A Playbook for Fundless Sponsors, Family Offices, and Lower Middle Market Private Equity Funds. Overview of how to execute due diligence like a large fund to close more of the right deals at the right price for the right reasons.

1. E n h a n c i n g D u e D i l i g e n c e O u t c o m e s
A Playbook for Fundless Sponsors, Family Offices, and Lower Middle Market Private Equity Funds

2. Abstract
This presentation is for private equity funds, family offices,
fundless sponsors, or other parties in the business of acquiring
businesses.
Contains guidance for teams on how to use experienced
Operating Partners to more effectively perform due diligence.
The goal of due diligence projects is to provide deep insights into
the potential value of a target entity in order to optimize investor
decisions and its valuation.
Mainsheet Operating Partners provides Operating Partner
services to private equity funds in the middle market and lower
middle market on an “on-demand” basis.

3. PART ONE
What’s the problem and
how does an Operating
Partner help you solve it?

4. Operations insight is often missing from the Due
Diligence process.
Common
Problem
Operating Partners bring insight into a due diligence
team, making the process more productive and accurate.
Operational diligence processes often look at everything
and miss the essential issues
Operating Partner relevant business experience can
quickly ’join the dots’
A smaller fund or fundless
sponsor may not be able to
justify the cost of a full time
Operating Partner.
But even for a fund with one
or more full-time Operating
partners, they may not be the
right fit for the deal that is
currently on the table.

5. The Operating Partner knows where to look with an
expectation of what the business should look like and
gets straight to the important drivers of the business.
Experience
Matters
Experience takes you straight
to topics that matter most.

6. Client Engagement
MSOP was recently engaged on
the due diligence portion of an
operating partner assignment for
a fundless sponsor.
Target business
Getting straight to the problemCase
Study
Manufacturer of electronics
products used for critical
infrastructure applications
entering bankruptcy process.
The Company had begun the
process of outsourcing its
manufacturing to an ODM partner
in China.
Red Flags
The Operating Partner
immediately understood that
numerous red flags existed.

7. (Continued)Case
Study
Sales Disconnect
Forecasted sales consisted of
growth of Federal government
sales to become 20% of total
sales volume. The use of a
Chinese ODM would seriously
constrain its ability to sell to the
U.S. federal government.
The ODM strategy utilized multiple
ODM partners to “diversify the risk”
and a final assembly partner. Each
partner using a mix of in-house
toolings and company provided
toolings.
This structure allowed the ODM
partners to have an excuse for why
products were late and why
tolerances or specifications could not
be met.
The first deliveries of the ODM
products were expected to fall during
the 4 month DD process. As the OP
expected, no deliveries were made
and the forecast for the year was
drastically impacted by lack of
product.
The ODM contracts did not
contain sufficient protection from
design copying and reuse or
penalties and definitions around
late delivery.
Lack of Protection
ODM Strategy
ODM Result

8. A Balanced
Perspective
Due Diligence with an Operating Partner
Identify Downside Risk The Operating Partner:
• Identifies the value that can be
unlocked in the business
getting closer to the real value
of the target investment
• Approaches every due
diligence project with a wealth
of experience that guides the
process and gets diligence
done faster
Verify Business Operations
Identify Upside Potential (Sales
Growth & Cost Efficiency)

9. The Value
Creation Plan
Using Due Diligence to Create Value
The core of the Operating Partner’s work is in
operational due diligence (ODD) and
commercial due diligence (CDD).
Main Focus
ODD and CDD are the process of evaluating
the business and market to provide inputs to
or validation of the assumptions in a financial
model of a potential investment.
Providing Inputs
Output of an ODD exercise feeds the value
generation, growth plan, and/or 100-day
strategic plans of the target company.
Value Generation
Company
Today
For some, due diligence is
the process of looking at
what the business “is.”
The due diligence performed
by the operating partner also
looks at what the business
“could be” and provides
perspective on the certainty
of a potential outcome.
Company
Post-Acquisition

10. Due Diligence
Outcomes
What an Experience OP
Delivers
• A clear view into what the company can be
• Real deliverables that guide the deal team’s
decisions
• Insights powered by real world experience
into potential upsides that will impact the
investor perspective on valuation
• A 100-day plan that can be started on day
one
• The OP Ideally positions the CEO and the
business to execute the plan.
• An ability to close more deals for the right
reasons and at the right price
Visit mainsheetop.com for more
information
Or follow us on LinkedIn
linkedin.com/company/mainsheet-op

11. Ready to get started?
mainsheetop.com