Private equity deal teams have a lot on their plates. They are responsible for finding prospects, conducting due diligence, underwriting, structuring terms, consummating deals, monitoring performance, and creating operational alpha, all with the ultimate aim of a successful exit. It’s a lot to juggle. 

Traditionally, deal teams distinguish themselves by finding the deals where the opportunity to create value is greatest. With today’s rate environment virtually eliminating buy-and-hold and financial engineering as effective strategies for generating returns, deal teams are increasingly more active in the aspects of portfolio operations, working alongside operating partner teams to identify and pull the levers that will accelerate transformation and allow for the investment hypothesis to be realized. 

Each PE sponsor has its own composition. In some cases, deal teams assume a secondary role to operating partners and expert specialists who manage and execute transformation projects. In others, they are more actively engaged on the operational front lines. In either case, embracing value creation technology can help any deal team drive operating alpha across their respective portfolios in the following ways:

Transformation Structure and Discipline:

As private equity firms scale assets under management and add companies of various sizes and complexities to the portfolio, the need to define effective processes across operating and deal teams becomes more pronounced. A modernized value creation planning platform offers a template for establishing a unique and differentiated approach to value creation while giving internal teams structure, discipline, and a formalized portfolio governance framework that can be replicated as new assets enter the portfolio. 

Tracking Transformation Agenda Progress: 

Deal teams are persistently challenged with tracking the performance of financial and operational factors, monitoring the status of the various transformation projects, and understanding how individual companies are performing relative to their peers and industries. Resources should be spent analyzing performance and working with management teams to effect value creation action, not chasing, collating, and storing data. Value creation platforms give deal teams the ability to navigate the increasing volumes of data and extract the desired level of detail related to performance and progress against the transformation agenda. 

A Transparent Source of Record:

Historically, PE firms have lacked effective mechanisms for monitoring value created through their operating strategies. Internal teams typically worked in Excel spreadsheets to track financial data and share lagging indicators. The linkage between value creation and financial plans was minimal. By instituting a technology-enabled and operationalized approach to value creation planning and execution, deal teams can drill down deeper with greater transparency and identify with greater ease both lagging and leading indicators that can prompt interventions and course corrections needed to keep the value creation plan on track.

Elevating Confidence and Reputation:

In the world of PE, reputation is a cornerstone of success. Earning the confidence of management teams, co-investors, and LPs is foundational to growth. By having a tool that clearly articulates a GP’s formalized approach to creating value, details the execution process, and provides partners with access to performance data, GPs can fuel confidence in their capabilities as effective managers of value creation and more easily enlist co-investment partners for future deals, paving the way for future portfolio growth.

To learn more about how deal teams can benefit from using Maestro, click here to schedule a demo.