The Private Equity (PE) Industry has gone through fundamental changes in the last 20+ years. IRR has over time has been driven first by leverage, then by multiples and in the 2000’s by earnings growth. Today, IRR is being driven by operational improvements. A recent BCO-IESE study concluded that portfolio company improvements are now driving over 60% of PE industry IRR.
In the last few years of slow growth markets, PE firms have primarily driven operational improvements through cost controls and operational improvements.
Today the focus must be on the top-line as well and MRA has developed a growth planning process just for middle market companies their PE sponsors. MRA’s “Fact Based Planning” process is proven, straight-forward, fast, scalable and repeatable.
The Fact Based Planning Process
The MRA “Fact Based Planning” process for PE firms and middle market companies (Usually 2-4 weeks in duration):
- Business review and assessment.
- Consensus building on findings and implications.
- Action plan development.
- Consensus building on action plans.
- Forecast Goals and KPI development.
- Bonus plan development.
- Implementation.
While this planning process is basic in many ways, it is missing from most middle market and Private Equity companies.