PMCC Interactive

Tag: Private Equity

  • Business challenges are not like wine and cheese….

    Over the past few months, I have had scores of discussions with people working in and providing services to Private Equity Firms.  The conversations have been interesting and focused on questioning and challenging the status quo.  I thought it would be fair and appropriate to summarize the themes of the conversations for your consideration.

    Business challenges are not like wine and cheese…. but more like bread and milk– they are common, but don’t get better with time…

    These are the most frequently discussed and vexing themes….

    1. The strike zone is expanding- Longer holds don’t generally seem to represent additional opportunity for incremental growth and development- but place extraordinary pressure for returns and maintaining expected IRR’s for investors… creating additional risk with little prospect for incremental reward
    2. Velocity on the sell side is emanating from A companies, while B’s sit and search for a way out…Plentiful debt and plentiful equity in search of the A companies, make this segment of the market hypercompetitive and Strategics, PE firms and lenders are in the quest to provide a value add- and make their green money even brighter and shinier
    3. Everyone has them, few like to acknowledge it. Every portfolio has a “bottom 50%”– those companies that are under achieving expectations, or underperforming on an absolute basis.  The surest way to make money is to not lose any.  But, the time energy and attention placed on the challenged companies, tends to be a trap that saps attention from the higher performing companies that likely have an opportunity to outperform
    4. Management teams have been built and curated to focus on growth and development and set up for the exit…. but most don’t have significant successful experience in dealing with types of challenges presented by the “bottom 50%”
    5. Quality information is elusive.  It is a challenge to sustain a focus on relevant, reliable and readily available information to effectively run the business.  This delays or impedes problem recognition and response- and in some cases does not promote confidence in the strategies and steps necessary to “get out from under”- at the very time confidence and resolve is critical to break the cycle and drive improvements

  • Helping create value in underperforming and underachieving Private Equity Investments

    The Best way to make money is to start by not losing it.  PMCC Ventures has worked with scores of private equity backed companies to improve performance and move from the bottom 50% of performers to the top 50%.  Our 35 years of experience span industries, company size, stages of development and  range of performance.  These individual experiences are good and interesting.  The combination of the experiences provides our clients with significant value.  We understand that underperforming is not a comfortable place for most organizations- and we know how to help stabilize the organization to enable it to execute a thoughtful and productive process to become the best it can be.

    The core investment hypothesis generally revolves around finding several good business ideas and businesses and provide capital to help them become value creating sustainable businesses.  That is the straightest path to value creation.

    Sometimes, companies stagger along that path.  Changes might occur in markets and industries, the company is leapfrogged by competitors, or the company just isn’t executing the way it needs to.  The bottom line is that the company slows progress and its  performance begins to deteriorate yields on investment.

    Most Private equity firms plan for and build to manage the upside.  That makes sense until the arrows start pointing down.  Our approach is to support our clients dealing with downturns, and underperforming and underachieving investments.  We have the skills experiences, and track record to help clients get out of the hole and back on the path to performance and value creation.

    If you want to learn more, click on the link below.

     

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  • Best wishes for a prosperous, healthy, happy and meaningful 2017

     

    As we move on to a new year, I wanted to take a time out to thank all of you that have supported PMCC Ventures in 2016.  I appreciate it.  We had an interesting year, and I hope we continued to serve our clients in the exact way they needed support- and to help them create value.

    As we committed at the beginning- now 10 years ago, we are once again sharing our reflections on our key learnings from the past year.  We share them in hopes that you find them interesting, but more importantly helpful in some situation you are yet to encounter.

    Most all of our assignments this past year, revolved around private equity, structured finance or dealing with some sort of performance gap.  It felt good to get back to our roots, as we really enjoy working in this space.  Not sure if it is our familiarity or the dynamics or both…  Each situation was different- and at the same time, they were the same.

    In the world that we work in, it is an oft repeated phrase: “But you don’t understand: We are different”.  So over the past year or so, we concentrated on understanding differences, but of course to do that effectively, we had to also focus on similarities.  We found that there are of course differences—but they are generally rooted in the management team and the backgrounds they brought to the current situation.  In the world of underachieving organizations, there are a lot of similarities- about what the company is experiencing- and how they got into the situations they are encountering.  Our reflections below will share some of those insights.

    We are going to place a lot of focus and intention on underperforming and underachieving organizations in 2017.  We know that there is a lot of opportunity created by organizations as they “bounce off the bottom”.  We want to work with them, to minimize the disruption and maximize the height of the bounce.

     

    Reflections on 2016

    Underperforming and underachieving organizations—similarities and differences-

    Conditions that seem to be common:

    • Markets in flux… Difficult to grasp meaningful movement and change in direction… differing pace and intensity of changes experienced serve to further disorient and generated confidence in a direction to follow
    • Leapfrogging technologies… Shortening product life cycles… Difficulty keeping up with emerging opportunities and disappointments of disappearing opportunities… Uncertainty about where to place bets… Difficult to recover development costs… Staffing and knowledge base challenges…
    • Shifting customer needs, performance and loyalties… Customers face similar challenges… The importance of the relationship to weather these challenges is significant… keeping up with the various stages of relationships and lifecycle events was costly and required a lot of attention and time…Not getting it “right” was a death knell…
    • Critical resources: time, talent, capital and information are in short supply and not optimally applied… The longer the challenge, the more resources evaporated or became stretched… Market and technology changes make it tough to keep fresh and relevant talent available to pounce on opportunities… Capital or loan opportunities are already stretched, making new sources a real challenge to obtain and likely costly… The lack of relevant information- particularly about changing conditions was the most insipient and critically important… Resources frequently diverted to ministerial matters and strategies that were not promising….
    • Shifting contexts are confusing and make it difficult to plan and act- systemically and consistently… Difficulty keeping up with changing situations… Rest of organization characterizes management coping with this poorly, without fully understanding the volume of change, conflicting insights and information that management is juggling….
    • Time and focus shifts to dealing with ministerial duties and away from the things that help an organization create value… Increased time dealing with regulators, lenders, investors, lawyers etc.…. less time and energy available to focus on customers, markets and operations… can become a spiraling situation further driving organization from value added thinking and action
    • Responses become operational… and less strategic…and less cognizant of the system…. less value placed on thinking and more on motion than forward action… concepts of motion and action became confused… More inwardly focused…. People satisfice and focus on surviving and not thriving

    Underperforming and underachieving organizations—Conditions that are different

    • Type of presenting issue…Industry wide… or specific to the organization… influences the dimensions and probability of positive outcomes
    • Management team Experiences… many teams’ experiences and persona are growth oriented… many individuals and rarely teams have the experiences to manage through the downside… Team members selected for deep functional excellence- when the premium capability… is cross-functional systemic thinking and action
    • The starting point… Objectively how deep is deep? … How much effort needs to be extended to get back to “even”
    • Recognition and resolution…How well does the team recognize the challenge at hand?… How prepared are they to come to grips with it… Denial,,, Anger… Acceptance… Resolution and Healing….
    • Time and what has transpired so far…Passage of time and prior decisions and actions can either negatively or positively influence the outcome and the [re] starting point for any transformation activity
    • Capacity and capability… Influence the effort, the timing and the intensity of the change effort that can be applied- and hence the duration of the transformation period
    • The ability to execute the steps needed to … gain control and stabilize- what has been done- what needs to be done… when should it happen… distinguish urgent and critical… What might foreclose opportunities to maneuver later….
    • Resources… Does the organization have the resources (time… capital… talent… information) or can they be secured or created] to accomplish the necessary changes…. If not, what is a practical level of desired achievement in the best possible timeframe…

    Be diligent with diligence

    • Set a plan… Execute the plan…completely…. particularly in new or challenged situations… make sure that the basics of the deal are covered….  Risks are articulated and strategies in place to manage them… Know the structure that the new entities need to work within… head that direction… make sure that the inventory of service level and retention agreements are adequate and that they are favorable to provide the time and focus to accomplish “newco” requirements…Don’t assume… focus on key risks… identify transitional resources… remember, you don’t always get what you thought you would buy

    Strategy is not just adding and doing new things

    • Strategy is about placing resources and bets to win… it is not about adding efforts and requirements without ensuring that key resources are available…. .it is about making choices… overloading (or under-resourcing) an organization is a sure fire way to help a strategy fail…be thoughtful, realistic and practical about what it will take so succeed

    Strategic, financial and operational information is not like wine or cheese… the situation doesn’t get better with age when you don’t have them readily available

    • Integrated and systemic information is key to success… What insights do you need to run the business…is it readily available… against a context or model that makes sense for the business…Do the timeframes represented make sense…. Is it published in times and ways that can help make a difference… are all of the answers to the repeated or likely questions presented… Can you say immediately….” Now I understand” … Or do you have to do some of your own digging or calculations… Late or incomplete information are bad within themselves, but more importantly point to the existence of other organizational challenges…the organization that invests the effort to do this right will improve performance because of better insights…. And will improve processes and data models that will increase quality of controls… administrative effectiveness… efficiency….

    Marketing is a key turnaround tool and weapon

    • Getting the basics of marketing straight has never been more important…If you don’t understand your markets, your customers, their needs and wants- cold… be assured that someone else is trying to figure it out…and might beat you to the punch… Whether you deploy it physically, digitally or better- both… the basics are key…. No one has the time or the luxury of getting it wrong with customers today… few have extra resources to deploy in a wasteful way… though this waste is rarely evident- it represents a lot of cash and a lot of unmet opportunity…There is someone out there right now trying to know and attract your markets and customers… they just hired “that person” who knows x, y, or z technique cold—and they are deploying it for your customers…now

     

  • Private Equity backed global business marketing firm

    Client Description:

    Private equity owned- Global business marketing firm

    Client Opportunity or Challenge:

    • The Client is a European private equity backed company; new investors have an aggressive growth plan in mind. Within 9 months of investment, the Client acquired 3 companies in the US- its first US investments.  Since growth via acquisition was not part of the core experience of our Client, our European Affiliate, Greene 6 Partners, based in Paris was engaged to support post merger integration and assimilation.  Since the diligence period was short, many risk areas were not well understood and required post acquisition remediation.
    • Most of the existing management team was leaving the company because of the relocation of  company headquarters, hence there was a time sensitivity to dealing with issues
    • We advised on a wide range of issues including
    Organization structure IT Risk
    Severance Tax structure
    Recruiting new employees and leaders Marketing
    Cash management and forecasting Finance and accounting
    Performance Management Outsourcing of key functions
    Real Estate and Leases  

    Role:

    Consultant and advisor

    Outcomes or Benefit:

    • Created due diligence and acquisition assimilation guide book for client to use in subsequent transactions
    • Devised strategy and criteria for Leasing decisions
    • Executed risk assessment as well as IT transition plan
    • Established structure for revised performance reporting including data structures
    • Provided criteria and assessed outsourcing proposals for key functions
    • Project managed issues resolution
    • Mentored interim staff
    • Served as surrogate general manager

     

    NOTE:

    Client names are not used because of Client privacy and Confidentiality Agreements.  Similarly, facts are cloaked to preclude people from deducing the Client name or situation.