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Operations and private equity: from prejudice to nuance and shared interests

Last year, we at ARV Group organized one of our Experience Workshops; the theme was: what are the consequences for operations when a private equity party takes over the company? And what lessons can be learned from those experiences? The speed with which the workshop became fully booked was an indication of how real a role these questions play among many operations managers.

Broad scope

After the invitations were sent, the reactions came pouring in. And, as it turned out, the participants were to include people with experience with external investors, and people with no such experience at all. In order to go for a broad scope, to thoroughly examine the theme from all sides and arrive at nuanced insights, we decided to invite one of our contacts from the world of private equity. At ARV Group, after all, we work not only for the management boards of family companies and corporate organizations, but also for small- and medium-sized businesses and private equity parties. 

Black-and-white image 

As starting point for our workshop, we selected the public image of private equity, which is fairly black-and-white. Investors and investment funds are often seen as parties operating with a short-term focus. Parties with a keen interest in reorganizing the company and stuffing it full of loans. Once that has happened, the sale to a third party is not long in coming. Those preconceptions soon reared their head during our Experience workshop as well. The representative of the private equity parties recognized them too, of course. He stated that public opinion concerning private equity – the image of the bull in the china shop – was accurate in some cases, but usually not.

Same interests and objectives

By entering into conversation, a much more nuanced image soon emerged. In fact, the participants agreed quite quickly that when it came to making a plant or company healthier and future-proof, the interests of both parties are almost always identical. The same applies to an investor acquiring a financial interest in a company or the longtime owner of a family company, or even an ambitious operations manager who receives a hefty assignment for improvement from the parent company. In each case, the goal is to achieve improvements and efficiencies on the basis of strategic goals and ambitions, based in turn on a clear plan. The result aimed for is always a good, healthy and sustainably operating organization, as guarantee for optimal results and satisfied customers.

Great ambitions, fast results

Once that feeling of mutual recognition was on the table, the discussion then shifted to the question: what can we learn from each other? The operations people in particular felt inspired by the equity partners’ straightforward mentality. The courage to cherish great ambitions and to make them happen by means of a robust, well-planned approach. The focus on precisely those spots within the organization, processes and teams where the greatest room for improvements lie. And the rapid and decisive lining up of those possibilities, which allowed sustainable improvements to be achieved within a short period.

Decreasing distance

On the basis of the operations managers’ experiences with takeovers and/or investors, an important bit of advice was also given to private equity partners: be conscious that prejudices do exist. Realize that this means that you are starting with a handicap right off the bat, which means that winning the organization’s trust has to be the first step. So communicate openly and directly. From the very first moment, make your intentions and ambitions clear. And enter into conversation with the people who must ultimately bring the plans into practice. In that way, you decrease the distance between parties and create shared insights; in that way, room is created for nuances and understanding, and then shared interests rise to the surface almost automatically. This will result in everyone ending up “on the same page” easily and quickly, and clear the way for continuous improvement and optimal results.

Roelant van Herwaarden
Managing Partner ARV Group

"Investor, owner or manager, the interests are virtually always the same."

Publish date 6 March 2018