Turbocharge Private Equity Value Creation with Indirect Procurement
This report focuses on how to use indirect procurement to turbocharge private equity (PE) value creation. Indirect procurement (third-party spend on areas such as IT, facilities etc.) is often seen as the unglamorous and unloved cousin of direct procurement. But this needs to change.
Why? Simple: well-planned and executed indirect procurement transformations can turbocharge value creation within a conventional PE ownership period, potentially delivering significant margin and EBITDA improvements. Because indirect procurement has historically been under optimised compared to direct procurement, it is a 'rich' area for savings in multi-national and de-centralised businesses. It can also rapidly unlock trapped value and do so much faster than performance improvement initiatives based around streamlining headcount.
PE firms pride themselves on creating operational value faster than their corporate counterparts. However, executives and investors in PE-backed companies still have to contend with the perennial challenges of limited spend visibility and muddy P&L attribution from procurement initiatives.
As a result, only a few large-cap PE firms have made progress in unlocking cross-portfolio value by leveraging sector-agnostic 'spend aggregation' for multiple portfolio companies. Most PE portfolio management teams still struggle to build detailed spend visibility and exploit the extraordinary promise of indirect procurement.
In our latest report, we focus on indirect procurement opportunities within mid-sized companies (i.e. Net sales of >£200m). We highlight emerging procurement trends through the PE investment cycle and then outline a structured approach to turbocharge value creation based on our experience working with PE companies, management teams and financial sponsors.
If you are interested in discussing how we could help you through a rapid diagnostic or implementation, please contact one of our experts.
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If you are interested in discussing how we could help you through indirect procurement implementation, please get in touch with one of our experts Raymond Berglund, David Jones and Naresh Kumar.
