post investment management (PIM) in PE

10 years ago I was tasked to design our fund's post-investment management (PIM) program. I started first with a top-down study of how different PE firms did PIM, and then we designed our own program. We ended up modeling our program based on a modified and expanded version of KKR's Capstone team. It just occurred to me that we can use this work to spark a discussion on WSO about PIM. I'm quite keen to see how you monkeys see PIM done at your firms. Frankly I find PIM as a concept even more interesting than investing. Investing is somewhat of an informed/educated gamble and quite lofty and aloof, whereas actual PIM or company-building involves rolling up sleeves, making difficult management and operating decisions, and getting into the unglamorous nitty-gritty details of an operating business.

For the purpose of the study, I conducted interviews with friends at numerous PE firms. They ranged from less-hands-on to more-hands-on and structured their process in different ways. For instance some firms, like KKR, primarily used in-house consulting teams, which set plans and conducted long-distance KPI monitoring after the investment and onboarding was made. Other firms, like Bain Capital, would assign a team member to go live at the portfolio company for a while and try to help them implement the PIM plan. And yet others, like CD&R, would actually send partners in to take operating roles within the business. Some takeaways included the following.

• PIM is of critical importance, and should be done early. Bain Consulting calculated that PIM work done within the first year of ownership yielded a deal multiple of 3.4x. If the PIM work was done after the first year, with late intervention, the multiple shrank to 1.7x. If no PIM was conducted, the industry mean shrank to 1.3x.

• Many firms used the PIM process to deepen their relationship with the portfolio company BEFORE they made their investment. That way, the plan for what the company and the PE investor would do after their marriage was understood well in advance of the investment itself. This pre-investment planning also helped make sure that management and investor were on the same page. And by doing pre-investment planning it gave both sides a chance to 'date' each other, negotiate and plan, and see how well they might work together in the future.

• 100-day strategic or 30-60-90 day plans seemed to be the norm, reinforcing the concept of the need for early intervention.

• There were many philosophies on how to conduct PIM, but it was often striking to see whether the firm embedded deal team members ('he who invests, manages') vs. using separate PIM teams and deal teams. Synthesizing anecdotal data, it seems having the deal team members also act as PIM impementers made the most sense, as the relationship that the deal team established through the investment DD process carried over into their post-investment work in concert with management.

General PIM activities

• Blueprinting via 100 day and 1 year plans
• BOD presence
• IPO support
• Incentive and corporate governance system overhaul (mgmt equity incentives)
• Implementing KPI monitoring (selecting which KPIs are of focus, implementing accountability, addressing shortfalls)
• Recruiting, mgmt team build-out
• Supporting international / domestic expansion
• Networking across portfolio companies
• Cashflow, sales growth focus/assistance

Specialized PIM activities

• Blueprinting with mgmt before investing,crafting a post-investment vision, working with management actively to implement
• Assessing mgmt team members to replace, train or supplement
• Providing M&A support (identifying and executing acquisitions)
• Seconding fund representatives to co.
• Bringing senior advisors as coaches/ BOD
• Specialized training sessions (sales, IR)
• Growth companies need “nuts-and-bolts” including marketing/branding upgrade, IT and ERP systems upgrade, accounting overhaul

So now on to how some of the different shops conducted PIM itself. was also basing my research on single employee interviews at each firm, because it was generally hard to find an employee willing to divulge the inner workings of their fund. Finding a second employee at a fund to do the same again proved untenable. Therefore the information is based on an N=1 sample size and thus greatly prone to error. This is just the description of a singular employee at the fund. If you know the way the firm mentioned conducted PIM, and you think my research is wrong, please tell me in the comments below. Always keen to learn.

Broadly speaking:
* Bain Capital – Places representative at company. Blueprints extensively
* KKR – internal consulting firm. Board of advisors to provide contacts and insight
* TPG – comprehensive portfolio-management team at TPG (CFOs, i-bankers, operators,)
* Carlyle – performs blueprint, then expects company to implement. Exerts BOD pressure
* Morgan Stanley – conducted little PIM and instead relied on the MS brand to increase the portfolio company's market value. Teams were too lean to dedicate resources to PIM

• MSPE - damn near proud of not conducting PIM. They said they mostly just kept out of management's way. They believed that their brand itself as an investor on the cap table would create value at the portfolio company, when the portfolio company eventually listed. At best they set some KPIs and sat on a BOD. The fund's team was already stretched and lightly staffed, so they didn't have time to get their hands dirty.

• KKR - decades ago they set up Capstone as an in-house strategy consulting practice to optimize portfolio companies. They started by hiring a couple of 'content-driven consultants' from BCG, made them full partners at KKR, and gave them mandate to build a hands-on practice. They supplement this with a stable of retired senior CEO/chairman people that can be dropped in to help run a portfolio company. Setting and measuring KPIs was also key.

• Bain Capital - Given the origin of BC, coming out of Bain Consulting, it's no surprise that BC loved to use the in-depth and extensive Bain blueprinting methodology, with very detailed 100-day plans focused on key inflection areas in the business, and further emphasized a tight set of KPIs ('that which gets measured gets done'). The teams had usually executed many such blueprinting exercises in their consulting days so they were naturally able to do so at BC. Typically BC also seconded one or more members of the deal team to live at the company post-investment for several months or years just to get the blueprint executed.

• TPG - staffed their deal team at TPG mothership with former CFO/CEO/COOs who could advise the portfolio companies. However they typically would not second someone to live at the company, nor did blueprinting / planning seem to be as big a part of TPG's culture.

*Note: my research is 10 years old. It was never published, as we used it for internal planning purposes only, so the nature of PIM done at many of the firms may have already changed greatly. I