private equity investor value creation
DESCRIPTION
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.TRANSCRIPT
Investor Value CreationSoutheast Venture ConferenceCharlotte, NCMarch 13, 2013
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.
LLR Snapshot
Confidential 2
Investment Criteria
Revenues $15MM to $250MM
Growth 10%+
EBITDA $0 to $50MM
Investment Size $20MM to $100MM
Management Vision & alignment
Market $500MM+ & growth
Model Differentiated, scalable, & sustainable
LLR Experience Situations where we can add value
A. “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.”
The Value Added Investor
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PE and VC Backed Company Study
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• 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
Revenue CAGR – Five Years After Investment
Investor Resources
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Company
Sector Experience
Best Practices
Portfolio
Operating Partners
Advisory Board
Consultants
Service Providers
Lenders
Value Accelerators
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Board of Directors
Strategic Planning
Customers & Partners
Operational Improvements
Talent Management
Acquisitions
Exit
Valu
e
Time
• Stacking the board with a bunch of investor types• Just a foundational board providing basic oversight and compliance
“We Help Build a World Class Board”
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Don’t SettleFor
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• Independent directors with direct operating experience in complementary functional areas
• Active involvement beyond quarterly meetings
• What is the role of the Board?• How active is the Board?• What profile do you envision for board members?
• A sounding board• A mandate rather than a dialogue: “Here is your three-year strategic
plan, now go execute”
“We Provide Strategic Insight”
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• Collaborative strategic planning sessions that you and your team own, with an independent facilitator
• Playbooks and frameworks to help as a guide, but application that is left to you and your team
• What typically happens post-closing?• Can you share a prior 100-day plan?• What are your preliminary thoughts on avenues for growth?• What are the backgrounds of the investors/advisors?
Don’t Settle
For
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By
Ask Questions
• A network of companies that can provide meaningful business value
“We Can Make Introductions to Customers & Partners”
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• Portfolio of prospective customers and/or partners• Thoughtful partner development plan• Deep relationships with channel partners / potential buyers
• Are other portfolio companies potential customers and/or partners?• What does the broader portfolio partner ecosystem look like?• What is the firm’s history with driving business through its network?
Don’t Settle
For
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By
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• Monthly/quarterly reporting calls• More mandates: “You must implement these processes and
systems”
“We Assist with Improving Operational Efficiency”
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• Roadmaps by each functional area from prior successes• Best practices sharing among portfolio – informal and formal• Specific project examples from other portfolio companies
• We are challenged by X; what has been your experience?• How much interaction occurs within the portfolio?
Don’t SettleFor
GetExcited
By
AskQuestions
• Minimal incremental value: “Meet Bob, he runs a search firm”• Unilateral hiring decisions: “Meet Joe, your new head of sales”
“We Can Source Talent”
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• Deep bench of operating talent in multiple functional areas• Relationships and experience with multiple search firms across
multiple functions, geographies, experience levels• Dedicated director of talent leveraged by the portfolio
• Is there someone on your staff dedicated to helping the portfolio build talent management plans?
• I have holes in my management team; do you have access to talent who can fill them?
Don’t Settle
For
Get Excited
By
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• Pledge to provide or help secure incremental capital• Basic deal experience
“We Can Help with Acquisitions”
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• Thoughtful, collaborative approach: “Here’s an initial acquisition target list, let’s talk about what makes sense for your growth plan”
• An outsourced M&A department• Previous buy-and-build experience and proven playbooks
• What are your thoughts on an acquisition strategy?• Do you have dedicated resources to support our acquisition strategy?• How much experience do you have with buy-and-builds and
integrations?
Don’t SettleFor
GetExcited
By
AskQuestions
• We have successfully exited X number of companies
“We Optimize Exit Value”
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• Thoughtful view on logical buyers and existing relationships into them• Flexible strategy that will expand and evolve your exit options• Management input on exit timing (partnership approach)
• Who have you sold prior portfolio companies to?• Do you have regular dialogues with strategic buyers?• What is your investment horizon?• Walk me through sub-optimal outcomes
Don’t SettleFor
GetExcited
By
AskQuestions
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 street
Investor Evaluation Checklist
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Confidential 15
Questions
Justin Reger, LLR Partners
www.llrpartners.com Twitter: @LLRPartners