Two ways Private Equity can avoid missed B2B revenue opportunities
Working for big B2B consultancy most of my career – private equity has always been a key target audience when it comes to sales and marketing. However, as the industry has transformed to a ‘buy and grow’ model, does PE need a new sales and marketing playbook for their own investments?
“You have to sweat the asset and work harder to generate decent returns, just because of the multiples that are being paid. It’s a tough grind.” – *Shane Feeney, Global Head of Private Investments, CPPIB.
Every £ of value is hard fought. Rising multiples = continued pressure on top-line growth – you can’t create value by just buying and leveraging the business.
'Buy and transform’ and ‘buy and build’ is now the new ‘leveraged buyout’ – banking on growth acceleration as a primary source of value creation. This means more pressure than ever to ensure every single £ of potential revenue growth is realised in the short, medium and long-term.
But there are two areas in particular where opportunities to maximise revenue can be missed, and where sales and marketing becomes an important strategic level to pull.
1. Elusive buy and build synergies
When value-creating synergies are built into the ‘buy and build’ acquisition price, integration can’t afford to fail. But the ‘building’ aspect can prove even more difficult than the 'buying'.
Realising integration synergies is tricky. And 'revenue' synergies from new clients, new markets or new products, for example, can be particularly elusive. Clients can switch to rivals, competitors can eventually imitate the new strategy or product, and so on.
It’s therefore important to have a sales and marketing playbook that mitigates against the risk of lost revenue synergies – in particular, ensuring opportunities to cross and up-sell to a newly expanded client base aren’t lost.
Quickly building a compelling joint sales proposition – that clearly communicates the value of the new product/services portfolio – allows you to run sales and marketing campaigns that quickly bring together the strengths of the newly combined business to deliver higher sales and lower marketing costs.
2. Speed to ROI
Building an organisation that can deliver the defined growth strategy requires putting in place the right people, structures and processes. However, investment of this type is less likely to create value/deliver additional revenue in the short-term.
When speed to ROI is important (especially to help fund longer-term infrastructure investment) more immediate opportunities to accelerate growth cannot be overlooked. Whilst the sales and marketing function may need an operational overhaul for the longer-term, it is entirely possible to boost the sales pipeline almost immediately.
The playbook, therefore, must include targeted sales and marketing campaigns that focus on winning high potential/high margin clients/opportunities, fast.
Big brand/PR-first campaigns can take several months to deliver and cost a fortune (whilst the pipeline dries up) – whereas, sales-first campaigns that are quickly executed can deliver sales faster and accelerate speed to ROI in the short-term.
Does PE need a new sales and marketing playbook?
Increasing revenue is now the most important source of added value for any PE investment, therefore, sales and marketing must be the growth engine at every stage. You don’t need to rip up the playbook, but there are some tricks that can stack the odds in your favour of getting to sales faster. Sales and marketing campaigns that are:
1) Focused on creating and accelerating high-potential/margin opportunities from day 1.
2) Built around a joint sales proposition that brings together newly combined businesses to successfully cross/up-sell to new clients/markets.
*Source: How can private equity transform into positive equity? Perspectives on the future of private equity from industry pioneers, EY