The Private Equity Toolkit

12Adding Value Through Active Ownership

Key Topics in Chapter 12:

• Develop your own success formula with a Value Creation Plan
• Four value-accretive actions for every portfolio company to consider
• Create powerful performance improvement momentum with a 100-Day Plan
• Governance and reporting: strategic priorities of a well-run private equity board
• When things go wrong: spot the first signs of company distress and take radical action

When the ink on the signed transaction documentation dries, it is very tempting for deal teams to get into full-on celebratory mode: the deal is finally done! While a closing dinner (or two) is a nice way to honor this important milestone for the deal team, transaction advisers and the newly acquired portfolio company, any prolonged festivities might be premature. Guess what: if you just acquired a struggling business with significant improvement potential, the company will still be underperforming on the first day of your ownership—and it will continue leaking value until you roll up your sleeves and do something about it. Henry Kravis of KKR famously said, “Don't congratulate us when we buy a company. Any fool can buy a company. You just pay enough and that's the easy part. The hard part is, what do you with the business once you've made your investment? How do you create value? What do you do to make that company much more efficient?” (Goldman Sachs, 2017).

Private equity investors tend to differ in how they engage with their portfolio businesses ...