Profit from Procurement

12PRIVATE EQUITY: Learning Lessons from PE

You may wonder why this book has a whole chapter devoted to Private Equity, when it's only relevant to a subset of our audience. This book's authors have worked extensively with the world's leading PE firms to drive Procurement benefits, and we've seen over and over again that Procurement and PE can be a powerful combination. Private Equity is very interested in the relatively painless potential to generate savings that drop straight to the bottom line, and the more sophisticated firms are highly proactive in creating a platform that permits Procurement to step up and deliver. There are interesting lessons for all of us in this, and that is what this chapter will explore.

Of course, our intent here is not to encourage you to sell your company to Private Equity! And it's also not to promote the “PE model” over other ownership models. It is merely to hold up Private Equity as an interesting example of what can be achieved in Procurement when there is a high level of interest in the function, and when a platform is created for it to step up and deliver cross-functionally.

We've talked extensively about how Procurement is under-invested in many companies because the “top table” fails to recognize its potential. The more progressive PE firms do recognize that potential and are willing to make that investment. The mid-cap companies that PE tends to buy often have quite basic Procurement functions at best…and yet in the space of a couple ...