Private Equity Investor Value Creation


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LLR's Justin Reger presented at the 2013 Southeast Venture Conference, held March 13 - 14 in Charlotte, NC.

Justin presented on how to get the most out of partnering with an investor. Beyond securing capital to help grow a business, partnering with an investor can bring with it the strategic guidance, corporate development support, access to talent networks and other resources needed to help business owners achieve their goals. Learn how to get the most long-term value out of a partnership with your investor.

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Private Equity Investor Value Creation

  1. 1. Investor Value CreationSoutheast Venture ConferenceCharlotte, NCMarch 13, 2013
  2. 2. LLR Snapshot LLR is a leading private equity firm focused on investing and partnering with strong management teams to accelerate growth and profitability in established technology and service businesses. Investment Criteria Revenues $15MM to $250MM Growth 10%+ EBITDA $0 to $50MM Investment Size $20MM to $100MM Management Vision & alignment Market $500MM+ & growth Differentiated, scalable, & Model sustainable Situations where we can LLR Experience add valueConfidential 2
  3. 3. The Value Added InvestorA. “We love to roll up our sleeves and work side-by-side with our portfolio companies for the long haul.”B. “We work with management teams to implement strategic and operating initiatives to build long-term value.”C. “We are active investors who take a proactive approach to working with our portfolio companies.”D. “We work as a team to support the management of our portfolio companies in a variety of ways.”Confidential 3
  4. 4. PE and VC Backed Company Study Revenue CAGR – Five Years After Investment• 6,815 companies that received PE investments generated annual revenue growth of 11.6% after 5 years• 1,854 companies that received VC investments generated annual revenue growth of 36.4% after 5 years Source: Institute for Exceptional Growth Companies (IEGC) and Pepperdine University Confidential 4
  5. 5. Investor Resources Sector Experience Best Lenders Practices Service Providers Company Portfolio Operating Consultants Partners Advisory BoardConfidential 5
  6. 6. Value Accelerators Exit Acquisitions Talent ManagementValue Operational Improvements Customers & Partners Strategic Planning Board of Directors Time Confidential 6
  7. 7. “We Help Build a World Class Board” Don’t • Stacking the board with a bunch of investor types Settle • Just a foundational board providing basic oversight and compliance For Get • Independent directors with direct operating experience in Excited complementary functional areas By • Active involvement beyond quarterly meetings • What is the role of the Board? Ask • How active is the Board? Questions • What profile do you envision for board members?Confidential 7
  8. 8. “We Provide Strategic Insight” Don’t • A sounding board Settle • A mandate rather than a dialogue: “Here is your three-year strategic For plan, now go execute” Get • Collaborative strategic planning sessions that you and your team Excited own, with an independent facilitator By • Playbooks and frameworks to help as a guide, but application that is left to you and your team • What typically happens post-closing? Ask • Can you share a prior 100-day plan? Questions • What are your preliminary thoughts on avenues for growth? • What are the backgrounds of the investors/advisors?Confidential 8
  9. 9. “We Can Make Introductions to Customers & Partners” Don’t • A network of companies that can provide meaningful business value Settle For Get • Portfolio of prospective customers and/or partners Excited • Thoughtful partner development plan By • Deep relationships with channel partners / potential buyers • Are other portfolio companies potential customers and/or partners? Ask • What does the broader portfolio partner ecosystem look like? Questions • What is the firm’s history with driving business through its network?Confidential 9
  10. 10. “We Assist with Improving Operational Efficiency” Don’t • Monthly/quarterly reporting calls Settle • More mandates: “You must implement these processes and For systems” Get • Roadmaps by each functional area from prior successes Excited • Best practices sharing among portfolio – informal and formal By • Specific project examples from other portfolio companies Ask • We are challenged by X; what has been your experience? Questions • How much interaction occurs within the portfolio?Confidential 10
  11. 11. “We Can Source Talent” Don’t • Minimal incremental value: “Meet Bob, he runs a search firm” Settle • Unilateral hiring decisions: “Meet Joe, your new head of sales” For Get • Deep bench of operating talent in multiple functional areas Excited • Relationships and experience with multiple search firms across By multiple functions, geographies, experience levels • Dedicated director of talent leveraged by the portfolio • Is there someone on your staff dedicated to helping the portfolio Ask build talent management plans? Questions • I have holes in my management team; do you have access to talent who can fill them?Confidential 11
  12. 12. “We Can Help with Acquisitions” Don’t • Pledge to provide or help secure incremental capital Settle • Basic deal experience For • Thoughtful, collaborative approach: “Here’s an initial acquisition Get target list, let’s talk about what makes sense for your growth plan” Excited • An outsourced M&A department By • Previous buy-and-build experience and proven playbooks • What are your thoughts on an acquisition strategy? Ask • Do you have dedicated resources to support our acquisition strategy? Questions • How much experience do you have with buy-and-builds and integrations?Confidential 12
  13. 13. “We Optimize Exit Value” Don’t • We have successfully exited X number of companies Settle For Get • Thoughtful view on logical buyers and existing relationships into them Excited • Flexible strategy that will expand and evolve your exit options By • Management input on exit timing (partnership approach) • Who have you sold prior portfolio companies to? Ask • Do you have regular dialogues with strategic buyers? Questions • What is your investment horizon? • Walk me through sub-optimal outcomesConfidential 13
  14. 14. Investor Evaluation Checklist Decide if you truly want an active investor as your partner Determine if they really know your space Make a list of areas you need help and have them present a plan to you Talk to past and present portfolio companies – the good, the bad and the ugly Make sure diligence is a two-way streetConfidential 14
  15. 15. Questions Justin Reger, LLR Partners 215-717-2900 Twitter: @LLRPartnersConfidential 15