Workings of Private Equity

Private Equity – Inner workings of best industry performers.

Executive Summary,

Private equity operators continue to drive significant benchmarks in upper quartile performance metrics, they are masters in driving top end performance improvements delivering results that are admired and respected across industries. New business acquisitions commonly deliver extraordinary growth in sales in the first five years referred to as 25%,25%,25%,20% & 20% these levels of performance are legendary but often the methods, practices and processes used to deliver such results remain a secret.

Retail Metrics Specialists have in depth knowledge, best practices and know how taken from multiple Private Equity recovery and sale projects.

Our team of specialists AT RETAIL METRICS have worked with and for some of the global private equity A listers that have delivered incredible performances and economic recoveries leading to successful exits. Let us explore some of the characteristics and insights used by top performing Private equity operators which can be adopted across any business model.

A combination of skills, levers , models and cultural attitudes are mobilized in unison and at pace in newly acquired businesses, be clear the pace of operations and management will instantly lift and intensify as every corner of the business is forensically analysed for economic value and benchmarked against the industry best performances.

Private Equity teams are specialists in every aspect of organizational process, performance and profitability metrics. Most specialists will have deep industry expertise and access to global best performance metrics therefore understand what good looks like. Equally Private equity teams can identify levels of underperformance whilst motivating good performances into great performances.

Private equity will be trained in negotiation tactics often as a by-product of years of experience in challenging existent terms and conditions considered golden opportunities. Expectations are high from day one, the pace of movements will instantly shift to fifth gear, this of course is not for everyone and personnel change is expected. Dramatic shifts in business value are no accident there is a clear blueprint that can be adopted across industries.

The slowest pace of change will be the ability of key people in the business grasping, adopting, and adapting to new strategic directions and new ways of working. Whilst there will be respect for tacit knowledge, the key moving forward will be understanding who can and will deliver change, equally who will become a barrier or individuals not willing to change who will be rooted out fast.

Private equity operators apply tried and tested strategies to realise effective and efficient returns such as cash flow management, margin and price improvements, strong incentives for team members who are invested for the three- or five-year plan. Benchmarking data reveals opportunities across buying, operations, marketing, third parties and landlord charges as cost optimization and renegotiation in key areas provide hard number benefits.

Robust reviews of debt, debtors and interest rates provide insights to potential efficiencies, seasoned specialists know where to attack to ensure swift returns in economic performance gained through years of experience in these high-pressured situations.

It is fair to say private equities operate at the top end performance league table of financial performance therefore adopting and driving critical behaviours throughout the business, creating innovative and exciting change cultures at speed. Retail Metrics Specialists can provide this level of support and know how at very reasonable day rates, this means an extremely easy way to understand how the best private equity teams operate.

Entering a new business, new functional specialists provide fresh eyes with unbiased views; agendas are clear, aggressive short-term maximization and optimization of economic growth on a strict three to five-year timeline. In fact, a private equity operator still involved in a six to eight-year engagement is rare. Retail Metrics Specialists have come from this world and understand how these game changing results can be delivered at speed whilst supporting the local management team through high speed change.

Often private equity teams buy out of favour businesses that are not part of the core business focus. Sometimes these businesses are neglected or undervalued, or underperformance is tolerated by the current leadership or owners for various reasons. Acquisitions suddenly bring these businesses into full focus, management teams will be scrutinized, challenged and benchmarked against industry and marketplace best in class performance.

New stretch economic growth, efficiency and profit targets will be set with full expectations that plans agreed deliver the financial returns. Measurement and analysis will become frequent and strategic solutions will require speedy execution and must lead to robust financial delivery.

Ownership, executive teams and strategic focus may require significant change however every element of the corporate machine will be reviewed, energized or modernized for the benefit of the organization. Visions, Missions and ambitions are rapidly aligned, and rough edges smoothed out fast. Retail Metrics can support strategic analysis, development of vision, mission and five-year business planning processes; equally execution and delivery or key performance projects if required.

As private equity teams are buying to sell generally over short investment periods, they rarely share best practices or document processes as they move rapidly from acquisition to recovery and successful sale. Management teams are generally smaller, faster, cheaper and simpler in approach which facilitates strategic planning, decision making and efficient implementation. Should a private equity team require help they reach out to functional specialist network of people who are employed for short periods of time to facilitate economic changes, either leading or coaching teams through complex change projects. Retail Metrics can provide you with access to these functional specialists with private equity insights and experience gained from leading national transitional projects.

Private equity teams move at speed, are light of foot and travel in small numbers of functional and complementary skill sets, they have acquired and developed deep industry knowledge in buying, operations, marketing distribution, finance, technology and human resources as they purchase, turnaround and successful sell businesses. The businesses they sell are generally lean, aggressive and have developed robust trading mindsets whilst driving a culture of continuous cost optimization. Retail Metrics can help your business through each functional requirement, our network is extensive.

Our specialist partners have been actively employed in strategic purchases, turnarounds and sell on capacities. They can support you in discovering new ways of working and develop effective and efficient Cost Optimization Strategies along with new income streams.

Our previous experiences show it is likely we can make more than 10% difference to your cost base; we would be delighted to have a conversation and see how we can help you.