Who Gets “It?” Private Equity Firms Overlook Some Basics - Part I

Buying or investing in a range of strategically similar companies, and then combining IT and back office operations, is a common practice for private equity firms to reduce overall costs of ownership and wring out more cash flow among all properties.

Introducing large or “important” potential same-sector customers to those PE-owned companies by leveraging relationships is another. Of course, there are many more that go along with those, but the collective goal is to increase the value of that company and either sell it off later or take it public.

And it takes experienced financial and management skills to consistently pull this off successfully.

But on average, only 30% of all PE deals achieve their financial goals and become profitable, success stories. Would that the ratio was 70/30, instead of 30/70. Granted, one big deal, one high flying success, trumps all others in the fund or the portfolio. But if other businesses and industries used that as the benchmark, then our current brand landscape would look much different.

After speaking with several managers at PE companies, the one thing that seems missing from their overall value development strategies is what appears to be, on the face of it, job #1: increase sales.

Sure, I am biased because that’s my field – developing focused communications platforms that impact the buying decision-making process through strategic selling vehicles – but it makes fundamental sense, and a few of the PE companies my agency has spoken to agree.

Not as a replacement for their other strategies, for they too are critical, but simply to augment those strategies.

After all, the true business of any company is to sell a product or service and to consistently increase sales year over year. Not just create more efficient processes. Isn’t that what made the company attractive enough in the first place: undervalued with a big upside?

PE companies that actively utilize marketing to achieve their goals. Food for thought.

 

See Part II to find out what to do:

http://www.fastcompany.com/blog/alder-crocker/who-gets-it/who-gets-it-private-equity-firms-overlook-some-basics-part-ii

 

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