A recent article from ERP consulting firm Panorama Consulting which, like ourselves, has dealt with the ERP requirements of PE (Private Equity) firms after they’ve acquired another company, highlights a few key considerations they demand, and the lessons that can be drawn for private companies – whether ripe for their own PE acquisition or not.
First, no surprise, PE acquiring firms have a “low tolerance for implementation time and cost overruns.” While that’s not news in itself, what it does is drive them to implementations that require fewer customizations (at least initially) and to avoid overly complicated software that can be hard for new users to adjust to. They keep a watchful eye on timely project management, simpler functionality and anything else that might impact project risk or time. They keep superfluous project activities and distractions to a minimum and focus time only on the tasks at hand – and as defined, ideally, in the project plan.
Secondly, Panorama notes that PE companies have a higher likelihood of opting out of the “big” ERP systems, mentioning SAP and Oracle Clould as two examples. It’s all part of the prior point, where companies look to get “more bang for their buck” by implementing Tier II or industry-focused systems. As they note: “One common school of thought is the new system may be a shorter-term (but credible) enhancement until they sell the company to an acquirer, so they don’t want to spend too much time or money on a larger or more complex system.”
Thirdly, PE companies express a preference for the ability to scale for aggressive growth. We see this as being perhaps the number one factor in ERP upgrades these days: companies are growing fast — or they express the desire, and are planning to do so. PE companies are fueled by strategic growth even more than most, notes Panorama. They are willing and in need even of eliminating redundancy and inefficient processes. They want to automate as much as they can and build processes and a technology backbone that support this.
Companies also note the need for improved, optimized reporting and being able to relate these to KPIs (key performance indicators) or other benchmarks.
And of course, when viewed holistically, it’s not just Private Equity firms who want — or need – the characteristics noted here. Every company today needs much the same – and in turn, they can take a lesson from the sharp focus of the PE firms who have made the priorities outlined today into buying points for their ERP systems.