• Industry: Private Equity
  • Type: Survey report, White paper
  • Date: 1/14/2013

Managing portfolio companies most effectively 

Managing portfolios
The research reveals that private equity directors are generally highly regarded for their deal-making and financing skills. However, according to participants in the survey, their effectiveness when interacting with portfolio companies is more variable. The most effective make a real effort to build a relationship of trust with management and actively use their skills, knowledge and network of contacts. The least effective are perceived to add more limited value, apart from providing capital and execution capabilities.

The research should be read in the context of the current economic environment which has presented enormous challenges to the corporate world in general and not just private equity. Given we have just been through some of the most difficult years since the industry grew in prominence over the last twenty years, we see the feedback overall as very supportive.

Chart 1

The majority of those surveyed rated the quality of the private equity director’s involvement in the business as good or excellent. However, with 41 percent rating the quality of private equity input as average or poor, there is clearly room for improvement and the respondents had a number of suggestions on how it could be done better.

Effective ways of working

  • Have a very open and honest dialogue – especially with regard to exit strategy.
  • Have either operational understanding or access to advisers with relevant experience.
  • Allocate sufficient time and input to the strategic planning process.
  • Spend more time on the business, not just at board meetings.
  • Truly understand the business, the competitive landscape and influences – not just the numbers.
  • Cut back on the number of performance indicators requested and quickly identify the key levers.
  • Have fewer private equity professionals and more independent directors on the board.

The private equity firm had operational experience so they were able to help solve problems, support management and were a bit like a personal coach. It was a fine example of how private equity can work.

- CEO, Packaging sector


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