How external expertise changed the future of a PE investment
Technology transformation in private equity
For many PE houses, the decision to invest in a target company hinges on that business’s potential to deliver rapid digital transformation. The value of bringing in external consultants is two-fold. First, they can advise on technical due diligence and opportunities for value creation. Then, if the deal is done, the lead consultant can switch to an interim executive role - bringing in proven transformation experience that may be lacking in the portfolio company’s incumbent leaders. The interim’s expertise can build capacity, boost performance and deliver key change goals with a direct impact on EBITDA that justifies tech investment many times over.
Identifying opportunities, not just risks
Our consultants were initially engaged when a private equity house client requested our specialist expertise for the technical due diligence of a deal.
Their target was a medical equipment manufacturer, with huge scope for digitisation. One of the strengths of experienced consultants is their ability to see the full possibilities in digital investment, and then weigh those up against the dangers. We were able to show how the financial opportunities in the deal eclipsed the costs of addressing the risks. The technology findings also extended to ideas for enhancing physical products as well as upgrading their ERP system to enable better execution of business process and enable digital distribution channels.
Creating the strategy & roadmap
Our team produced business cases for the opportunities they had identified in due diligence, and a report highlighting what was needed from each business unit to achieve successful transformation.
Once the deal was agreed, this insight helped identify areas from improvement which were agreed across the first year of investment. Crucially, the PE house and consultants recognised that the head of IT had huge potential, but currently lacked the full skillset to deliver the transformation alone. The strategy required external expertise to be brought in.
Delivering on the plan
The solution was for the lead consultant to step in as interim CIO – and provide coaching and development for the Head of IT, enabling him to run the combined technology teams in the near future.
The Interim CEO moved swiftly to select and implement new partners to provide external resources, cloud hosting solutions and software development – while embedding the digital transformation process within the portfolio company. The foundation was laid, transformation was launched and the momentum was building.
Optimising for value creation
The interim CIO engagement ended once the Head of IT was sufficiently developed and he had a new CFO in place to report to.
However, due to the trust built with the portfolio company and PE house, the lead consultant was asked to continue in a consultancy capacity. They stepped back to pure technology consulting and advising on ongoing personal and technical developments linked directly to EBITDA performance. The consultancy engagement delivered its own return across the due diligence and value creation phases, providing short-term impact and long-term capability-building.