Many operating teams have been in overdrive for the last 18 months. The initial scramble to react to the covid-19 outbreak and first round of lockdown measures may be over, yet the impact of the pandemic and subsequent economic uncertainty continues to ripple through a number of sectors.
The covid-19 environment has put operating partners’ skills to the test, but the lessons they have learned will be invaluable in dealing with future shocks and in helping to build ever-more robust and effective value-creation plans in the future.
In particular, the importance of human capital strategies and strength of a portfolio company’s management team to a business’s success, especially in challenging periods, has come to the fore. Indeed, in a recent survey of private fund leaders by affiliate title Private Funds CFO, 46 percent of respondents listed talent management among the top three most important operational levers in the current altered environment.
Meanwhile, in EY’s 2021 Global Private Equity Divestment Study, more than half of respondents said digitisation was important to developing their value-creation story and divestment thesis in their last major exit – indicative, in part, of the accelerated shift online since the pandemic.
The covid-19 crisis and events of 2020 have also pushed environmental, social and governance issues up the agenda, highlighting the risks involved in not paying due consideration to such issues and the potential upsides a proactive approach to ESG can deliver. Almost three-quarters of private equity firms in EY’s study expect to capture an ESG premium in the businesses they are thinking about exiting.
Talent management, ESG and digital transformation are just a few of the tools in operating partners’ value-creation toolkits. These kits have been steadily growing over the last decade, along with the size and capabilities of operating teams themselves.
In our 10th annual Operational Excellence special report, we look back at the evolution of operating teams and value-creation strategies over the last decade and celebrate 10 years of the Operational Excellence Awards.
This year’s OpEx Awards winners are no strangers to the aforementioned value-creation tools. The private equity sponsors behind one of the winning entries in the EMEA region, for example, invested in enhancing customers’ digital experience at the e-commerce platform they backed, including the launch of a mobile app and a one-click check-out process.
And in Asia-Pacific, a GP helped a publishing company transition from print to digital during its three-and-a-half year holding period, generating a gross internal rate of return of approximately 40 percent. Alongside reducing paper use, the GP also assisted the company in implementing a 33-strand ESG programme.
In the Americas, a long-time value-creation pioneer put together a best-in-class management team to help grow a value-based healthcare company, which successfully listed on the New York Stock Exchange this year. In the same region, a tech-focused GP worked with an entrepreneurial management team to build an in-home healthcare company from scratch, which is understood to have generated a 27.2 multiple of money invested and a 75 percent IRR on exit.
At a time when eyes are on the private equity industry about the way it operates and its contributions to society, our OpEx Awards highlight stand-out players in an industry creating value and returns for investors.
Learn more about 2021’s OpEx Awards winners here.