A PE fund principal came to us with an immediate need for a strategy session facilitator for their software portfolio company. Having recently acquired the business, the fund wanted to quickly get the portco into strategy sessions so that they could start defining long-term goals. Needing structure for these sessions, they were looking for a facilitator that was a former executive or management consultant and had software industry experience. They immediately needed someone to remotely lead the session and help the portco form and prioritize goals. We promptly worked to understand the nuances of their need and then leveraged our data and human ingenuity to match them with two select strategy session facilitators. The client selected their ideal choice and was so pleased that they have continued to use this resource across their entire portfolio.
A PE fund came to us with a critical need for an ERP selection consultant for their portco in the manufacturing industry. Since acquiring the portco, they knew that the company’s older ERP system would need to be replaced. Knowing that the selection and implementation would be a lengthy process, they were urgently seeking a consultant with experience in the manufacturing industry at the same scale as the portco that could guide them through what needed to be evaluated before making a selection and then manage the entire process. After quickly understanding the key needs of our client, we were able to match them to a curated couple of ERP selection consultants in our network within 24 hours. Selecting their ideal choice, the client was able to quickly and confidently kick off their ERP selection process.
Read the full case study here. Have a similar need that you would like to connect with us on? Contact us here and a team member will be happy to begin helping you within 24 hours.
Firm immediately needs strategy session facilitator for portco
A PE firm principal came to us with an immediate need for a strategy session facilitator for their software portfolio company. Having recently acquired the business, the firm wanted to quickly get the portco into strategy sessions so that they could start defining long-term goals. Needing structure for these sessions, they were looking for a facilitator that was a former executive or management consultant and had software industry experience. They immediately needed someone to remotely lead the session and help the portco form and prioritize goals.
BluWave identifies top consultant with software experience
Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade strategic plan facilitation needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of strategic plan facilitators that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria, and then connected the client with two select pre-vetted facilitators from our invitation-only Intelligent Network that fit their exact needs.
Firm engages strategic facilitator to formalize and structure portco goals
Within 24 hours of the initial scoping call, the PE firm and portfolio company were introduced to two PE-grade strategic plan facilitators that had software and prior executive/management consulting experience. The client selected their ideal choice. The PE firm was able to confidently hold a strategy session for their portco that was expertly structured and facilitated, leading to clear and defined long-term goals for the company.
With PE funds fighting an uphill battle last year amid a global pandemic, Q2 2020 industry reports were shrouded in uncertainty. Across the globe, organizations fought against a looming economic collapse as businesses folded and life as we knew it shut down for months.
Despite the shifting tides, we witnessed first-hand the resilient nature of the private equity industry. Around this time last year, we published our analysis of the National Bureau of Economic Research’s study on PE and financial fragility that found that PE-backed companies were more resilient and rebounded more quickly than their non-PE-backed peers during the crisis.
One year later, we’re seeing that the study held up…and then some. In the last 18 months, the PE industry has shown tremendous growth despite an ever-changing economic environment. In PitchBook’s Q2 2021 US PE Breakdown, it was reported that middle market and billion-dollar deals are reaching unprecedented levels “thanks to the speedy economic recovery, demand for high-yield debt, an abundance of dry powder, and the looming threat of a capital gains tax hike.”
The report outlined how surging LP activity has brought not only the PE industry but also those it supports from harrowing lows to meteoric highs in just a few months. Here are some key highlights from Pitchbook’s Q2 findings:
Overall Market Trends: A Record-Breaking Year
PE firms have closed on 3,708 deals worth $456.6 billion in H1, which is about two-thirds of the total deal value for 2020. H1 2021 is also on track for a record-setting year in PE exit deals.
The Q2 inflation pop is signaling a move toward a potential rate increase by the end of 2023. The core consumer price index increased by 3.8%.
The White House’s proposed increase from 20% to 39.6% in the marginal capital gains rate has “spurred a dealmaking frenzy.” Pitchbook is seeing business owners race to realize profits from sales before the end of the year.
Areas of Growth: The Driving Factors
Funds worth $5 billion or more (“mega-funds”) accounted for the bulk of capital raised, “but both middle-market managers and first-time funds are also finding success as the increased appetite for PE benefited funds of all sizes.”
Corporate bonds and private debt also accrued significant activity in Q2.
Investment in cybersecurity is on the rise. PE dealmaking in software continued to post was strong in Q2 2021 and cybersecurity emerged as a particular area of focus. This makes sense, as the pandemic also engendered an increase in remote-work-related cybercrime.
Distributions to LPs and high returns numbers across all fund sizes are set “to provide additional tailwinds” moving forward. Also, platforms that saw significant expansion under PE sponsors are now coming to market and achieving healthy valuation step-ups.
As our economic recovery continues, many PE firms and PE-backed companies can start to look past pandemic-related issues and get back to their missions: building and scaling stronger businesses. Having the hard data to demonstrate the powerful buoyancy of private equity, we can move forward confident that it’ll take more than a sudden recession to curb this industry.
To read the full Q2 report, visit Pitchbook’s site here.
Interested in gaining more detailed Q2 insights? Check out our Q2 report here.
A PE firm came to us with a critical need for an ERP selection consultant for their portco in the manufacturing industry. Since acquiring the portco, they knew that the company’s older ERP system would need to be replaced. Knowing that the selection and implementation would be a lengthy process, they were urgently seeking a consultant with experience in the manufacturing industry at the same scale as the portco that could guide them through what needed to be evaluated before making a selection and then manage the entire process.
BluWave identifies best-fit provider
Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade ERP selection needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of providers that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria, and then connected the client with three select pre-vetted consulting firms from our invitation-only Intelligent Network that fit their exact needs.
Firm engages provider to aid with ERP selection and implementation
Within 24 hours of the initial scoping call, the PE firm and portfolio company were introduced to the PE-grade ERP selection consulting firms that specialized in the manufacturing industry. The client selected their ideal choice. The PE firm was able to confidently drive an excellent outcome without wasting time and cost and the portfolio company was able to quickly kick off their ERP selection process.
At first glance, Troy Templeton is a stereotypical private equity managing partner demonized by the click-bait driven media machine and industry detractors as “people in charge of thrashing companies only to fill Steven Schwarzman’s pockets.” Is part of his role at Trivest to make money? Of course, because that is the role of any business. But when I spoke to Troy—who joined the “oldest private equity firm in the Southeastern United States” in 1989—he told quite a different story than the general public is used to seeing in the headlines.
From his “Just Say No” philosophy to Trivest’s proven “Path to 3x” methodology, Troy considers his main job as the firm’s leader to be “acting as a steward of any business we put its dollars into”; thus, preserving the positive aspects of the culture and providing incentives for founders to take their business to the next level instead of cashing out to fulfill their childhood dream of racing cars (which some inevitably do). With all the disruption happening around us, it’s nice to hear about those who value hard work, job creation, and stability over the long-term—while prioritizing high-growth and money-making. Perhaps this is the headline we should all strive to attain, despite the naysayers’ seeming grasp on the narrative.
Sean Mooney: I’ve heard you say “we run a business not a deal shop.” What do you mean by that?
Troy Templeton: From the beginning of Trivest (1981) the investment philosophy was always about finding good deals and working with companies to make them more valuable. At first, this meant doing a couple of deals a year. But over time, the realization was that we needed to build a scalable business model for PE, otherwise we would just be a deal shop. In order to consider ourselves a business, we worked on the three main components of an investment (deal sourcing, deal execution, and value creation), and put process, data, and strategy around each one of them to make it scalable.
SM: Any chance you will open the kimono on how this works, even on a high level?
TT: Well, for starters, in terms of deal sourcing: we used to source about 300 deals per year, which translates to roughly 25 a month. In June 2021 alone, we sourced 418 deals; and we will likely end up sourcing around 4,000 deals this year. That’s over 10x in deal sourcing compared to what it was with the old model. We’ve done that by investing heavily in this area, and almost 20% of our firm iscomprised of business development professionals. We are not reliant on a single source of deals; instead, we source from multiple channels and have a strategy for finding opportunities in each of those channels. We no longer have to wait for good deals to find us because we are proactively going out with a dedicated team and finding them.
With regard to deal execution, it really comes down to differentiating in a crowded market. In other words: how can we convince an owner to choose us based on things other than price? Our model eliminates pain points for the seller with our “Just Say No” philosophy. This pertains to saying “no” to things like requiring them to reinvest proceeds, aggressive capital structures, requiring heavy debt burdens, escrow requirements, and indemnification or working capital adjustments. We want the seller to see us as stewards of their life achievement. We want to be fair and transparent where both parties feel good afterward.
Lastly, it’s about value creation. This is what PE is all about. In public markets just 4% of public companies triple their value over a five-year period; but 75% of Trivest companies triple their value over five years. This value creation process is called the “Path to 3x.” Every company has six areas of focus: category of one (differentiate), management, measure what matters, organic growth strategy, acquisition strategy, benchmarks to measure against greatest companies. If we can work with a company to align and execute on these areas, that is where the real value is created, and ultimately money is made.
SM: If you’re a founder-owned business considering private equity as a path for expansion and growth, what are the most important questions to ask potential PE investors?
TT: The first question is “will I have to reinvest?” Not all founders will want to do this, but they never ask the question upfront. We had a very successful investment (it was a 10x deal) where three of the key players wanted to reinvest nothing. They wanted a 90-day “out” plan so they could go race cars. Most PE funds wouldn’t invest in this situation, because for the most part, they want founders to reinvest.
The second question is “will I receive 100% of the purchase price at closing?” This question is important from a deal perspective. The devil is in the details, and some term sheets will require all these costs (escrows, working capital adjustments, seller note, earn-out, etc.) that will lower the purchase price significantly. Owners should understand what they will get at close.
I also think owners have a responsibility to ensure their company has a proper chance to succeed, and it shouldn’t be just about the seller maximizing value. An owner should be asking themselves whether the company will be better off five years from now if we do this deal. So, this translates to the third question: “how much debt is going to be on my business moving forward?” Businesses fluctuate, and if an appropriate capital structure is not in place for the company to help it weather whatever storms occur over the next several years, then both the buyer and seller lose. To avoid this, Trivest has a policy of only using senior debt and no more than 3x of operating cash flow.
SM: Have any investments you’ve made outperformed your expectations? How and why?
TT: We purchased a small plumbing business in Kentucky about four years ago and used the “Path to 3x” to build it up significantly through roughly 15 add-ons. During the pandemic, the business started thriving. With each add-on, the founders remained in place after they sold. We minted over 20 people becoming millionaires: this was a life-changing event for most of them. Additionally, 100 employees were shareholders—since we believe strongly in bringing as many employees into the equity of the business as possible. It was such an amazing thing to witness and play a role in, as this isn’t something you normally see in a privately held business.
SM: In terms of “Topgrading”—a term that simply means ensuring the right people are in place—how do expert, third-party resources play into that?
TT: The key to Topgrading isn’t just about the CEO and C-level. It’s also about the next two layers below the C-suite. This is where you can make a dramatic difference, but unfortunately, far too many companies don’t focus on it. I think this is why Trivest has been growing so quickly, because we’ve used this concept in our own company, and it works! Our business development team is filled with great people who “own” their function, and as a result we’ve been able to build a culture of success around it. For any organization, this is an important part of overall company health. While leadership has to come from the top, if you don’t empower other levels of the organization to thrive, then you essentially build a layer of dependency into the process. When that happens, it becomes nearly impossible to scale.
SM: Add-on acquisitions are a core part of the Trivest playbook. In your opinion, what are a few elements that ensure a smooth transition and integration process?
TT: We’ve done about 75 in the past couple of years. Truthfully, some worked and some didn’t—but that’s all part of the risk portion of being an investor. Here’s what we’ve learned:
First up, there has to be a business fit. A lot of people will buy companies when there isn’t a reason for the companies to be together. It’s just about size and irrelevant to the core business; you see this a lot with tech companies. In addition to business fit, there also has to be a cultural fit.
Second, communication must be prioritized in order for the integration to work. You have to be transparent, otherwise, people will think the worst about what’s going to happen (read: they think they are going to get fired). This uncertainty leads to poor performance, and ultimately, people leaving whether this was part of the plan or not.
Third, and likely most importantly: you need a “butt on the line.” Someone has to be responsible for the transition, and you need a dedicated resource to be held accountable for any missed opportunities or failures (and successes too).
SM: If private equity didn’t exist, what would the economy look like?
TT: This may seem hyperbolic, but (especially after 2020) it would be in shambles. Private equity is a key component of liquidity, and a key buyer in every major, essential industry. If PE didn’t exist, founder and/or family-owned businesses could only sell to strategics or a management team. You’d have more public companies, which on average perform poorly compared to PE-backed companies—as I noted earlier. The focus may largely be on cost savings and making money, and wouldn’t necessarily account for people or culture. In short: there would be fewer options for selling, with worse outcomes for the companies post the sale.
Also, to wit, you never hear about the other side of the PE-equation: what these companies we invest in do for their families, communities, and partners. Most founders who realize their life’s goal by selling their business don’t immediately go out and buy a yacht and a new mansion, rather—they typically invest in other companies, provide security for their families and become much more philanthropic. Yes, sometimes they pursue their hobbies like racing cars…but that’s generally the exception and a small part of their overall net worth.
Without private equity, there would be no vehicle for most investors, large and small, to participate in the most vibrant and growing part of our economy—lower and middle-market companies. PE is an important growth engine of the economy, and the economy wouldn’t be nearly as robust.
SM: What is one thing you wish everyone understood about private equity?
TT: I wish everyone would think of us like the Meghan Trainor song “It’s all about that bass”—except for us it’s: “It’s all about that growth.” If we are growing, then our companies are going to do well. From the frontline workers to the founder to the investor, it’s a win-win. Money is simply a byproduct of being a good steward and helping a company grow. [drops the mic]
BluWave works with over 500 PE funds from around the globe, connecting them with pre-vetted, best-in-class, interim executives and small groups across a variety of resource and functional areas. From information technology and manufacturing to healthcare and consumer goods, our clients are paving the way for “Industry 4.0.” In other words, they have their heads in the game and their hands on the pulse of news you can use.
Check out the latest, curated collection of reports, insights, and musings from a handful of our PE funds.
Parker Gale recently launched a three-part series on boards on its Private Equity Funcast. In the latest episode, the team talked to Jason Heltzer, Managing Partner at Origin Ventures and a professor at The University of Chicago Booth Business School, about what makes a good board member — as well as the behaviors to look out for and avoid.
Sun Capital Co-founder and Co-CEO Marc Leder was recently featured on The Deal’s Behind the Buyouts Podcast. In this episode, Leder speaks about how Sun Capital has invested more than $13 billion since its founding in 1995, and how he’s navigated the past quarter-century of dealmaking. You’ll also hear about the firm’s deals in “healthcare, bedding, and its increased focus on technology companies, as well as the efforts of private equity firms to build up companies to create value.”
One year ago in July, TCV published this Q&A with Peloton Co-Founder and CEO John Foley and TCV GP Jay Hoag. As a throwback, we’re revisiting this interesting conversation in which Foley discusses how the fitness industry was “ripe for disruption,” why early investors were hesitant about Peloton’s approach, why culture and social responsibility are increasingly important to business success, and how to navigate the road to the IPO.
While “the theory on minimizing a firm’s cost of capital is straightforward enough,” Heartwood Partners argues that it has not been the best way to create equity value in a sustainable fashion. This model is reliant on the business succeeding and growing, which may not always be the reality. In this piece, Heartwood makes the case for why debt leverage is not “all it’s cracked up to be.”
A private equity firm came to us with a critical need for an HR consultant to conduct HR-focused diligence on a new target in the fintech space. With the target under LOI, the firm wanted to go a step further than normal and have an HR expert come in immediately to look at data such as employment contracts and compensation agreements, summarize the strengths and weaknesses they identified, find gaps in the current HR system, and then come in post-close to fix those gaps.
BluWave identifies provider with industry expertise
Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade HR diligence needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of specialized diligence providers that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria and then connected the client with the select pre-vetted HR diligence resources from our invitation-only Intelligent Network that fit their exact needs.
Firm engages provider and receives top results
Within 48 hours of the initial scoping call, the PE firm and portfolio company were introduced to the PE-grade HR diligence provider that specialized in HR diligence and consulting for PE-backed companies. The PE firm was able to confidently drive an excellent outcome without wasting time and was so pleased with this resource that they brought them on for a project with another portco a week later.
In a recent article for CEOWorld Magazine, BluWave founder and CEO Sean Mooney shared how his love for the beautiful, streamlined, and seemingly perfect Ferrari sports cars that constantly improved with each model led to his love for the concept of Lean Six Sigma. He saw a similar sense of beauty in the ideas of perfecting form, reducing variability, eliminating waste, and continuously seeking improvement.
While the concept was first embraced by the manufacturing industry, it is becoming increasingly popular across all sectors and industries, even in how business leaders think about their people.
You can read the full article and Sean’s thoughts on how Lean Six Sigma is all about people here. And if you need help connecting to the fractional and interim resources you need when you need them in order to apply Lean Six Sigma in your business, you can contact us here.
Firm urgently needs market study for target portco
A PE firm investment vice president came to us with an immediate need for a time-sensitive market study on a potential deal they were looking at in the home safety aspect of the construction industry. With their go-to commercial due diligence providers unavailable due to capacity constraints, the firm was in a crunch to find a provider that could fill their need quickly, while also having the experience they desired in new construction multifamily apartment buildings in the southeast.
Using pre-vetted network, BluWave identifies two ideal providers for client
Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade commercial due diligence needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of market study providers that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria, and then connected the client with the select pre-vetted commercial due diligence provider from our invitation-only Intelligent Network that fit their exact needs.
PE firm engages specialized commercial due diligence provider to complete market study
Within 24 hours of the initial scoping call, the PE firm was introduced to two PE-grade commercial due diligence providers that specialized in the construction industry. The client selected their ideal choice. The provider had run several engagements in the home safety area in the past year and a half. The PE firm was able to quickly engage a provider that had the expertise they needed to fully understand the target’s market and whether or not the deal was worth pursuing.
A PE fund vice president came to us with a critical need for a commercial due diligence provider that could complete a proactive market study for an asset that they expected to come to market in the next month. With their go-to providers at capacity, no access to the company’s information, and a desire to understand the major players in the IT management software market before the target went to market, the fund was in critical need of an available provider that could perform a full market study in the next week. We promptly worked to understand the client’s exact market study needs and were then able to introduce them to two exact-fit commercial due diligence providers within 24 hours. The client selected their ideal choice that had specific experience in proactively assessing industry attractiveness and was able to quickly gain the market knowledge they needed to confidently assess whether or not the potential target was something they wanted to continue pursuing.
Do you have a similar need or any other specific need we can help you with? Contact us here and we will be happy to help you.
Prep for sale resource needed for healthcare tech portco
A PE firm came to us with a critical need for an independent prep for sale resource for their healthcare technology company. Ready to sell their portco, they were looking for an interim controller that could come in and manage the book closing as well as the influx of requests that would occur during the sales process. They immediately needed a resource that had been through a PE sales process before that could come in early and stay with them for 3 to 6 months until the firm closed the sale of this portco.
BluWave identifies top providers with industry specific expertise
Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade prep for sale needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of independent interim controllers that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria, and then connected the client with the select pre-vetted interim controller from our invitation-only Intelligent Network that fit their exact needs.
Firm engages provider and begins prep for sale process
Within 48 hours of the initial scoping call, the PE firm and portfolio company were introduced to an experienced PE-grade financial consultant who specialized in preparing companies for sale. The PE firm engaged with the consultant and was able to confidently begin the sale prep process while also providing the portco with the support they needed to prepare all the items needed for a successful sale.
