New Wave of PE Firms Reshaping Landscape

Case Study Sep 11, 2020

Private equity firms have sometimes held a reputation for ruthless emphasis on value creation through financial engineering, M&A, or hard operational levers to realize returns. This approach, however, is undifferentiated and easily competed away in an environment with fewer easy targets available and an abundance of undeployed capital. To maintain the high levels of return their investors expect, private equity firms need to adapt beyond increasing holding periods to drive long term value creation.

Some PE firms take a partnership-orientation to their investment thesis with a hands-on approach working with company management teams to build high performing organizations, emphasizing people, processes, and culture. This holistic approach creates a stronger relationship between the company and the private equity firm and focuses on maximizing value through highly engaged and enabled executive teams.

With fierce competition and high purchase multiples, realizing value creation plans require effective tools to uncover potential risks and identify strategic opportunities. Private equity firms need to focus on transforming their investments into better businesses by diving deeply into business practices and taking a holistic approach toward portfolio company growth, rather than turning the asset.  

By failing to leverage new technologies and take a long term approach, private equity firms are significantly less likely to achieve meaningful returns on their investments.  

Strategic Partnerships with PE Firms

The new wave of PE firms are rethinking how to not just win deals, but create repeatable, sustainable success with their portfolios by empowering their leadership teams, establishing trust and alignment within the organization and providing significant operational tools and know-how in a partnership fashion. A strategic partnership with the right PE firm comes with plenty of benefits, and it's been the catalyst for sustainable growth and prosperity for countless companies.

Today, successful private equity firms maintain focus by industry or sector; this specialization provides a high degree of market expertise and a wealth of experience in growing profitable businesses within their target verticals. In addition to access of an extensive pool of resources, proven methodologies, and cutting-edge tools, the right PE firms will have a closer operating relationship with their portfolio company to guide and execute strategic plans to maximize value.

The New Look of Private Equity  

A prime example of this new wave of PE investors is Clearhaven Partners, a Boston-based private equity firm exclusively focused on partnering with software and software-driven technology companies to accelerate profitable growth. Clearhaven’s unique approach to investing is derived from the founding partners 20 years of software investing experience and 30 years of operating experience. Clearhaven takes a thesis-driven approach within software and technology to identify companies that fit well for the firm’s experience and interest and seeks to partner with companies who can achieve even greater results by partnering with Clearhaven than they can alone. Clearhaven’s investment philosophy revolves around the idea of building businesses from the inside out – and the firm provides its portfolio companies a practical, hands-on operational playbook grounded from the firm’s experience in helping companies grow. But Clearhaven also recognizes that each situation is unique and driven by the people and management teams involved. By leveraging the playbook, and adapting it to each unique circumstance, Clearhaven and its portfolio companies seek to achieve outsized success.  

Clearhaven’s playbook consists of five key operational levers:

New Executive Onboarding  

When any new CEO joins an organization, it is often very difficult to begin communicating and implementing new strategic plans for driving change right away. For private equity firms, three key questions need to be answered right after a new CEO comes on board:  

Clearhaven engaged with Entromy upon acquiring TimeTrade Systems, a 20 year old best-of-breed software company specializing in enterprise appointment scheduling. With a new CEO on board at TimeTrade, Clearhaven’s Managing Partner, Michelle Noon, and TimeTrade’s board of directors, sought a differentiated solution to rapidly integrate veteran software CEO Bill Clark into the executive leadership team and to provide actionable insights into organizational health.    

Insights Delivered by Entromy  

Entromy’s NEW CEO Effectiveness assessment was used to gather insights, feedback, and ideas from TimeTrade’s employees and the executive report detailing the insights was delivered less than a week later. The report delivered robust insights around strategic alignment, effectiveness of the leadership team, collaboration between teams, and surfaced a number of opportunities and risks to the overall state of the business. It provided the executive teams at TimeTrade and its private equity backers at Clearhaven Partners with key opportunity areas to focus on based on the feedback from across the organization. The assessment also provided an effective medium for the company and leadership team to come together around common tenets opportunities. Entromy’s Organizational Network Analysis capabilities provided the newly incoming CEO with a critical view of the organizational dynamic and key influencers.  

How this helped TimeTrade and Clearhaven  

Entromy’s executive report provided a detailed picture of the critical business and operating areas that TimeTrade both excels at, and those that need improvement. Leveraging these insights, Bill Clark, as the new CEO was able to more effectively understand the state of the organization and start building trust with the team, despite the organization working remotely due to the COVID environment. The assessment also established a baseline of results to measure progress against when they run their next pulse check assessment.  


About Entromy  

Entromy provides a solution to rapidly complete organizational assessments and understand organizational network dynamics through automated collaborative surveys supporting nuanced company-wide discovery — with actionable insights. Entromy helps executives, management consultants, and private equity firms rapidly understand the critical needs of an organization to accelerate decision making. The Entromy platform is a convenient, stand-alone tool, automatically delivering reporting in PowerPoint format or online dashboard.

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