Private Equity Procurement
Insight Sourcing Group currently works with over 50 Private Equity firms and has performed hundreds of individual projects with portfolio companies. Insight Sourcing Group was an early pioneer in the application of Fortune 500 strategic sourcing best practices in a Private Equity environment. We understand the complexities of Private Equity cross-portfolio spend management and bring a clear and proven approach to Private Equity cost optimization.
Should a PE firm pursue cross-portfolio spend aggregation or focus on cost optimization within individual portfolio companies? Or are there other strategies in between that might make sense? What’s worked at other firms and what has led to some of the more spectacular public failures?
Working with PE firms and portfolio companies, and particularly under a cross-portfolio model, has unique challenges and can be some of the most complex sourcing work any firm ever performs. Insight Sourcing Group is one of the most experienced firms in the space and can guide operating executives to the right strategy that fits your portfolio and your management model.
Few procurement consultants can match our ability to drive collaboration and support among portfolio executives. Our data driven approach and collegial style wins over reluctant portfolio stakeholders and consistently drives strong results. Above all, we understand the mid-market and how to work effectively with your often thinly stretched management teams.
Our Private Equity services include (click on each to learn more):
You cannot manage what you cannot see. Most of our projects begin with some form of spend analysis. We offer the following options for PE firms:
- One-Time Cross-Portfolio Spend Analysis: Leveraging our SpendHQ machine learning technology, we quickly and accurately normalize the spend across your portfolio to quickly identify spend leverage opportunities across some or all portfolio companies. It serves as a great guide for strategy selection for a PE firm seeking to implement a comprehensive procurement program.
- SpendHQ as a PE Strategy: Over a dozen large firms have selected SpendHQ for ongoing spend visibility. They recognize that spend visibility is table stakes for procurement optimization, and any portfolio company that lacks it clearly has savings opportunities. In a matter of weeks, we consolidate the spend across the entire portfolio, providing a powerful tool for portfolio procurement executives who lack them. Equally important, we provide the PE operating executive with a control panel for not only driving procurement strategy but also for monitoring compliance to ensure that portfolio companies achieve their goals. As an example, one top PE firm gained visibility into $40 billon in spend across 60 companies.
Insight Sourcing Group has performed nearly 1,000 opportunity assessments for individual companies, and many of them were PE-owned. In a matter of weeks, we perform a spend analysis, perform low-impact interviews with key stakeholders on-site, and then develop a roadmap to EBITDA Improvement. For many PE firms, Insight Sourcing Group is sent in as part of the 100-day plan for all new acquisitions.
Immediately upon approval of the roadmap, we begin hands-on strategic sourcing with your team. We have the depth, expertise, and resumes of the large firms but also have a unique capability with mid-market companies. Unlike many large firms, we execute all of the steps of the sourcing process, meaning we perform direct negotiations with vendors, partner with your legal team on contracts, and ensure full implementation of new suppliers. Our people blend extremely high intellectual horsepower with humility and focus on data-driven results. We find this is well received by mid-market portfolio executives who appreciate our work ethic and lack of arrogance.
Insight Sourcing Group has likely performed as many or more cross-portfolio projects than any other firm in North America. These projects are exceptionally complex as you attempt to normalize requirements and needs across 10-30 CPOs, CFOs, CEOs, and other relevant stakeholders. It is strategic sourcing on steroids and it is not for amateurs. And it may not be the right strategy for you, but you can count on us to steer you straight. We were a very early pioneer in the space and educated many suppliers in the cross-portfolio model. In fact, we wrote the contract language for several suppliers to ensure deal portability after exit and other critical terms for PE firms.
We coined the term for this partial consolidation strategy where you combine the spend of a few firms, versus the whole portfolio, in common areas and take it to market as a package that may or may not result in common vendor selections. This is a delicate strategy that we have had great success with in the market.
When procurement savings is a significant component of the investment thesis and you need to be sure of your projections, Insight Sourcing Group can perform a rapid assessment of the spend or even of the target company’s procurement team’s capabilities. We fully understand the hyper-responsiveness you need in these circumstances and the often incomplete data we are required to use. If you make the acquisition, we will be ready to immediately launch savings capture efforts to fulfill any projections we make.
Increasingly, we are becoming an extension of PE operations teams in under a formalized program. This service is fully customizable but often includes:
- SpendHQ across the portfolio
- Identification of sourcing opportunities and leadership of sourcing events
- Full Category Management of deals we source or that the PE team has sourced to ensure full savings capture. This often includes active management of vendor relationships, portfolio compliance, and anything else needed to ensure savings hit the bottom line.
- Hosting and management of PE CPO Conferences. Many PE firms bring their CPOs together once or twice a year. Insight Sourcing Group speaks at a dozen of these a year. In some cases, however, we actively manage the full event, developing content, training, and facilitating workshops designed to elevate skill levels and to encourage collaboration.
- This fully managed service includes anything else that is needed such as management of other vendor partners, full portfolio savings tracking, diligence, skills assessment and gap closure for the teams, and so forth.
We launched our consortia program in 2005 and today have hundreds of PE portfolio company participants. We fully manage our programs and they are a great way to get early wins. In addition to our standard programs, we also develop “private” programs for a PE firm. For example, when a cross-portfolio sourcing project results in a new vendor relationship, we can actively manage it for the life of the contract, giving you the best of all worlds—a program custom designed for you and long-term sustainability. Plus we offer unique Category Management technology that no other consortia offers.
As you add new acquisitions to your platform companies or buy and bundle a few large companies, we can quickly tackle the “procurement synergies” line item in your game plan with rapid sourcing execution. We have deep experience in this area and have built specialized tools for spend comparison and rapid decision making. In addition, we have performed many carve outs where a PE firm buys a division of a large corporation and it suddenly finds itself needing hundreds of new vendor contracts.
“We take great pride in partnering with over half of North America’s top 20 Private Equity firms.”
Senior Vice President &
PE Practice Lead
Insight Sourcing Group
PE Projects SNAPSHOT
- Delivered over $12M in EBITDA improvement; $100M in valuation enhancement
- Averaged over 817% ROI and over $350 million in valuation improvement
- Established robust spend management capabilities
- Portfolio-wide spend assessment reveals millions in savings opportunities
Exclusive White Paper
The Importance of Procurement Analytics & Spend Visibility in the Private Equity Environment
Spend visibility is the foundation for any cost optimization program—whether it translates to individual company procurement optimization or a cross-portfolio procurement synergy program—to harness the aggregated purchasing power of a portfolio. Spend analytics are also crucial to capturing the full value of indirect consortia programs, where compliance issues are typically either not visible or are drastically eroding the expected savings realization.
In this Executive Insight brief, we will examine common challenges to achieving spend visibility in a Private Equity environment and provide proven strategies to leverage spend visibility in order to accelerate the value of your portfolio companies.
“We have become the market leader in Private Equity procurement optimization and take great pride in partnering with over half of the top 20 leading Private Equity firms in North America.”
Senior Vice President & Private Equity Practice Lead
Insight Sourcing Group