The days of driving returns by buying cheap and selling high are long gone. With rising interest rates, continued inflation, and risk of recession, CFOs and COOs who are driving market-beating value creation are rolling up their sleeves and digging into operational work. Two big themes emerging in recent conferences are to slow down and keep close.
PE Firms feel pressure to build best-in-class operations while accounting for evolving technology, business, security, and regulatory environments. A consistent playbook for evaluating strategy, budgets, and risk will help define the path forward. Budget reviews are becoming more frequent. Many organizations had settled into an annual cadence, but now and for the foreseeable future, everyone is back up to looking hard at the numbers 3 times per year.
CFOs and COOs add value on the portfolio company level in the areas of efficiency, spend, regulation, performance, and more. In the realm of risk and insurance, cyber assessments at the portfolio level are becoming more common. With new SEC guidelines taking effect, there is a growing focus on maintaining a single source of truth for risk and insurance data at the Fund andPortfolio Company levels. Firms are also getting more process oriented about onboarding new portfolio companies into their governance system.
The days of driving returns by buying cheap and selling high are over. The most resilient value creation today comes from refining the playbook on operational value creation. A subsequent post will highlight two other key themes – maximize impact and outsource everything possible. For now, to squeeze a return from every single hard-won LP dollar, the most successful private equity firms slow down and keep close. Join us for the panel discussion on maximizing impact at the Private Funds CFO NY event in January to learn more: https://www.peievents.com/en/event/cfo-new-york/agenda/