GP: We acted several weeks before everything started shutting down to increase support for our portfolio companies. For example, we developed a Rapid Response Playbook focused on the implementation of safety protocols and developing guidelines for remote work. There are 7,000 employees at our portfolio companies, and their safety is our top priority.

SM: How do the prospects for recovery look?

GP: When the crisis hit, we immediately started doing 13-week cash flow forecasts, and we’ve discovered that things aren’t as bad as we initially thought it could have been. Now we’re focused on implementing our Restart Playbook, which is designed to take a close look at business operations across our portfolio and help companies emerge from the crisis even stronger and more adaptable. We’re doing everything we can to help our portfolio companies navigate COVID-19 and the economic aftermath, but our management teams are rising to the occasion. This should serve as a reminder that in the current state of PE, firms are more interested in finding effective partners they can work with to build great companies over the long run than ineffectively micromanaging the companies in their portfolios.

SM: What types of businesses are you focused on investing in and growing now?

GP: We’re looking at add-on acquisitions to companies that can thrive during the crisis – insurance companies, for instance. We are also looking into food and beverage businesses that have proven to be COVID-19 resistant. But what we’re most interested in are companies that have solid leadership teams and growth potential – these are the partners that will help us move into the post-COVID-19 era in a stronger position than ever.

Industry Insights: An Interview with ParkerGale’s Devin Mathews

July 21, 2020 Sean Mooney

This is an unprecedented time for private equity firms and their portfolio companies. As the economy begins to show signs of a tenuous post-COVID-19 recovery, there is no telling how the business landscape will be impacted. But one thing is clear: PE will be a major factor in the recovery. Devin Mathews is a partner at ParkerGale, and he generously took the time to discuss his firm, perceptions of the PE industry, and what investment trends we should be keeping an eye on right now.

Sean Mooney: Tell me about ParkerGale’s history and investment philosophy.

Devin Mathews: ParkerGale was founded in 2014, though the founding team worked together running the technology group at another private equity firm. We only do tech buyouts (not venture capital or growth equity) and always take a majority control position. We only buy in two ways: directly from bootstrapped founders or as carve out divisions from larger companies. Both of these strategies have similar dynamics – good businesses that need some care and attention. We focus on owners who are at an inflection point with all their wealth tied up in the business – we help them greatly reduce their personal financial risk and take their businesses to the next level.

SM: Why would an owner want to partner with ParkerGale?

DM: Quality, not quantity, is our ambition. At the end of the day, founders bring us in because they believe we’re going to respect the businesses they’ve built. We’ll change things, but the employees will still feel like it’s a great place to work. We place a heavy emphasis on culture and developing people at our portfolio companies, and even though our expectations are high, we recognize that we have to provide the necessary resources to meet those expectations.

SM: What are a few of the biggest myths about PE?

DM: For starters, not all PE firms are created equal. There are different types of PE firms out there: some are more transactional, while others are more hands-on and operational to help companies build long-term success.

Also, it’s important to recognize that private equity is the economy – it’s not a niche asset class anymore. There are twice as many private equity-backed companies as public companies. This is all the more reason why PE firms have to focus on improving the image of the industry and showing others that our success as an industry is determined by the long term success of the companies we own. This industry cannot thrive if our companies fail.

As an industry, our reputation isn’t great. People sometimes expect all of us to be MBA jerks, with low EQ and high intensity. While much of that is well-deserved, we try to show people we’re human, empathic, and prepared to listen. At ParkerGale, we talk a lot about vulnerability, transparency, and trust. That’s really the only way to get results in our experience.

SM: How has COVID-19 impacted your firm?

DM: We are all getting older around here and have invested during booms and busts before. We all subscribe to the great Howard Marks quote that “you can’t predict – you can only prepare.” So we don’t make predictions. We just get up every day and execute alongside our management teams.

SM: What types of businesses are you focused on investing in now?

DM: We look for software companies that are hard to hurt – that means they have sticky products, no customer concentration, no vendor concentration, and good profit margins. They’re also in segments of the market where VCs aren’t pointing their money cannons, which usually ends up poorly. When we get involved, the companies are customer-centric and profitable, but may not necessarily be doing the things they need to do to secure long-term viability. There are tens of thousands of companies in North America that fit our criteria, and we need to invest in one or two per year. We operate at the small end of the market – we’re providing the first institutional capital that any of these companies have had.

SM: What’s your take on the future of PE investment?

DM: Within the next six months, will founders say “I’m too old for this sh*t” and want to sell even if it’s at a price less than the top of the market? Or will they wait for the market to come back enough to get them the price they need to walk away? Just imagine you’re a founder in your sixties and you’ve been through way too many ups and downs already. Do you have the stomach to hang on a few years or is it time to find the right partner that helps you walk away and enjoy retirement? My sense is that it will be a mix of the two, but as I said earlier, we don’t try to predict. So we’ll just prepare for whatever comes our way.

5 Value Creation Ideas for Private Equity Funds

October 31, 2018 Sean Mooney

The business of private equity is getting more business-like. Today, most private equity funds are largely managed like partnerships, not like the companies they own. However, many firms have realized the private equity industry has now matured into an industry and are starting to manage their own companies like their portfolio companies.

Here are some value creation ideas being implemented with our other PE fund customers that can help you get the ball rolling on maximizing the effectiveness and competitiveness of your private equity fund operations.

Get Digital Marketing Going
Amazingly, many B2B businesses still aren’t reaching their full potential because they don’t understand or appreciate the power of digital marketing. Nearly all private equity funds fall in this bucket and are not taking advantage of this low-hanging fruit because they don’t see it as particularly relevant or appropriate for their model.

However, there are only so many hands that you can shake during the course of a year. With digital, you can regularly speak to thousands of intermediaries, business owners, and other influencers at the click of a button.

To do digital well, you need to do more than an update of the creative on your website or a quarterly deal announcement email. You should be using an integrated approach leveraging not only email, but also paid search, SEO, and regular content that is interesting and relevant.

The good news is that digital can now be done well with a relatively reasonable budget. Don’t try to brute force this with internal resources. You can outsource this to professionals who can help you get it done right and allow your team to leverage their strategic strengths rather than taking precious time to sub-optimally recreate the wheel.

Never Say Small When You’re Talking About Your Money
Most private equity funds don’t think meaningfully about the spend within their own organizations after compensation, real estate, and deal-related expenses. However, you’re spending money on all sorts of other things that add up. You don’t want to let the tail wag the dog by any means, but there are some relatively easy tools you can use to drive savings and free up some cash to invest elsewhere in your organization. One such tool that both you and your portfolio companies should use is a group purchasing organization (GPO). You’ll likely find savings in travel, office supplies, and data and telephony. It may not change your world, but it’s free money that’s relatively easy to get.

Stop Getting Bogged Down With Post-Closing Tactics
PE funds typically come up with a differential strategy, use it to prevail in a process, and then get swamped out of the gates with the minutiae of the 100-day plan. Rent an independent consultant hailing from a top PE ops improvement consulting firm to drive tactics that are important but not the best use of your teams’ scarce time, such as:

Reporting
KPIs & dashboarding
13-week cash flow forecasting
Ad-hoc onboarding analyses

And other similar tactics. Groups who use these resources also typically ask for and get baskets in their debt agreements and push these costs below the bottom line (P.S., they’re also great for preparing for sale).

Use the Robots
Your team’s opportunity costs are in the $1,000s per hour. We’re regularly asked at BluWave how many employees we have. Our answer is always “as few as possible.” Like you, each hour is precious for us and we use technology, automate, and outsource whenever possible so we can as optimally as possible focus resources on our strategic cores. PE funds should do the same by using and getting the most out of the latest CRM software, portfolio company reporting solutions, strategic planning tools and the like.

Get Leverage
Using variable resources is a necessity in this day and age in PE. Groups who use them well can accelerate growth, development, and value creation in profound ways. However, it’s hard to know who is good; as soon as you like them, they change or aren’t available, and as a single fund it’s hard to hold third party resources accountable. Shameless plug: Use BluWave. Our business is to be the expert of experts, so you can focus more on your strategic priorities.

You can’t do it alone. Value creation is, in large part, about the people and resources you leverage to help, especially for private equity funds. Take advantage of the pre-vetted network of experts available through BluWave today. Get in touch with us.

How to Run Your PE Fund Like a Business

May 8, 2018 Sean Mooney

There are currently more than 4,000 private equity funds competing for limited opportunities. Economics 101 is hitting the PE industry hard: since the demand for investment opportunities has been growing and the actual number of opportunities has stayed consistent over time, PE investors are facing an uphill battle. To succeed in a crowded field, PE funds must now run their own organizations like their portfolio companies.

Private equity funds are in the business of taking enterprises operating below full potential, growing their value, and selling them at a profit. And while PE investors focus on improving the operations and value of their portfolio companies, they often overlook the management of their own fund. Don’t let the cobbler’s kids have no shoes. PE investors need to learn to look at their funds the way they look at their portfolio companies, with an eye for increasing opportunities and optimizing operational effectiveness across the fund’s lifecycle.

The Business of Private Equity
Much like target businesses, PE funds typically have a Front of the House (deal and human capital origination), Operating Engines (assessing investment opportunities and post-closing value creation), and Back of the House (fund administration and fund operations). The business of private equity must increasingly be more business-like to succeed in today’s increasingly competitive environment. The good news is that most PE funds have tremendous opportunities to improve how they operate and differentiate from the pack. In this post, we focus on the low hanging fruit within your Front of the House and Operating Engine.

Front of the House

Knowing How to Market your PE Fund
Gone are the days of investment opportunities finding you simply because you have capital to invest. There are too many funds competing for the same deals. One of the hardest jobs for investment bankers now is knowing where to cut the deck for a sale process. Branding and marketing efforts are essential in the competitive PE world. PE funds must use marketing to source new deals, raise funds from investors, and recruit new talent for their internal needs and to their portfolio companies. The same marketing tools that are applied to portfolio companies can and should be applied to PE funds.

PE firm members should take the time to determine and hone what differentiates their fund from the competition. This brand positioning exercise requires thorough research into the market, as well as feedback from firm members, limited partners, and portfolio company leaders. It’s often beneficial for PE funds to work with third-party marketing experts who will take an unbiased approach to their research and can help develop effective brand messaging.

Once you have your brand messaging figured out, your fund should be using digital marketing to raise and regularly reinforce awareness. It amazes us that virtually no funds are using these tools other than episodic emails tied to new deals. The good news is that early adopters have a green field opportunity to differentiate. If interested, we know excellent agencies that will be great for both you and your portfolio companies. And when you’re ready to execute, we can also point you to the best technology tools like CRM, implementation groups, and data providers to get the job done.

Using Human Capital Assessment Tools
Many PE funds are already using human capital assessment tools for their target acquisitions. Far too few are using these tools to support their own teams.

Many, if not most, PE professionals (including me) came from the investment banking ranks. I think most will agree that these institutions have many strengths; however, training their professionals to lead and manage highly effective teams is not always one of them. The school of hard knocks gets results for sure, but a lot of china tends to be needlessly broken in the meantime with morale and performance suffering as a result.

Human capital assessment tools can benefit PE funds by identifying opportunities for structural improvements in the organization, as well as people who have the right skills to positively affect change and fit within your existing group dynamic. PE funds can also use the results of their HR intelligence initiatives in their marketing and recruiting efforts by pointing to standout results they’ve created. We have a particularly relevant group that can help understand your team dynamics, improve group cohesion, and guide future hires. Their method helps the Israeli special forces do the same and can be just as helpful to you (as well as your portfolio companies).

Back of the House

Tuning up your operational engine
Many PEGs are now adding operational resources to the internal teams, ranging from operating partners, to project support QBs, to full blown portfolio support groups.

We regularly see a common flaw in the private equity operating support model. In this model, the private equity operating professionals usually come from senior level industry positions in varying end markets where they bring true executive and operating excellence experience. In their prior capacities as senior executives, they led highly functional teams to execute on their vision and related strategy. However, when they join the private equity fund as an operator, they often find themselves in an army of one, where they formulate the vision, often have to single handedly determine the strategy, and then typically execute it themselves while navigating varying degrees of pushback from the portfolio companies.

Your operating professionals should be acting like they did before joining as an operating executive: assess the situation, set the vision and strategy, and support / manage the execution (without doing the execution). Very few firms can afford however to build their own full blown internal AT Kearney (nor should they). The good news is that there is a world of excellent third-party resources that your operating executives can manage in conjunction with your portfolio company leaders to execute on identified opportunities. When chosen and managed correctly, you’ll get better outcomes, the cost won’t be borne by your management company and is variable at the portfolio company level (and often add-backable at sale time), and operating partners will have significantly more leverage to impact your broader portfolio versus getting bogged down on individual projects.

Learning to Outsource
Highly-trained PE firm members shouldn’t be wasting hours Googling the solutions to industry-specific problems their portcos are facing—going down these rabbit holes can cause firms to lose thousands of dollars per hour per professional in opportunity costs (run the math – it’s not for the faint of heart, though). PE firms must become more comfortable outsourcing projects to consulting professionals with niche skills and industry expertise so that their teams can focus on their core competencies.

BluWave can quickly and efficiently connect you with vetted, PE-tested service providers who can tackle the projects your internal teams shouldn’t. Our invitation-only expert network includes specialized consultants who can help assess opportunities, build value, and complete projects with more speed and certainty—for PE firms’ internal teams or their portfolio companies.

Partnering with BluWave is the first step towards running your PE firm more like a business. Contact us today to learn more about how we can create value for your firm.