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Private Equity Whitepaper 2021

Private Equity Whitepaper 2021

Private equity companies have recently pulled out all the stops in the top and bottom lines to defy the pandemic and stabilize margins. A closer look, however, reveals that not all potential for operational value creation has been exhausted. Procurement in particular still has a lot to offer in terms of cost optimization.

Best-in-class portfolio companies: Exploiting value creation potential in and after the pandemic

Private equity companies and their portfolio companies have so far come through the Corona pandemic largely unscathed. This is the result of the second INVERTO study on value creation strategies of private equity companies.

Compared to the 2019 study, PE firms intensified activities in the so-called bottom line, i.e. they dealt with cost reductions and working capital management. This is not surprising, because hardly any entry investments are needed for these measures. They have a direct positive impact on profit and loss.

Contents of the Private Equity Whitepaper:

  • Impact of the pandemic on portfolio companies
  • Momentum for top-line and bottom-line measures
  • Operational value creation: The role of procurement in the crisis
  • Top-performing portfolio companies before the pandemic
  • Operational excellence: How the wheat is separated from the chaff in procurement

 

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Value contribution of procurement highly dependent on clear targets and external expertise

Particularly in the procurement departments, it became apparent that private equity companies expected their portfolio companies to cut costs quickly: This can be achieved, for example, by bundling, renegotiating or re-tendering requirements. However, the effect of these quick measures is limited. To optimize costs beyond this, companies should also work with more sophisticated concepts such as demand management or technical respecification.

The successes that procurement departments achieve with their measures vary greatly among the study participants. The value contribution for the respective company ranges from 2.5 to over 10 percent. Buyers who achieved the best results were those who had clear targets and also brought in external experts.

 

Download the full results presentation including detailed recommendations for action free of charge here:


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