Key takeaway: Since Jamie Davis joined Bow River Capital in 2019, the firm's assets under management grew from under $800 million to $3 billion with only a modest increase in staff. To manage operational complexities without overextending staff, Davis turned to outsourced procurement, aligning with trend many mid-market PE firms are adopting. The partnership with Concertiv not only helped Bow River realize significant savings in data subscriptions and travel costs but also optimized operational efficiencies and resource utilization.
When Jamie Davis first joined Bow River Capital in 2019, the Denver, Colorado-based private equity (PE) firm had less than $800 million in assets under management (AUM) and roughly 25 employees. In less than four years, Bow River Capital’s AUM has grown to $3 billion, yet the firm’s staff remains just under 50 employees.
“We’ve been growing a lot, but we’ve not been growing headcount as fast as revenue. And I think there are a lot of peers in similar situations,” says Davis, the multi-strategy firm’s Chief Financial Officer (CFO). “So much of our energy and attention is focused on delivering investment returns, there was this big black hole –this big area of spend that we just didn’t have the time and attention to focus on. But it was material dollars,” he says, noting that the firm’s spending on data alone was in the high six digits.
To save money and free staff from the headache of dealing with back-office issues, like managing data subscriptions so they can instead focus on delivering investment returns and raising capital, Davis decided to outsource the bulk of his firm’s procurement needs. And he’s not alone.
The Procurement Paradigm Shift
As middle market PE firms find themselves grappling with a host of issues – from economic uncertainty and a looming recession to ongoing talent shortages, ever-changing regulations, cybersecurity concerns and even the fallout of the recent bank collapses, a growing number of PE firms are turning to outsourced procurement as a way of removing back-office distractions so that employees can focus on higher priority issues for their firms.
Beyond cost-saving benefits which in many cases is the initial driver, procurement-as-a-service offers private equity firms a way to supplement their organization’s expertise without the need to bring on additional employees. Outsourcing also provides an additional layer of risk management surrounding third-party relationships, a realization not lost on investors who have been helping drive the adoption of procurement outsourcing to boost firms’ own due diligence efforts.
“So much of our energy and attention is focused on delivering investment returns… there was this big black hole –this big area of spend that we just didn’t have the time and attention to focus on. But it was material dollars.”
Bow River Capital
Outsourced Procurement: Beyond the Savings
Concertiv, with expertise in travel, market data, technology, and insurance, leverages collective client purchasing power to offer mid-market PE firms competitive pricing typically only available to the industry’s largest players. Their deep industry expertise aids firms in identifying which products and services truly add value, spotting resource gaps within their portfolios, and conducting subscription audits to eliminate redundant costs. Beyond mere savings, Concertiv provides cost optimization, boosting efficiency, and reallocating spending effectively.
“We went into this thinking, ‘Oh, these are people who do procurement and negotiation day in and day out, so they’ll be able to save us a little bit of money.’ But it’s really been much more than that… they’ve had a huge impact in helping us understand what we’ve bought and how we’re utilizing it,” says Bow River’s Davis.
Within just the first few months of bringing on Concertiv, he says the firm rapidly dug into employee usage of Bow River’s data subscriptions, immediately identifying two subscriptions that were underutilized or no longer useful, savings the firm was able to reallocate to things that can better help bolster its bottom line. “You can almost liken it to a real-life audit on all levels,” says Davis, pointing to the frustration he experienced trying to determine exactly what his firm was paying one prominent data provider for, and how much was being utilized. While Davis himself had gone back and forth with the company no less than 20 times, to no avail, Concertiv quickly sorted things out and help pared down the subscription. “It was really helpful navigating that –something I just would not have had the time to do, or maybe even known to think about,” says Davis.
“We went into this thinking, ‘Oh, these are people who do procurement and negotiation day in and day out, so they’ll be able to save us a little bit of money.’ But it’s really been much more than that… they’ve had a huge impact in helping us understand what we’ve bought and how we’re utilizing it.”
Bow River Capital
Though it was data costs that spurred Davis to embrace procurement outsourcing, another major pain point for Bow River was its spending on travel, an area where PE firms across the board have been endeavoring to keep costs in check. In the wake of soaring oil prices, business travel costs rose 48.5% in 2022, according to research from travel management company CWT and the Global Business Travel Association, which predict they will rise an additional 8.4% in 2023. Davis says travel was the first place it became clear how much value outsourcing could add, as substantial savings through Concertiv’s travel offerings were instantly visible.
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