When PE portfolio managers need anonymity and answers

There are challenging steps and uncomfortable conversations that businesses — especially private equity portfolio managers and their executive teams — must have when making decisions to advance.

Is our portfolio company on the best track? Should we acquire this add-on? Is this “industry norm” valid?

To answer the difficult questions, PE firms are turning to third parties when they need to remain anonymous. These third parties help to build a layer of privacy between the firms and the questions they want answered, allowing for increased freedom to get a full, unbiased look at the situation at hand.

Investors come to Apex Leaders wanting a better understanding. Whether it be an evaluation of their current portfolio companies or an exploration into a new market, Apex helps focus the lens. We provide a highly discrete and customized approach to address tough questions so PE can pulse faster in making informed decisions.

Discrete industry fact-finding
Some deals require an extra level of discretion. Suspicion and rumors can spread when questions are asked in certain industries. But when portfolio managers operate with the future at the forefront, questions that push comfort levels must be asked.

At Apex Leaders, we had a client who wanted to make an informed decision about a portfolio company, but needed to remain anonymous in the industry. Their portfolio company, a saw manufacturer, was reporting low performing sales across the Pacific Northwest. Their management team attributed the poor performance to dwindling mill production and possible regulation impacts between the U.S. and Canada, while the housing market continued to grow at a fast pace.

The client wanted an outside perspective on the situation — were low sales around the industry in line with the management team’s claims, or had other factors influenced the dip in sales?

These critical questions needed to be answered to protect the PE firm and their stake in the company. They could ask the questions, but couldn’t get answers without making waves in the industry.

A different approach to validation
To help our client, we thoughtfully crafted a series of questions to ensure we approached the project with a clear purpose. The portfolio manager specifically wanted answers to four questions, so we formulated a plan to help them find the insight they needed.

Ultimately, we spoke with 36 individuals at sawmills, trade associations, industry regulatory experts and conducted the calls on behalf of our client. These multiple angles helped direct us to a clearer, unbiased picture. We talked with saw file managers — those responsible for keeping saws sharp. We conducted conversations with individuals who made consumables purchasing decisions. We also spoke with experts familiar with the Softwood Lumber Agreement between the U.S. and Canada.

Industry claims — not always what they seem
In the end, we learned the management team’s claims about the decrease in sales were unsubstantiated. Around 80% of respondents reported they maintained or even increased output within the past 12 months. About 20% of respondents said that shifts had been reduced but the mills’ output remained unchanged due to better technology, equipment and lean management principles. All regulatory professionals noted no significant impact to their mills because of shifts in public policy. With our help, the portfolio manager was able to remain anonymous and make an informed decision about the company’s future.

Make decisions based on unbiased information
At some point, most PE firms will likely need the help of a service provider that can operate independently of the firm. When your firm needs a layer of privacy or unbiased insight while evaluating a deal or current portfolio company, Apex Leaders can accelerate the pace at which you acquire the answers you need. We’ll help safeguard your firm’s reputation and provide you with insights at a level of depth that goes well beyond what you could gather yourself or through the use of an expert network.

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