Chapter 6

Making the Partnership Work

Making the Partnership Work

Covered in this Module

Investor Involvement

Budgets, Plans and Value Enhancement

Communicating and Reporting

Board Structure and Composition

How the Board Functions

This Module looks at life after completing the Buyout, exploring the realities of managing a private equity backed company and, in particular, how the partnership between management team and investor works in practice.

“The business had been structured to deliver results – and it had to deliver them. If you lose credibility as a management team in the private equity environment you are dead.”

By the time the Buyout completes, the management team and investors will have developed an understanding of each other, of the key business issues and of what needs to be done to make the Buyout work. The due diligence exercise, described in Module 5, demands the full engagement and commitment of the management team, not only in helping investors understand the business but in paving the way to developing a plan to maximise value creation (see Budgets, Plans and Value Enhancement later in this Module). This process will have laid the foundations of the open, constructive partnership that characterises a successful Buyout.

Although the investors will have played a highly participative role in helping develop the plan, ultimately it is management who must deliver it, and hence they must take complete ownership of it – and responsibility for it – irrespective of who contributed what. The investors are reliant on the management team for this, and the demands of putting plans into practice mean that the period immediately following completion can often be the most challenging – and sometimes tense – of the entire Buyout cycle. The key for management at this stage is to use its understanding of the private equity approach to anticipate the investor’s needs and priorities; the team needs to be on the front foot when it comes to adjusting to a new form of partnership and making it work.