Former PE Investor & CEO // Current PE Advisor // Author // 𝘏𝘦𝘭𝘱𝘪𝘯𝘨 𝘢𝘮𝘣𝘪𝘵𝘪𝘰𝘶𝘴 𝘗𝘌-𝘣𝘢𝘤𝘬𝘦𝘥 𝘤𝘰𝘮𝘱𝘢𝘯𝘪𝘦𝘴 𝘢𝘤𝘤𝘦𝘭𝘦𝘳𝘢𝘵𝘦 𝘷𝘢𝘭𝘶𝘦 𝘤𝘳𝘦𝘢𝘵𝘪𝘰𝘯
Each of those revenue drivers on your M&A deal model? Someone at the port-co has to actually drive it. So... 1. Who owns each? 2. Do they have the skills, experience, and qualities to ensure success? 3. If "No," what will you do about it? And if you don't know, how will you assess? #PrivateEquity #HumanCapital #ValueCreation
David Tresko
5mo
Revenue < EBITDA flow - allot of leaders celebrate discounted revenue that has immaterial FCF associated with it - this is false growth.
Vladan Jovanovic
5mo
Generally agree, although this is more applicable to services businesses, and as your bridge shows more specific to top line / revenue generation model. A lot more goes into it on the ops side. It would be interesting to see part 2 which shows the expenses optimization bridge relative to the revenue bridge.
Great visual, Dan Cremons! You're absolutely right to highlight the human element behind financial models. I'll add some supporting data and perspective on why focusing on talent and leadership is crucial for realizing deal value: • Companies with high-quality leadership are 13x more likely to outperform their competition in key bottom-line metrics (DDI) • Effective leadership development practices can lead to a 25% increase in organizational performance (Bersin by Deloitte) • Companies that excel at talent management increase their revenues 2.2x faster and their profits 1.5x faster than their peers (BCG) • Organizations with strong talent optimization practices are 3.4x more likely to achieve or exceed their financial targets (Predictive Index) • Poor leadership costs U.S. corporations up to $550 billion annually (Gallup) • 57% of employees have left a job because of their manager (DDI) Lastly, based on your experience and passion for this, I am curious as to your thoughts on when a CHRO best fits into the model, related to the internal human capital expansion aspect of driving revenue?
Do you have a similiar view on the operational expense value levers?
Don Allen
5mo
Excellent chart Dan Cremons. The key is ensuring the port-co has the right people, with the right skills, in the right roles to drive the revenue growth. This is why it is essential the CRO primarily, as well as the COO and CPO, work directly with the PE firm and company leadership to quickly address any gaps and set the team up for success to scale from $50-$150m. The collaboration between the CRO, COO, and CPO is crucial for a holistic approach to scaling operations, product development, and revenue generation. Make a bad hire in any of these areas, especially the CRO, and there will be struggles ahead.
Brendan Leonard
5mo
Love it Dan Cremons...Role Map > Org Chart https://www.crewsandco.com/blog/navigate-your-people-future-with-the-role-map
Vladan Jovanovic
5mo
Just for fun, I would consider part 3, which should show how these two distinct “turfs”, and their leaders, work together to support one mission, and how this collaboration is enabled, supported, tracked, and rewarded by the rest of the C-suite.
Vince King
5mo
Dan Cremons, great callout and so very much to unpack. 1. Revenue/cost implications. 2. Who’s driving the tactics, execution and accountability of each? 3. Who is ensuring alignment of the strategy across functional delivery and ensuring the tactics are maximizing the identified growth levers? This is where the magic happens in GTM and value realization.
Nailed it Dan. Such a simple methodology to assess if you have the right potential goal on each area. 4. (For me) if yes - how am I bringing them value to inspire them to greatness.
Dixon & Associates | Author - After The Game via Simon & Schuster | Athlete M&A at SuccessCoach.com
5moWe need more real world folks and less finance/ MBAs in PE.