SLKone's Private Equity Practice

Stabilize > Leap > Keep-Climbing

Every investment undergoes the sequence of Stabilize, Leap, and Keep-Climbing from acquisition to exit. However, rarely does the investment thesis and trajectory of the company map seamlessly and as the PE sponsor, you are responsible for ensuring success at each step of the sequence.

The Staircase

In the PE world, the greater risk/reward profile manifests both in the motivations of the sponsors and the day to day operations of the portfolio company. As the sponsor, your margin for error is minimal and this is reflected in the expectations and incentives you set for the management team at the portfolio company. The management team facing expectations from above and wary employee base below end up walking a high-wire tightrope with tremendous crosswinds. Everything must come together perfectly to realize the investment thesis.

At SLKone we take these disparate challenges among the stakeholders to Operationalize and Execute through the sequence of Stabilize, Leap and Keep-Climbing to deliver for our PE clients.

Client Goal

A “Buy & Build” middle market private equity leader required a professional services provider to assist the portfolio team ‘to ‘fuel the growth and build value’.

SLKone’s Bespoke Approach
  • Recognized that while the goal was universal, each portfolio company situation presented a distinct need for the maturity and life-cycle stage and ‘rinse and repeat’ solutions would not work.
  • Responded with urgency to conduct ‘root cause analysis’ in an accelerated time frame to understand functional priorities for the highest payoff on seriousness-urgency-growth matrix.
  • Linked the issues to the causal drivers in the process and organizational performance needs.

Stabilize

The investment from a new sponsor is like a jolt of lightening for the business. One would expect that renewed focus, a greater emphasis on reporting, and an expectation of urgency would help the business, however, very often it leads to anxiety and performance slippages. Stabilizing an investment; channels the energy into areas that revitalizes the businesses and prepares them to Leap forward.

The window for stabilization is short, and it generally begins with pre-transaction financial and operational diligence to understand areas of weaknesses hidden behind the hockey stick charts prepared by investment bankers. It is imperative for sponsors to ‘train’ the business to their portfolio management approach. The window is short - no more than 30-60-90 days to institute new reporting, make personnel and systems upgrades, and institute a cash discipline that makes the business healthy to leap forward.

Client Goal

A private equity client was interested in finance function assessment for a recent acquisition in medical devices space.

SLKone’s Bespoke Approach
  • Teamed up with the functional leadership and conducted an accelerated assessment that included touchpoints with other business functions.
  • Delivered a list of high priority stabilization roadmap

Leap Forward

Without coordinated growth efforts, even a healthy and stabilized business can quickly dissipate its energy. Often in the urgency to meet expectations, revenue discipline is lost as management resorts to bringing in revenue at any cost whichy paralyzes the organic growth. Similarly, add-ons whether tuck-ins or sizeable acquisitions, executed without a playbook can handicap the trajectory through straddled costs.

Frequently, the business finds itself adding costs that are disproportionate to creating value. Leaping forward requires building a healthy top line that is the envy of the competition while continuously factoring down the costs supported by smart systems and upgrading the management team that spends more time in informed decision making vs. fighting fires.

Client Goal

A middle market private equity firm was integrating two specialty practices in healthcare space to create a leader and needed assistance in a disciplined approach to integrate two organizations in the background without disrupting patients’ experience.

SLKone’s Bespoke Approach
  • Brought the two business teams together and assigned roles and responsibilities that matched with future state combined organization needs and competencies
  • Seamlessly pivoted the role of ‘team player in the court when needed’, ‘A coach from the sidelines to guide to keep moving forward’ and ‘cheered from the bleachers’ to maintain the momentum.
  • The combined business exceeded expectations from the outset and took up our assistance for next cycle of strategy formulation

Keep Climbing

Even best run businesses that have leaped forward will require trimming and staying fit to keep adding multiples to EBITDA. Whether, it is customer profitability improvement, inventory optimization or harnessing shared services for an ever growing business footprint, the sponsors and management teams should be careful about capital investment timing, efficiencies,and free cash flow to perfectly time for a exit event. This in-flight maintenance effort must be managed, and leaders must keep their eye on the ball. As is often the case, the next transaction or event is just around the corner – one must constantly apply these principles to Keep Climbing.

Client Goal

A private equity owned business needed assistance with focused improvement with an accelerated realization on efforts

SLKone’s Bespoke Approach
  • Conducted a rapid mode business assessment and validated high priority improvements.
  • Assisted management in roadmapping critical few operational and financial processes and developed the ‘size of the prize’
  • Established a cadence for tracking progress towards realization of the business financial results.