April 08, 2016
PitchBook Dealmakers Column
Private equity firms continue to implement portfolio procurement programs in increasing numbers. With this in mind, Treya Partners reviewed its client experience to identify lessons learned that could be valuable for PE firms with procurement programs in place, as well as those in the planning stage.
Prioritize spend analysis
Without a single consolidated view of procurement spend across all portfolio companies, your highest return opportunities will stay hidden. A cross-portfolio spend analysis is critical for realizing the full potential of a procurement program.
Diversify savings strategies
If spend leverage is your only play, the benefits will eventually plateau. Maximizing value from portfolio procurement requires a comprehensive toolkit of techniques including leveraged contracts, company-specific sourcing, incumbent negotiations, compliance management and others.
Align program with portfolio environment
The most successful PE procurement programs utilize pragmatic and flexible approaches grounded in an understanding of the unique characteristics and value drivers specific to a portfolio. These can include variations in investment objectives, company size, industry focus, operations and deal stage, to name a few.
Implement savings reporting
PE firms unable to quantify EBITDA impact of their portfolio procurement programs will struggle to create meaningful value. High performing programs track savings realization at the portfolio company level and roll up aggregated cross-portfolio numbers to a PE-level dashboard.
Complement internal resources with specialized providers
Procurement programs fail to get traction at some PE firms due to other priorities competing for resources. Hiring service providers to deliver targeted assistance in areas such as strategic sourcing and spend analytics can maintain program momentum and keep benefits capture on track.
For further information, contact:
Rahul Ahuja, Partner
Mark Usher, Partner
This article represents the views of the author only and does not necessarily represent the views of PitchBook.