The Experts Weigh In: Reflecting on Themes from 2021

One of the advantages of providing specialized solutions for more than 500 PE funds and business leaders is that we gain a 360-degree view about what is impacting portfolio companies and the private equity industry as a whole. From our hundreds of interactions with fund managers, interim executives, business leaders, and experts from across industries we learn about trends, themes, and opportunities that affect all aspects of PE. As we look ahead to 2022, we reflect on some interesting insights that we gained from our network, as well as our founder and CEO, in 2021 that point to themes to watch for in the year ahead.

Theme 1: Focus on people as core strategy

While it may seem counterintuitive in such a technology- and-data-obsessed culture, what we’ve seen the past year (with no sign of slowing down) is a commitment to focusing on talent and culture as a core part of business strategy. With an anemic and highly “flexible” job market, companies are thinking of innovative ways to attract and retain top talent in order to compete, including giving the CHRO a seat at the table.

The expert’s take: “I believe human capital is one of the most valuable assets of any successful company. End of story. We have put in place a strategy to have our portfolio companies hire a Chief HR Officer—a role that drives strategic thinking, fundamental change through processes, and design efficiencies. This person’s role is to think strategically about the business, then marry that strategic thinking with decision-making around human capital. He or she understands long-term objectives and implements a hiring strategy to meet these objectives. It was a game-changer for our companies and enabled us to swiftly drive change and make money for the shareholders.” — Matthew Garff, Managing Director at Sun Capital 

Theme 2: Public policy and its key role for PE

Recently, Congress and the current Administration have put forth measures that could affect the private equity industry and have a negative impact, particularly on women investors. The industry employs over 11 million Americans and supports thousands of small businesses; a fact that sometimes gets lost when legislators are just focused on the balance sheets of the funds.

The expert’s take: “Washington is trying to move very quickly: it’s like being in a baseball game but not knowing what inning you’re in. Oftentimes the intention of these proposals isn’t nefarious or ill-intended; rather, haste makes waste and politicians are drinking massive amounts of information from a firehose. One minute they are talking to someone like me, with a private equity agenda. The next minute, it’s someone from higher education, renewable energy, or critical infrastructure. Our job [as industry insiders and lobbyists] is to inform them about the realities and potential negative consequences in a non-incendiary way so they will actually listen; subsequently, we hope they make decisions based on the data-rich information we have provided.” — Pam Hendrickson, Vice Chair at The Riverside Company 

Theme 3: Specialized talent offers a competitive advantage

One theme that started to stand out in 2021, and will likely continue to be true for years to come, was top-level executives leaving companies in search of more flexible, specialized projects that put them in the driver’s seat. What does this mean for the PE industry? A shift in focus to interim, specialized talent who can quickly and accurately provide results during the process of due diligence, recruiting, and beyond.

The expert’s take: “The private equity industry used to be about optimizing companies to get attractive returns. Today, it’s very competitive with hundreds of sponsors participating in every auction, often paying perfect prices for imperfect companies. To stand out, PE firms need to see something that’s not in the investment bank’s book. General insights from generalist advisers don’t cut it anymore. We’re equipping our clients with specialized resources that identify unique information that gives them a fundamentally different perspective in a competitive process.” — Sean Mooney, founder/CEO of BluWave

Theme 4: Prioritization of remote work

After years of testing the idea of working from home, the last two years have catapulted the acceptance of remote work—and working from anywhere—to the top of the “normal” list. In fact, companies report that a substantial number of new employees are prioritizing the ability to work remotely even ahead of a robust benefits package.

The expert’s take: “Candidates who were fortunate enough to be employed during the pandemic but unfortunate enough to deal with the constant disruption and stress are now coming up for air and looking around for new adventures. In tandem with this ‘fancy shiny object’ job search, most candidates learned that much of their knowledge and skills could be effectively managed remotely. That’s a game-changer. Once people figured out they could live in Park City, Utah while working for a company based in New York City, many of them made substantial lifestyle changes to strike that elusive work-life balance. It almost gave people permission to shed old norms and start fresh. They went from thinking, ‘I’m going to be stuck in an office for the rest of my life,” to “holy cow, I can work on the ski slopes!’ — William Tincup, President & Editor at Large for Recruiting Daily

Theme 5: Scarcity and its future implications

One thing is certain—from supply chain to the workforce, scarcity seems to be a theme du jour, if not douze mois une année. But how troublesome is it as we move into 2022, and what can we hope for in terms of how the economy will adjust?

The expert’s take: “Usually shortages are a sign of price controls, and usually when people say ‘we don’t have enough workers’ it means that the price they have to pay is too high to get the workers. Historically, there have only been shortages when raising prices is forbidden. This happened with gas controls in the 1950s. The puzzle with today’s shortages is why don’t suppliers just raise prices? My presumption is that they are afraid of being judged as gougers either by their customers or by the government. Eventually, prices will increase, instead of the other option: not having products. It’s already starting to happen. This will help eliminate the pressure on the supply chain.” — Russ Roberts, host of EconTalk and Hoover Institute Research Fellow 

Theme 6: The rise of impact investing with a focus on ESG

Almost every investor you talk to these days, whether for a public or private company, has one thing top of mind: how are our portfolio companies performing against ESG standards, including the initiatives around diversity, equity, and inclusion (DE&I). While ESG has been an important reporting tactic for years, only in the last two has it reached the tipping point. Many firms have already seen a positive impact by investing in diverse workforce development, and it seems that it is definitely possible to have success with a triple bottom line investment thesis.

The expert’s take: “We recently made an investment in a waste management company and our investment thesis was to formalize all policies and procedures, then top grade the management team. After implementing our suggested changes, the company attracted a more diverse workforce, which in turn embraced the ‘professionalization’ of the company. This included the way the company related to and communicated with its diverse customer base. As a result, the company improved its margins, increased customer retention, and was better positioned to win larger contracts from commercial customers.” — Colleen Gurda, Founder of Riveter Capital

Theme 7: Family wealth expands into new industries through collaboration

Family wealth, most often managed by family offices with a staff of ten or fewer employees, is reaching beyond the usual suspects of real estate and legacy business toward direct investments in emerging markets. What was once thought to be “old money” is now shapeshifting with younger generations of family members at the helm, many of whom are interested in collaborating with other family offices to expand their reach.

The expert’s take: “Direct investing has been the core strategy for families for decades. What we’ve seen is an increase in collaboration between family offices that happened less regularly before. For the most part, private equity has been taking the lead on lower market buyouts; and families see the upside and potential of that. Pooling resources allows families to reduce risk [in industries they aren’t as familiar with] and take advantage of companies that land between $3M and $20M EBITDA, who are looking to sell. Families are also looking at platform plays such as buying up HVAC companies and other firms within an industry. We are also hearing a lot of talk now about ESG, and also “business drivers” both of which contribute to innovation.” — Glen Johnson, President of Membership at Family Office Exchange 

Theme 8: As consolidation continues, culture is a top priority

While company culture is certainly an important part of any organization’s success, during and after an acquisition the focus on maintaining a “healthy culture” is paramount—and is often the difference between a smooth or rocky outcome. Add-ons and consolidations will continue to be at record highs in 2022, and acquirers are best served to create a solid strategy to ensure culture remains at the top of the priority list.

The expert’s take: “Here’s what we’ve learned with nearly 75 acquisitions under our belt, some of which worked and some didn’t. First and foremost, it 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. But it’s not only about the business fit; there also has to be a cultural fit.” — Troy Templeton, Managing Partner at Trivest Capital

PE VP Forum Recap | December 2021

Every quarter we gather vice presidents in PE to discuss current industry topics and to offer these peers the chance to gather, share information, and decompress with one another. In our most recent event, we discussed many topics and have listed our top takeaways below.

These forums are invite-only and follow Chatham House Rules, so listed below are high-level takeaways only. Are you in private equity and interested in joining fellow PE VPs during our next PE VP Forum? Please contact us at events@bluwave.net.

Increased Deal Competition 

  • Deal competition is at an all-time high, so firms are getting creative in how to best address this. Common themes across the ideas that were shared were:
    • Determine the best approach for your firm that allows you to quickly identify the best possible deals where you have unique insights.
    • Seek specialization from an investment strategy perspective.
    • Utilize help in the form of third-party advisors that have industry expertise and can assist in assessing the deal.

Deal Surge

  • There is currently an overabundance of deals in the market which means sellers are considering values like speed and partnership in addition to price. Look for opportunities to emphasize these values in order to differentiate yourself when you can’t differentiate on price.

Labor Dynamics

  • Firms are continually facing difficulties in attracting and retaining talent due to the pressurized market. Internally, one solution has been to offer associates more than one track for their advancement, and externally, firms are developing innovative solutions for longer than average portco exec hiring processes including beginning recruiting processes before the deal even closes.

We thoroughly enjoyed getting to gather with PE VPs to discuss these current industry hot topics. We’s be happy to connect you to the PE-grade, exact-fit, third-party resources to assist you in this tight market, just contact us here.

Learn more about how we can specifically help Deal Quarterbacks and access a toolkit that can help you do your job more efficiently here.

Why BluWave was built with deal quarterbacks in mind

As a deal quarterback in private equity, Sean Mooney often struggled with getting connected to the PE-grade, specialized resources he needed to drive differential success. Sean found himself spending lots of time searching for providers on google and calling friends in search of an exact-fit service provider. This made the diligence process time-consuming and stressful. It also left only a small amount of time for the other things that matter. In order to combat this pressing issue, Sean came up with the idea for BluWave. In fact, Sean created BluWave specifically with deal quarterbacks in mind and is someone who did the job himself. Now, BluWave helps deal quarterbacks get time back in their day and gives them confidence in the third-party resources that they are utilizing.

We are here to provide deal quarterbacks with the exact-fit, private equity grade service provider they need, exactly when they need them.

Learn more about how BluWave can help deal QBs specifically in both due diligence and value creation.

If you are a deal quarterback that struggles with due diligence or value creation, we would be happy to connect with you and provide for the need you have, just contact us here.

How BluWave facilitates due diligence for deal QBs

BluWave founder and CEO, Sean Mooney, recently shared his personal experiences as a private equity deal quarterback and how that led to him founding BluWave. Sean learned through his own experiences that due diligence for deal QBs is a flawed process. He found there are far too many generalist providers that don’t quite fit the bill for the specialized needs they are trying to solve. After spending far too much time during the vetting process, Sean realized there must be another way.

In this video, he highlights the difficulties he used to face in the due diligence process including:

  • The speed required to win deals as a private equity deal QB
  • Common struggles from his experience as a deal QB
  • The unique advantages BluWave offers

Sean references BluWave as the tool that could have helped him win as a deal QB. Now, BluWave helps over 550 of the top private equity firms in the world win every day, starting with the due diligence process. We facilitate due diligence for deal QBs by connecting them with the exact-fit, PE-grade resources they need exactly when they need them.

Do you share some of Sean’s frustrations with the diligence process? Contact us to get started.

How does BluWave help with value creation for deal QBs?

As a private equity deal QB, BluWave founder & CEO, Sean Mooney, faced challenges in the value creation process. He felt as though he was consistently getting generalist results from generalist providers. He also faced the pressure of knowing that one wrong move could follow him around for the rest of his career in private equity. After dealing with these challenges and working his way up to be a Partner at a PE firm, Sean decided to create the solution to the problems he always had by founding BluWave. The solution he envisioned gave deal QBs the exact provider they need at the exact time they need them. Providers who have a specialty in specific areas will be connected with the private equity deal QBs as soon as the need arises. This gives success with ease for private equity deal QBs who are lacking value creation with their service providers. That is exactly what BluWave has become today.

BluWave helps with value creation for deal QBs by providing them with:

Learn more about how BluWave helps with value creation for deal QBs. Contact us if you have a need we can help with.

Critical ESG diligence provider with industry expertise

ESG diligence needed for a consumer products target

A PE firm VP came to us with a critical need for a provider that could perform ESG diligence on a target they had in the consumer products industry. With their 60 days of exclusivity about to begin, the firm needed a provider that could assess the target within that timeframe. The target’s products were environmentally related, the PE firm had little to no experience performing ESG diligence, and they didn’t know what specifically to be concerned about in this industry, so the PE firm critically needed an ESG expert with industry experience to perform the diligence for them in order to spotlight potential areas of concern.

BluWave has exact-fit diligence provider with industry experience

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade ESG diligence 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 presented the client with two select pre-vetted diligence providers from our invitation-only Intelligent Network that fit their exact needs.

Firm connected with two PE-grade providers and selected ideal choice

Less than 24 hours after the initial scoping call, the PE firm was presented with two PE-grade providers that had experience in the target’s specific niche of the consumer products industry. The client was introduced to their ideal choice and they were able to quickly engage them in order to perform ESG diligence within their timeframe and budget. The service provider was able to use their industry and area expertise in order to derive the necessary insights the PE firm needed to make an informed decision on how to proceed.

Dual Commercial Due Diligence, GTM Provider Vitally Needed

PE Firm needs commercial due diligence and GTM strategist for construction target

A PE firm managing director came to us with a critical need for a commercial due diligence and GTM strategy provider for a target they had in the construction industry. Since identifying this target, they were looking for a group that could quickly perform diligence to determine if the market was strong enough for investment, and then promptly post-close help them develop a GTM strategy. Close to obtaining exclusivity, the PE firm was looking to find a provider with experience in the construction materials space that could move quickly once exclusivity was gained and stay engaged to create value post-close.

BluWave identifies provider to meet exact needs

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade commercial due diligence and GTM 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 providers from our invitation-only Intelligent Network that fit their exact needs.

Firm engages with ideal provider to confidently move forward with investment

Less than 24 hours after the initial scoping call, the PE firm was introduced to three PE-grade providers that specialized in commercial due diligence and GTM strategy with experience in the construction materials industry. The client selected their ideal choice, and the PE firm was able to confidently engage this provider without wasting time or costs. They were able to leverage their insights to move forward with the investment and then utilize the same provider to quickly begin creating value in the new portco by developing a GTM strategy.

They have done a good job, been very responsive and given us valuable insights. I would give them good ratings on everything, would recommend them to others and I expect we will use them again in the future.

Managing Director at PE Firm

Operational diligence provider urgent for VMS target

Firm needs operational diligence for target VMS manufacturing company

A PE firm principal came to us with a critical need for operational diligence on a target they had in the vitamins, minerals, and supplements (VMS) manufacturing space. A week into the diligence process after signing an LOI, the firm needed someone to answer their question on how the target could increase throughput given their issues with on-time delivery, backlog, and capsulation of their powders. They urgently needed an ops diligence provider with experience in the VMS space that could identify areas for operational improvement during their 45 days of exclusivity on the target.

Using our extensive network, BluWave identifies top PE-grade providers

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade operational diligence needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of operational diligence independent consultants and boutique firms that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria and then introduced the client to two select pre-vetted operational diligence consulting groups from our invitation-only Intelligent Network that fit their exact needs.

Firm properly assesses target company using selected provider

Within 24 hours of the initial scoping call, the PE firm was introduced to two PE-grade ops diligence providers with extensive experience in the VMS space. The client selected their ideal choice. The PE firm was able to confidently engage the provider without wasting time or cost and ultimately identify ways for the target to improve their throughput. The firm was so pleased with the provider’s operational performance and improvement recommendations that they engaged them again post-close to implement them.

Immediate senior advisor with technical expertise

Firm critically needs senior advisor with software industry knowledge

A PE firm principal came to us with a critical need for a senior advisor that could provide them with industry insight on a target they had in the application security sector of the software industry. Before moving forward with an investment, the firm needed someone with technical industry expertise that could frame the competitive landscape for them, how the target was positioned against competitors, and apply this to the market opportunity. They urgently needed a mid-to higher level advisor with technical sector expertise that could answer their questions within 7 to 10 days.

BluWave quickly connects firm to advisor with industry expertise

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade senior advisor needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of senior advisors across an array of industries 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 senior advisor from our invitation-only Intelligent Network that fit their exact needs.

Firm engages advisor to gain valuable industry insight

Within 24 hours of the initial scoping call, the PE firm was introduced to a select PE-grade senior advisor that had deep experience working in the application security industry and was now doing consulting in the space. The PE firm was able to confidently engage the advisor and gain the necessary industry insights they needed from someone with technical expertise in order to make an informed decision on whether or not to move forward with the investment.

Vital IT diligence provider with specific industry experience

IT diligence provider needed for healthcare portco

A PE firm vice president came to us with a critical need for an IT diligence provider for a target they had in the intellectual development disabilities area of the healthcare services industry. With an LOI on the target and a need to close the deal by year-end, the PE firm urgently needed an IT diligence provider that specifically understood this niche area of the healthcare industry to come in and identify IT needs, risks, and opportunities for the target within the next two weeks.

Using pre-vetted network, BluWave identifies exact-fit provider

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade IT diligence needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of IT 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 a select pre-vetted IT diligence provider from our invitation-only Intelligent Network that fit their exact needs.

Firm engages provider to make informed deal decision

Within 24 hours of the initial scoping call, the PE firm was introduced to a select PE-grade IT diligence provider with experience on similar projects in the behavioral health and rehabilitation space. The PE firm was able to confidently engage this provider without wasting time or cost and quickly gained the needed information about the target’s IT systems to make an informed decision on how to proceed.

PE VP Forum Recap | September 2021

Every quarter we gather Vice Presidents in PE to discuss current industry topics and to offer these peers the chance to gather, share information, and decompress with one another. In our most recent event, we discussed many topics and have listed our top takeaways below.

These forums are invite-only and follow Chatham House Rules, so listed below are high-level takeaways only. Are you in private equity and interested in joining fellow PE VPs during our next PE VP Forum? Please contact us at events@bluwave.net.

Deal Yardstick 

  • Firms are using a mix of quantitative and qualitative scorecards to gauge the attractiveness of a deal. Our VP attendees discussed the value of scorecards, but that they also need to be used in a measured way that incorporates other important factors during diligence. 

3 Things The VP Attendees Shared That They Thought Would Improve the Deal Evaluation Process Most

  •  Calibrating the level of diligence with the impact of a deal – beware of analysis paralysis.
  •  Let associates present deals during the Monday Morning Meeting for training and development purposes.
  • Find a way to streamline the NDA process which is time-consuming without apparent value add.  

IOI/LOI

  • Different firms are deploying different approaches to get the highest expected value out of their efforts before LOI.  

Portco CFOs

  • Develop a CFO playbook to help onboard CFOs more consistently and quickly.  Collaborate with and nurture your CFOs, but hope is not a strategy if they are not working out. 

We thoroughly enjoyed getting to gather with PE VPsto discuss these current industry hot topics.  Here at BluWave, we are specialized to quickly connect you with the exact-fit, pre-vetted, PE-grade service providers you need exactly when you need them.

Never worked with us before? Check out our How To Vet BluWave video to learn more about us and how we can help. And if you have an immediate need, contact us here and we will be happy to help you right away.

Critical boutique pricing consulting firm need

Pricing consultant essential for value creation in portco

A PE firm vice president came to us with a critical need for a pricing expert that could help several of their portcos in the manufacturing industry. Facing pricing challenges such as trouble getting price increases from procurement groups and historical company cultures of not raising prices, the PE firm knew a pricing expert was critical in building value at these portcos. They were looking for a single-shingle pricing consultant or boutique pricing consulting firm with industry experience that could provide analytical support to the management teams as well as strategic planning.

BluWave has exact-fit provider with industry experience

Leveraging our founder’s 20 years in private equity, we have extensive frameworks for assessing PE-grade pricing strategy needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of pricing consultants that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria, and then connected the client with select pre-vetted boutique pricing consulting firms from our invitation-only Intelligent Network that fit their exact needs.

Firm engages consultant to address pricing issues and more

Quickly after the initial scoping call, the PE firm was introduced to three PE-grade boutique consulting firms with extensive experience in manufacturing. The client selected their ideal choice quickly and was very pleased with the outcome the pricing consulting firm provided. The PE firm was able to use the consulting firm to not only address the pricing issues, but identify the root cause of the problem, and train the sales teams in all portcos on pricing strategies.