Private equity firms and their portfolio companies are both focused on one primary outcome: improving business performance. While this goal may seem simple, the path to achieving it is constantly evolving and the relationship between the two parties is both unique and complex.
The days when PE firms were mere sources of capital investment are gone. In today’s climate, firms like ParkerGale Capital, a control buyer of founder-owned technology companies and corporate carve outs, are focused on four pillars of value creation: product, market, team and systems.
“We focus on the lower left of the Ansoff Matrix – selling more product into our current market – and our four pillars are in service to that goal,” Jim Milbery, a partner at ParkerGale, explained.
In a recent webinar, we interviewed ParkerGale Capital, as well as one of their portfolio companies, OnePlus Systems, both of which are NetSuite customers and testaments to the power of the “systems” pillar of portfolio value creation.
In 2015, ParkerGale brought OnePlus Systems into its portfolio, an industry leading manufacturer of container fullness and control systems serving a variety of industries including healthcare, hospitality, manufacturing and retail. As with all its acquisitions, ParkerGale began to assess OnePlus System’s technology needs during the due diligence process. And, as with most acquisitions, it found that the platforms OnePlus had in place would not be able to scale with the growth trajectory of their company.
“When we acquire our portfolio companies from founders, the back-office technology stack is typically very light. Founders spend most of their time and resources on the product itself,” Milbery said. “OnePlus was no different.”
When bought by Milbery’s team, OnePlus was running a highly customized version of Act! for CRM and QuickBooks for finance and accounting.
“Typically, we are tackling the finance platform in the first 12 months of our ownership period. In the case of OnePlus – we started working on upgrading the systems within the first 30 days,” Milbery said.
As a control buyer, ParkerGale can mandate operational decisions at its portfolio companies, including decisions related to Enterprise Resource Planning. And, as buyers of mainly software companies, ParkerGale understands the value of having integrated, closed loop systems that bring continuity to the business and are user friendly.
“NetSuite is our standard platform for accounting and financials within our portfolio,” Milbery said. “Not only does it transform our portfolio companies operationally, but it also helps us attract top talent and leadership. The best CFOs are excited to work on a world-class platform.”
For Priya Emerson, the CFO of OnePlus Systems, NetSuite has brought efficiency and visibility to critical finance functions that allow for quicker and easier decision making.
“As a business with more than 70 percent of our revenue as recurring, it’s critical for us to be able to accurately predict and account for our revenue streams,” Emerson said. “NetSuite allows full data transparency around our income statement and balance sheet and allows us to monitor our cash flows to ensure we are making smart investment choices.
Prior to her current role, Emerson worked on finance teams at several enterprise companies that used Excel as their main consolidation tool. Although OnePlus Systems is a small company, running NetSuite gives it the power to act big.
“We’ve been able to eliminate a lot of non-value-add work by automating critical reports and business functions (e.g. sales commission reports, purchasing, and order fulfillment), which allows our staff to focus on more strategic endeavors.”
Moreover, for Emerson, better decision making has led to improved communication among all key stakeholders, including ParkerGale Capital.
“As a portfolio company we do have management requirements and board meetings that we must prepare for—NetSuite automates a lot of our management reporting that we would otherwise be spending hours creating,” she said.
ParkerGale has multiple portfolio companies running on NetSuite, but the relationship doesn’t end there—ParkerGale staff are also avid users. Aware of the security benefits of a cloud-based platform, ParkerGale implemented NetSuite in 2016 to reduce risk, among other benefits.
“Many PE firms are running systems like NetSuite at their portfolios, but then use QuickBooks and Excel at their own firms—that is very dangerous for a business with a lot of financial assets,” Milbery said. “Our auditors really like the fact that we run our business on an enterprise-class platform.”
Since ParkerGale has a small finance and accounting team, NetSuite also brought them unparalleled efficiency in certain back-office operations.
“We’ve integrated Expensify with NetSuite and that’s both our favorite feature set and biggest timesaver,” Milbery said. “We have a dozen people that spend their time on the road and organizing expenses and billing them back to the correct portfolio companies is a huge monthly task – one that is much, much easier with NetSuite.”
To hear more from ParkerGale Capital and OnePlus Systems, and to see a demo of the NetSuite solution, watch the on-demand webinar. You can also hear more about the tools ParkerGale uses to grow their portfolio companies on their weekly podcast called “The Private Equity Funcast.”