In the private equity world, let’s face it, time is everything. If your portfolio does not quickly produce impressive returns, you could be in trouble. That is why having a robust post-acquisition sales strategy is critical to ensuring a meaningful exit multiple.
Even with due diligence and careful analysis, it is common for challenges to arise after the transaction is complete. In the past, when difficulties arose, PE firms focused on finding areas to cut and consolidate. Essentially, the plan was to make the business lean enough to create short-term value in preparation for an exit.
However, more and more it is becoming critical for companies to solve top-line challenges to attract strategic buyers and allow for the multiples that impress investors. It is also more common for investments to pass between firms that may have already addressed all the obvious cost-cutting measures to increase EBITDA and dress up the asset.
In a competitive environment, quick intervention in the operations of a portfolio company is the key to creating short-term value and maximizing returns. The most successful firms now take a more holistic approach to remedying underperforming portfolios. Often, this means working with the portfolio company to create rapid organic growth that can be sustained even after the company changes hands, sometimes coupled with add-on investments to round out the portfolio and increase customer engagement.
What's the best way to grow a company and maximize investor return? I will give it to you plainly: Sales.
If you want a company to increase top-line results, you need to develop a robust sales strategy that can attract new customers from new and existing markets. That means hiring or cultivating successful sales leaders within the portfolio company. That means enhancing the company's ability to scale and create new opportunities for growth. That means creating a roadmap for products and services to improve the customer’s dependency on the partnership.
That said, designing and implementing a new sales strategy often falls outside of the firm's immediate skill set. Acting hastily to restructure the sales engine without a clear picture of the risks associated with different actions could lead to a costly and time-consuming re-start with unexpected outcomes.
That is why many of the best PE firms are bringing in outside help to quickly assess the sales organization and build, test, and deliver on the strategies that can most likely improve sales results. Bringing in a trusted sales advisor can help PE firms get an honest assessment of the strengths and weaknesses of the current sales team, organizational processes, and results. An expert sales advisory team can work with your leadership team to help create a strategy to address new market opportunities and devise ways to remediate and invigorate stagnant growth within the existing customer base.
If your portfolio company does not have a strong sales strategy and isn't equipped to scale sales, chances are cost cutting alone will not help enough to maximize the return on the investment.
Do not let an underperforming or inefficient sales engine hurt your portfolio and disappoint investors; instead, partner with a trusted sales advisory firm to build a plan, accelerate growth effectively, and maximize your return on investment as quickly as possible.
This is the first of a five-part series on Private Equity Sales Strategies.