private equity practice | leadership consulting …/media/publications and... · the group focused...

Accelerating performance in private equity: From due diligence to exit

PRIVATE EQUIT Y PRACTICE | LEADERSHIP CONSULTING PRACTICE

Private equity professionals looking to maximize returns are outmaneuvering competitors by reducing time to value in their portfolios at each stage of the investment cycle. Bain Capital’s experience demonstrates how fund managers can accelerate the performance of their portfolio companies.

17090639-hs-00280-PE Accelerating Performance.indd 1 29/09/2017 12:06

2 Accelerating performance in private equity: From due diligence to exit

Following three consecutive years

of strong deal activity, private equity

(PE) professionals are innovating their

value-creation strategies to overcome

market headwinds from high deal

multiples, strong competition, and

record levels of “dry powder” (money

raised but not yet invested).

Against this backdrop, leading PE firms are focusing

on four areas of corporate performance that

Heidrick & Struggles research indicates are the

most crucial for companies to build and change

momentum more quickly than their competitors—and

thus reduce time to value. As detailed in the book

Accelerating Performance, coauthored by Colin Price and

Sharon Toye, the four areas are:

M + E + T + A = Acceleration

Agility

Transform

Execute

Mobilize

spotting opportunities and

threats, adapting and pivoting

faster than competitors to

create competitive advantage

experimenting and innovating

to create growth engines and

reinvent existing businesses

ahead of the market

fully harnessing and

streamlining resources to

consistently deliver excellence

in the core business

inspiring aligned action based

on a compelling ambition and

purpose and a simple set of

strategic priorities

PE professionals have little time in which to accelerate the

performance of their portfolio companies, and the four

areas we have identified (summarized by the acronym

META) can reduce their time to value at every stage of the

investment cycle.


https://www.accelerating-performance.com/

Heidrick & Struggles 3

The investment cycle

1. Pretransaction diligenceWhile traditional due diligence identi�es a target

company’s risks, challenges, and opportunities,

shortening the time to value requires

experimentation and a culture of disruptive

thinking. Innovative PE professionals challenge

traditional growth strategies and create new

revenue streams by developing a value

proposition that focuses on how people,

processes, and technology maximize

value creation from day one.

3. Performance improvement

The average holding period for a

PE-backed portfolio company is three to

�ve years, leaving investors with a short

timeframe to execute their value-creation strategy

through revenue enhancements, operational

improvements, or cost reductions. The time to

value for each of these crucial paths can be

shortened by streamlining business silos and

holding employees accountable for reaching

straightforward goals that best drive enterprise

growth.

4. Exit preparationWhen the time comes to divest,

PE professionals look for the highest

possible return on their investment,

working hard to maximize exit multiples and

boost enterprise value. Sellers with an agile exit

readiness plan can quickly adapt to changing

market circumstances by having the foresight to

anticipate any market headwinds and quickly

recover.

2. “Day one” readinessIn PE, timing is everything. By the time due

diligence is conducted, a bid is accepted, and the

deal is signed, the target company’s competitive

advantage can be lost. Regardless if it’s a desired

capability, market, or technology, the elements

that made the company an attractive investment

must be mobilized before competitors inevitably

catch up. Having clearly de�ned strategic

priorities energizes management

teams and aligns their actions to

minimize business disruption

during the transition.



Accelerating performance in practice: Bain Capital Private EquityThe following example, drawn from

Accelerating Performance, details how

Bain Capital Private Equity has become

a catalyst for acceleration and walks

through a portfolio company case

study to demonstrate how the META

framework can be applied and reduce

time to value.

Accelerating portfolio companiesStuart Gent, head of Bain Capital’s European portfolio

group, says it “tries to accelerate the results of a company

quickly” through short-term levers such as pricing,

procurement, cost reductions, simplification, and so on

“to financially get ahead of our investment case, because

then you have more time to think about the profound

change you want to drive and you have more cash to

invest in making it happen.”

Bain Capital starts by making sure the right top team is

in place and then works very hard on getting alignment,

first with perhaps the top 20 and then the top 100 or so

people—based not on hierarchy but on their impact. “A

lot of what we do may sound obvious, but companies

rarely seem to drive change in such a focused and

disciplined way,” Gent says. In addition, Bain Capital

focuses not only on executing a plan but also on

understanding how the plan, its team members, and their

roles are determined. Gent says getting alignment up

front is crucial because it allows for better interactions

and much quicker decisions down the road.

Gent offers a wry observation about the need to put real

talent behind the rollout: “When we look to build teams

to lead key initiatives, I always question the first set of

names discussed. Real change needs the best people in

the company, and by definition, they are the busiest and

so are rarely offered up for key projects.” Instead, the

first names proposed are usually not as effective in their

current roles and wouldn’t be missed.

NXPNXP began in 1953, when Dutch giant Philips N.V. set

up an electronics business. A group of private equity

firms, including Bain Capital, acquired 80% of Philips

Semiconductors in 2006, valuing the entire company

at $9.4 billion right before the Great Recession struck

the global economy. The business, renamed NXP, went

public in 2010 at a 46% discount to its initial stated

offering price, but the business had gone through a

transformation that positioned it well. NXP is now the

fifth-largest semiconductor maker in the world, outside

of the memory-chip sector—it is known for chips for


Heidrick & Struggles 5

cybersecurity, for cars, and for digital networks. In

October 2016, Qualcomm announced that it will acquire

NXP for $47 billion—five times its initial purchase value.

During the four-year stretch that Bain Capital was involved

with NXP, partners worked closely with Ruediger Stroh,

who was brought in from LSI Corporation. He began by

taking his top 50 on a four-day trip to Spain that forced

people out of their routines, disoriented them to break

down barriers, and resulted in a tight-knit team.

“Our CEO said, ‘Are you nuts? We’re almost bankrupt, and

you want to do what?’” Stroh recalls. “I said, ‘Do you think

you could win a Super Bowl with people who haven’t met

each other? Well, how can I turn the business around with

a team that doesn’t know each other?’”

He had set an ambitious goal of at least 1.5 times the

market share of his nearest competitor, up from roughly

0.8 times the market share the company had when he

took over.

The group focused on role-modeling crisp behavior. “We

don’t just make decisions,” Stroh says. “We make fierce

commitments.” He said his team is like Yoda, who told

Luke Skywalker in The Empire Strikes Back: “Do. Or do not.

There is no try.” Stroh says, “Once we commit, we go for

it.” He insists on delegating to get decisions made at the

right level.

Impossible is really just an opinion.Stroh’s team developed standards for how to conduct

meetings and scores itself in each one. “When we have

meetings that suck, we address the issue,” Stroh says. He

puts three empty chairs in each meeting, to stand for

other team members, for shareholders, and for customers.

He sometimes has someone sit in one of those chairs

and advocate for whomever it represents. His mantra is

“Focus. Speed. Customers.”

Employees responded: his division went from the

bottom quartile to the top quartile in Gallup’s employee

engagement surveys. Stroh says employees bought into

his vision that radical growth was possible.

Of course, getting the team dynamics right is just

the start. There are a lot of effective teams in Silicon

Valley, where Stroh has lived for 20 years, that don’t

accelerate, because they don’t navigate the fast-changing

technology market well enough. Stroh decided that his

division was just cherry-picking and looking for high-

end markets, which tended to be small. Having spent

so much time raising the ambitions of his people, he

needed to find mass markets and build the capacity to

dominate them.

He pushed in several areas, including smartcards that,

among other things, can be read by scanners and used as

tickets on buses and trains. He also saw, back in 2009, how

important cybersecurity would be and has won big with

the sorts of chips that are used in bank cards, including in

China’s massive market.

Stroh’s division worked closely with customers and

prospects to anticipate their needs, because lead times

on new products can be exceptionally long. A new chip

may contain billions of transistors, and manufacturing

is devilishly complicated at the start—manufacturing

tolerances may be measured in widths of atoms. Any new

chip also has to be designed into whatever system the

customer is building. The work with customers went so

well that NXP’s Net Promoter Score rose from 5% to 42%.

Stroh achieved his targets—and then some. He went from

0.8 times of his biggest competitor’s market share to 3

times the share in some lines and 8 times in others.

As Stroh says, “Impossible is really just an opinion.”



Heidrick & Struggles has worked with Bain Capital enough

to know that it drives progress, while facilitating learning,

by putting a number on everything. That means no

describing likely results with qualifiers such as “well” or

“better.” The organization holds everyone accountable by

demanding precision, and then fine-tunes its approach

based on how close performance is to the predicted

number. Many of the principles that have driven results in

the Bain Capital portfolio overlap with our META concepts

and, as seen with NXP, have significantly reduced time to

value and maximized returns for investors.n

About the authors

Todd Monti ([email protected]) is a managing partner

in Heidrick & Struggles’ Private Equity Practice; he is based

in the New York office.

Larry Oberfeld ([email protected]) is an associate

in the New York office and a member of the Private

Equity Practice.

Colin Price ([email protected]) is an executive

vice president and the global managing partner of

the Leadership Consulting Practice; he is based in the

London office.

Sharon Toye ([email protected]) is a partner in the

London office and a member of the Leadership Consulting

Practice.


mailto:[email protected]




Private Equity PracticeHeidrick & Struggles’ global Private Equity Practice combines a deep understanding

of private equity markets with world-class expertise across all major industries and

functions to provide a broad range of value-adding services.

Private Equity Practice leadersDaniel Edwards

Global Practice Managing Partner

[email protected]

Michael Di Cicco

Regional Managing Partner, Asia Pacific

[email protected]

Jonathan Goldstein

Partner, Sector Leader Private Equity, Americas

[email protected]

Todd Monti

Managing Partner

[email protected]

Leadership Consulting PracticeHeidrick & Struggles’ Leadership Consulting Practice works with clients to build

their capacity to accelerate at four levels: strategy, the overall organization, the

team, and the individual leader.

Leadership Consulting Practice leadersColin Price

Executive Vice President and Managing Partner

[email protected]

Hervé Borensztejn

Regional Managing Partner, Europe and Africa

[email protected]

Scott Jacobs

Knowledge Leader, Organizations

[email protected]

Steven Krupp

Knowledge Leader, Leadership Development

[email protected]

Andrew LeSueur

Regional Managing Partner, Americas

[email protected]

Sharon Sands

Knowledge Leader, Coaching

[email protected]

Sharon Toye

Knowledge Leader, Teams

[email protected]

Toomas Truumees

Knowledge Leader, Strategy

[email protected]


Heidrick & Struggles is a premier provider of senior-level executive search,

culture shaping, and leadership consulting services. For more than 60 years

we have focused on quality service and built strong relationships with

clients and individuals worldwide. Today, Heidrick & Struggles’ leadership

experts operate from principal business centers globally.

www.heidrick.com

Copyright © 2017 Heidrick & Struggles International, Inc.

All rights reserved. Reproduction without permission is prohibited.

Trademarks and logos are copyrights of their respective owners.

Cover image: © iStock/guvendemir

hs-00280


private equity practice | leadership consulting …/media/publications and... · the group focused...

Documents