Private Equity Objectives
When committing to an acquisition or substantial investment, PE firms naturally share most of the same requirements as public companies: meticulous due diligence; careful drafting of the Sale and Purchase Agreement (SPA); skilful execution of the post-completion plan; supportive communications, etc.
In addition, the particular objectives commonly pursued by PE firms may require rapid action on:
- aligning local Senior Management and PE financial interests;
- maximising cash generation to pay down debt and interest within an LBO;
- adding value by growth and/or cost reduction;
- developing the road map to realising the investment within, say, 5 years.
Venture capitalists, business angels (and dragons), who focus on start-ups, new product development or backing entrepreneurial individuals can sometimes take a longer term view, but will still need to pursue many of the same actions.
**The role of HR-orientated ODM**
Given the lean personnel structures of PE companies and the wide range of different industries in which they invest, relevant HR-orientated OD skills are often not available in-house in the PE company itself.
The necessary culture shift, acceleration of pace, and break with the past at the acquired company often lead to the appointment of a new HR Director. Choosing the right candidate with relevant ODM skills can accelerate progress towards PE objectives in the following areas.
Shaping the organisation to be "fit for purpose" by:
- headcount reduction and replacement of those with no future in the business;
- restructuring with shorter reporting lines;
- recognition of PE operating model requirements;
- monitoring progress with relevant organisational metrics.
Aligning interests by:
- ensuring local management equity participation is attractively and realistically geared (usually covered in the SPA);
- leveraging the more flexible rewards structures available within PE;
- establishing appropriate bonus schemes (e.g. with cash and working capital targets, rather than just sales and operating profits);
- "talent management" to retain and develop key employees;
- helping manage the Board-level interface between local and PE-nominated members enabling it to run smoothly.
Generating cash by:
- expense reduction and control systems;
- outsourcing services (e.g. payroll) where cash-effective;
- organisational change linked to process re-engineering and other initiatives in supply chain management, working capital and capital expenditure.
Building the right working atmosphere and morale by:
- injecting briskness of pace by personal example;
- clear and timely communication with employees at all levels;
- managing expectations at the outset of the deal and when the time comes for PE to exit or sell on.
Who thrives in this environment?
A pro-active HRD with the right skill and mind sets can be a pivotal figure in the success of a PE investment. As the speaker at the recent Frazer Jones OD Forum stressed, the role is not one for shrinking violets, silo-thinkers or cautious respecters of other people's turf.
Where relevant, prior industry experience, internationality of outlook and language skills are all highly desirable, but relishing the challenge of transformational change can be just as important.
HR-orientated OD managers with the right attributes can make a strong case to potential employers about how they can help PE achieve faster, higher returns on investment.
How Frazer Jones can help
We think that HR-orientated OD managers will be increasingly important to PE companies. Frazer Jones has particular skill in finding highly experienced candidates for these roles, including those with prior PE experience.
Our international orientation helps us to identify leaders with relevant professional HR and operational skills applicable across a wide variety of countries and markets, especially in Europe. We have experience of what works for PE and we draw upon the expertise of the SR Group in a range of professional markets.
If you would like to discuss the above, are seeking candidates for your company, or are looking for new ODM challenges yourself, please contact us.