While a private equity firm can invest more heavily in one type of value strategy or another, the best result comes when a PE firm works with an operating company to increase both monetary value and relational value.
Lenders are far more cautious with the companies they invest in than they were just a few years ago. They want to see that a private equity can deliver real value. And since the only controllable way to create that kind of value is to become a “portfolio activist,” it is in a private equity firm’s best interest to focus on overall operational improvements. PE firms who took this approach early on in their relationship with their portfolio companies saw a 200% greater return than firms who didn’t.
In a recent survey conducted by Bain Capital, 75% of respondents said that operational improvements will be their primary source of value creation over the next several years. The same number claims to have already become far more involved in the management and mentoring of their operating companies – focusing on such improvements as financial reporting and operational efficiency.
The point is, great portfolio management isn’t just a slice and dice operation. It’s one of innovation, added value, and care.
One of the easiest and best ways to add value to operational efficiency is through telecommunications expense management. Telecommunications is typically one of the largest line items for private equity firms. Telecom bills come pouring in every month loaded with confusing jargon and bloated with overage charges.
The good news though is that it there are lots of ways private equity firms can save on telecom. Adapting a winning strategy not only saves money, it adds value to your portfolio.
[author_bio username=”Ken” name=”yes”]
