For private equity investors, success hinges on turbocharging performance in their portfolio companies. BCG helps investors craft high-yield portfolio strategies that improve portfolio companies’ top and bottom lines.
Private equity firms have long used three means to boost investment returns and value creation in their portfolio companies: leverage, multiple, and operations. Today, the most effective portfolio management actions center on enhancing performance in operations. BCG’s unique service offering—our full-potential plan approach—helps investors meet this imperative.
BCG’s full-potential plan approach comprises six steps:
Each plan that we develop for our private equity clients activates multiple levers—with an emphasis on leaving no stone unturned.
Top-line performance, in such areas as marketing and brand equity, channel and account management, pricing, after-sales service, store network management, and product and service innovation
Operational excellence, in such areas as manufacturing, fixed product costs, and logistics
Selling, general, and administrative expenses, including increasing efficiency of R&D and sales and reducing cost in general and administrative expenses and procurement
Organization and processes, for example improving governance and such processes as human resources, finance, and IT
Finance management excellence, by optimizing capital expenditures and working capital, as well as improving short-term liquidity forecasts
M&A, including mergers, add-on acquisitions, new ventures, and divestments
Disruptive changes, such as building innovative business models and launching digital transformation programs
Environmental, social, and governance (ESG) factors, by incorporating them across investment portfolios
As we build plans for clients, we start with the exit in mind. For example:
BCG’s portfolio consulting team includes experts with a strong track record in the private equity space—including portfolio company management, portfolio investment, and portfolio assessment. The team is backed by, and partners with, a network of more than 1,000 experts—in industries as varied as health care, consumer goods, telecommunications, financial services, and industrial goods—in order to help clients deploy potent new approaches to portfolio management.
For now, corporate sustainability spending may be curtailed. But investors believe that in the long run, ESG will remain a powerful driver of portfolio performance.
Championing inclusiveness at the highest levels of portfolio companies is the right moral choice—and it has practical benefits, too.
To prepare their funds and portfolio companies for the opportunities and demands that lie ahead, principal investors need to plan in layers and across multiple time horizons.
Far from being up on the blocks, the automotive sector has massive untapped potential. Investors that lock in their strategy now could tap into billions of dollars in value.
