Value creation: Four key learnings from the OpEx Awards

The Operational Excellence Awards include a range of winners that provide examples of how to successfully execute value creation plans.

The Operational Excellence Awards shine a spotlight on private equity firms’ value creation achievements – and the hard work, skill and strategic thinking behind these. This year’s winners range from a US connected fitness business to a cybersecurity software firm in Israel. In line with the particularities of each company and market, GPs pulled on numerous and diverse value creation levers over the course of their investment periods. Alongside examples of innovation in action, there were some common threads that ran through the winning submissions.

1. Honing the brand

In today’s social media age, developing a company’s brand image has become increasingly fundamental to its success. L Catterton recognised this with former portfolio company Peloton, which sells exercise equipment and access to live and on-demand classes. With consumer interest in health and wellness accelerating, L Catterton reinvested cost savings achieved through improvements to Peloton’s operational infrastructure into marketing and branding initiatives. This helped grow a sense of community among customers and catapult Peloton into the lifestyle brand well known today.

Identifying and focusing on your best attributes is a key tenet of effective branding. In Moldova, Horizon Capital assisted Purcari Wineries in streamlining its product portfolio and relaunching its four main wine brands, which was marketed via a digital and social media-led strategy.

2. Moving into new markets

Several of this year’s winners took steps to facilitate geographic expansion. KPS Capital Partners not only helped Netherlands-based Chassis Brakes International to grow its operations in China, it also oversaw the automotive brake manufacturer’s entry into the North American market where its revenue grew to nearly €100 million in three years. In Israel, software security solutions business Checkmarx grew its footprint in Europe and North America with the backing of Insight Partners. To aid its international expansion, former Fortify Software COO John True was appointed to the Checkmarx board, bringing with him operational experience and knowledge of the North American software market. Checkmarx now serves more than 40 companies in the Fortune 100.

3. Making strategic acquisitions

M&A featured heavily among 2020’s winning entries, including the successful simultaneous acquisition and merger of payment integrity platform Equian and cost containment services and software provider Trover by New Mountain Capital.

Meanwhile, during its investment in LBX Pharmacy, EQT helped capture growth opportunities in China’s pharmaceutical retail market via more than 40 add-on acquisitions. In addition to accelerated store openings, this strategy saw LBX’s store numbers rise more than 40-fold.

Elsewhere, Riverside-backed US training and compliance company Health and Safety Institute executed four acquisitions during the GP’s 2015-19 holding period. These enabled it to grow market share and increase its recurring revenue mix. Notably, Riverside invested in IT systems at HSI, which allowed it to migrate the bolt-on acquisitions onto a unified platform.

4. Developing and aligning talent

Finding the right people to lead and support a firm’s growth trajectory is an integral piece of the value creation puzzle. When Affinity acquired Virgin Australia’s frequent flyer loyalty programme, Velocity Frequent Flyer, it identified 20 strategically important roles and led the recruitment initiative, while EQT introduced incentive programmes at LBX Pharmacy to align management with its aims and support long-term talent acquisition and retention.

Inclusive talent practices also came to the fore this year. During its ownership of Japanese care home operator Vati, NSSK led initiatives to support the hiring and career progression of women and people with disabilities. Today, 68 percent of Vati’s managers are women.