Abundant dry powder, a low interest rate environment, and increased competition from buyers are driving buyout multiples to record highs. These trends are causing the private equity industry to feel increased pressure to take a hands-on approach to create value at the portfolio company level in order to hit desired returns. The first step firms often take with a new investment is collaborating with the executive team to develop a 100-day plan.
On the surface, a 100-day plan sounds straightforward—the actions that are going to be carried out in the first 100 days after closing of the acquisition. The reality, however, is that a 100-day plan goes beyond a pretty Gantt chart and can be one of the most crucial factors leading to the early success of investment. A properly executed 100-day plan creates urgency, sets expectations, and builds the foundation necessary for growth.
Start planning during diligence
In private equity, the ideal time to get something done is yesterday. This applies to beginning the 100-day plan. If a PE firm is executing proper diligence, then it should identify and prioritize key value drivers and opportunities in the deal evaluation stage. Putting a plan into place before close creates critical momentum necessary for PE’s aggressive value creation timelines and over intended hold periods.
Go for quick wins
Nothing creates momentum and urgency quite like achieving quick wins. Not only do quick wins provide a strong psychological boost for management, employees, and the investment team alike, they also deliver tactical advantages. Common examples include renegotiating vendor agreements and improving working capital to free up cash to fund further growth.
Stabilize and become scalable
Finance and IT functions are often ripe for stabilization. Siloed legacy systems, ad hoc reporting, and long close processes leave management without timely and accurate data to make decisions. Not only does that force management to drive with the rearview mirror, but it limits scalability. As growth continues, these issues multiply exponentially. The first 100 days are an ideal time to not only overhaul these functions but to prepare for the future. For example, a strategically planned IT environment can drastically increase the ease of organic growth and add-on acquisitions, all while being incurred as a one-time cost.
Empower people to fuel growth
Even a perfect plan will fail without proper execution. While having the right management team in place is the biggest factor for success, a good 100-day plan will drive management by setting expectations, communicating measures and targets, and creating accountability. The alignment of people working toward clear, concrete goals will ultimately be what drives successful outcomes.
At MorganFranklin, we take pride in creating value through the entire private equity lifecycle. We help PE firms create and sustain momentum in every stage by providing a diverse team of experts through a single, continuous point of contact and driving value creation in an increasingly competitive private equity landscape.