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How EY can help
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Value creation is at the core of every transaction investment thesis. Our business is organized, resourced and led to help private equity firms transform companies and increase their ability to create more value across their portfolio.
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Four priorities to drive change
The selection of priorities depends on the timing of the value creation goals, the investment life cycle and the maturity of the finance function.
Prioritizing people and process in PE backed companies establishes standardized ways of working, quickly unlocking operational improvements. This foundation not only streamlines workflows but also serves as a critical enabler for tech-led automation, allowing technology solutions to be integrated and effectively leveraged to enhance performance and scalability.
1. Organization, talent and culture:
Assigning appropriate resources across roles, identifying skill gaps and enhancing in-house capabilities through training in traditional and emerging areas is essential. Establishing a culture of investing in people development with common values and principles will create a high-performing and resilient team.
2. Process standardization and automation:
Today, most organizations are looking to drive value creation improvement through artificial intelligence (AI) and automation. However, there is often a greater near-term impact by first understanding the work that can be addressed through the elimination, simplification and standardization of processes. Streamlining and eliminating overly complex processes, closing system gaps and standardizing operations all enhance productivity. Automating repetitive tasks by leveraging ERP functionality, digital tools or platforms and generative AI (Gen AI) can drive further efficiency.
3. Strong data governance:
Reliable data governance is essential for setting meaningful baselines, realistic targets and ensuring that reporting is trusted by management. Many portfolio companies, particularly scale-ups, often overlook this aspect. A data-centric finance organization leads to enhanced data quality and establishes a single source of truth, delivering consistent, right-first-time data and insights.
4. Technology and digital tools:
Strategically assessing the technology landscape in Finance can yield substantial operational gains. Focus should be on practical solutions rather than seeking best-in-class practices. Close collaboration between Finance and IT is essential to clearly communicate functional requirements and expectations before selecting tools and making investments. With the rapid evolution of financial technology and the increasing use of Gen AI, it is important for Finance to prioritize time and resources to establish the right digital tools and priorities.
Creating an effective and efficient finance engine for value creation
Now is the time for this function to emerge as a key enabler of value creation. By prioritizing the establishment of a fit-for-purpose finance function in their 100-day plans and recognizing that tactical investment in finance transformation is needed early in the investment cycle, PE firms will not only accelerate the delivery of the VCP but also unlock cost reduction, ultimately enhancing the exit multiple.
For new investments, initiating this transformation early is crucial. It establishes a robust start for CFOs, particularly considering the declining average tenure of C-suite roles. Meanwhile, existing portfolio companies may require a compelling narrative around the necessary changes to support the future equity story, one that will withstand rigorous scrutiny during exit processes.