The impressive passion and perseverance of entrepreneurs can take many a long way.
However as Andrew Priest, Partner, at Inflexion Private Equity explains even the most ambitious of teams will have faced testing times recently and may be looking for support as they consider their plans for the future and the path back to growth. Many businesses will be facing critical junctures – opportunities to buy another business, rethink their digital offering or expand geographically, for example – which can be as tricky as it is exciting.
Fortunately, private equity could be a great partner to help overcome these hurdles given the financial backers’ ability to provide both capital and expertise in areas such as M&A, international expansion, digital enhancement, talent management and commercial strategy.
M&A
Thoughtful acquisitions can transform a business. But they can be tricky: from sourcing and approaching targets, to negotiating with them, to integrating the businesses post-deal. Since our founding over 20 years ago, we have supported over 260 acquisitions for our portfolio companies and so have learned a lot about this exciting task.
Relationships matter, especially with M&A and at a time like this. Our longstanding relationships meant we were able to sign six add-ons for our portfolio in Q2 2020, including two for Alcumus, a risk management specialist already au fait with acquisitive growth given its two strategic transactions with our support since its 2015 buyout. Most recently, the firm announced the purchase of ContractorCheck in Canada and Banyard Solutions of the UK at the end of June.
Owing to the delicate nature of integrating businesses post-deal, and the need to respect delicate cultures and embedded systems, we often undertake M&A early on in our partnerships. For example, we backed managed IT and communication services business Ridgewall in November 2019 and supported the firm’s simultaneous acquisition of QDOS SBL, giving us ample time to work with the teams to integrate their IT and cultures, among other things.
International expansion
Firms may also look to grow by expanding overseas, which can be achieved through M&A, organically, or a combination of both. We’ve helped facilitate 42 international add-ons in 19 countries to help our partnerships realise their global ambitions.
The presence of our in-country experts in China, India, Brazil and the US was particularly helpful during the lockdown months when travel was severely restricted, as they were able to represent our partners in their respective geographies.
Optical transceivers business Halo for example has seen first-hand the benefits of a local presence in fast-growing markets. The business was created in 2017 when we merged UK-based ProLabs with California-based AddOn, and more recently the firm has been growing in India. At the beginning of 2020, our in-country expert facilitated a meeting which resulted in securing a major Tier 1 telecoms provider in India as a client the day before lockdown commenced in the country. This has now resulted in a contract that is worth $2 million and is likely to be repeated annually.
Digital enhancement
Gone are the days when a digital presence was the sole preserve of high-tech companies: a well thought-out digital strategy can help businesses across all sectors provide a better customer experience and build up valuable data. Our digital team is working with Marley, a century-old roof tiling specialist, to support its adoption of systems to create a better customer experience. The firm invested in a new digital platform around 20 months ago to enable customers to self-serve with a range of design, specification and installation tools.
Other areas of digital can seem rather futuristic – for example, the team at Virgin Experience Days (VED) has seen the benefits of robotic process automation (RPA). As a curated experiences business, VED has peaks and troughs in its customer activity, but rather than bringing additional people in over peaks, the firm is now using robots to help smooth the workflow. Now VED can re-deploy staff to dealing with customers and higher value-add tasks. Not only should that make for happier staff, but it also reduces wait-time for customers, and the potential for human error is reduced.
Talent management
People are at the heart of every business, and their engagement is crucial to success. As part of growth or during times of uncertainty, attracting, nurturing and engaging valuable people is crucial.
Every company needs different types of leaders at various times, and someone who performs well in their current role may not be the right person to help you reach you immediate goals. Establishing a leadership pipeline can require a lot of time and often money, though some private equity firms may be able to assist. During lockdown our Talent Director helped to facilitate half a dozen c-suite appointments for our portfolio.
Commercial strategy
A firm’s commercial strategy underpins its financial success – and this has been sorely tested for most firms over the last few months. Focusing on retaining existing customers has been the highest priority for many businesses, but not all products and services are well suited for remote delivery. Reassessing, testing and iterating how your offering can be tailored to today’s uncertain world is key. We have worked closely with our 48-strong portfolio to stress test and pivot plans during lockdown, and have learned a lot with them in the process.
Cross-functional topics such as pricing are often left with lingering questions around what the right value-based approach is, despite the clear impact an improved approach can have on the bottom line. Specialist roofing system maker Marley worked with us to understand how to better structure its pricing and managing discounting consistently to align with value delivered.
It’s clear that the right private equity partner brings more than much-needed capital; they can bring expertise crucial to support growth. In these uncertain times, a backer with experience in managing through economic downturns with a culture of support is vital.
