How has Irving Place developed its operating partners strategy over the years?
When I joined in 2004, I was one of the first operating resources. Our focus over the past seven to eight years has been strategically hiring the right mix of operating talent to work alongside our investment teams and portfolio companies.
We’ve made a significant investment in building our proprietary strategic services platform, which focuses on functional excellence, best practices and cost savings across the portfolio.
We’ve also brought on a number of world-class former CEOs and senior executives that have both deep industry and functional expertise. Having the right people, with the right experience set, accelerates our ability to make an impact with our portfolio companies from day one.
Has the development of an operations strategy given Irving Place an advantage in sourcing deals?
[The] strategic services [platform] has become an integral part of our approach, from early meetings with management, assisting in due diligence and leading special projects throughout the investment cycle. Our involvement has certainly been helpful as we’re learning more about our portfolio companies earlier, and we are demonstrating our value-add by way of these extra resources.
That said, we are very sensitive about our role as their “partner”. Our job isn’t displacing management or working behind-the-scenes on our own agenda. We set expectations upfront, work together on priorities and make our resources available to them on a voluntary basis. We find this approach works very well with mid-market companies.
Does it accelerate the investment holding period too?
It depends on the situation. If we help management stay focused and we bring something to the table, the company is going to be more profitable and worth more when we come to exit.
To use a simple golf analogy: ‘every stroke counts’. Our job as operating partners is to create awareness of potential opportunities and to advise and coach our companies toward a successful outcome. Having specialists in industries, and in areas like talent management, e-commerce and operations/ supply chain, is a huge advantage in our business. We identify opportunities early and work closely with management to ensure they are implemented with a high degree of discipline.
What sort of feedback do you get from LPs on this strategy?
LPs are excited about this and want to see more of it. When we can accelerate and deliver savings, there’s a multiple effect. LPs are more sophisticated today and clearly understand the value of having operating resources in a private equity firm. They don’t want to hear excuses about private equity firms wishing they’d acted faster on people issues in portfolio companies or learning about the ubiquitous failed IT roll-out.
LPs want to understand our value-add, how we have executed the plan put forth in the original investment memo, and what specifically we did to improve the performance of our portfolio companies from day one. Ultimately, LPs want to know if we have a true orientation around value creation. We think this is a powerful differentiator for us.
LPs are smart, and they will clearly see through those firms who “market” these resources versus those who actually deliver tangible results. At the end of the day, results still matter and every stroke counts.