For growing businesses, private equity investment often comes with a sudden shift in strategy: Embracing acquisitions.

Companies that had not been active acquirers often take on PE investment with a plan to make a rapid string of acquisitions of complementary businesses as part of a “buy-and-build” strategy. Buy-and-build is a go-to strategy of private equity firms, which today manage about 20% of US businesses. The hope is the resulting company becomes more valuable than the sum of its parts thanks to revenue growth from improved management and lower costs through economies of scale in marketing, purchasing, back-office operations, and other areas.

Core BTS, an IT consulting firm, is an example of a company that adopted a buy-and-build approach using private equity investment.

“The PE firm’s investment thesis was, ‘Hey, Core BTS has this great infrastructure business, it's a great platform to build on and to expand the product offerings,’” says Kevin Thimjon, CEO of the IT consulting firm. “So over about the next three years, we bought four businesses.”

But this strategy can put real stress on the “platform company” such as Core BTS—meaning the initial business in which PE acquires a stake to start making deals. That company must rapidly integrate the financials, operations, and employees of acquired companies so they can spot opportunities to increase revenue and cut costs, and to see if a new business isn’t measuring up.

In these situations, the right core business software systems go from nice-to-have to must-have. It’s where a comprehensive suite of cloud solutions such as NetSuite comes in. As private equity activity picks up—PE firms invested $159 billion in the second quarter of 2024, the most in two years, according to Dealogic and EY—this blog highlights two PE-backed companies that adopted a new technology strategy to successfully support their buy-and-build efforts.

Core BTS fully integrates a new acquisition in only 45 days

PE firm Tailwind Capital purchased Core BTS in 2018 with plans for an aggressive acquisition strategy. Core BTS helps clients build applications, move systems to the cloud, and develop data lakes and data warehouses for deep data analysis. But the company’s first acquisition under Tailwind ownership, in 2019, went poorly. Core BTS ran the business on Microsoft Great Plains ERP at the time, and the aging system made it difficult to parse financial and performance data by practice, department, or region. Tailwind and Core BTS leadership became convinced it was time for a new ERP system.

So Tailwind reached out to NetSuite partner Turning Point Consulting to overhaul the tech stack of its portfolio company, Core BTS. The change included replacing Microsoft Great Plains with NetSuite ERP and NetSuite OpenAir, a comprehensive professional services automation application. With that new technology foundation, Core BTS was able to quickly integrate three more companies in 2020 and 2021.

The first business of those three, Blue Chip Consulting Group, was fully integrated into NetSuite in 90 days, and it only got faster from there. The final acquisition happened shortly before Tailwind started looking to sell Core BTS and was fully integrated in just 45 days. Because Core BTS could integrate acquired companies so quickly, would-be buyers could easily see financial data from that recent deal.

“As we were showing people our business, they weren't having to go and look in a different system when they were doing due diligence to review that last acquisition. It was all integrated,” Thimjon says. “Having the flexibility that NetSuite offered us to add a practice, or to add a location, it was really pretty easy to do.”

Core BTS’s demonstrated ability to quickly acquire and integrate businesses into its operations using NetSuite made it more valuable when it was time to sell again. “We literally had a slide in the pitch deck that showed how good we were at doing these integrations,” Thimjon says.

AST quickly onboards acquired employees

AST is a technology solutions provider that helps businesses implement core business systems such as ERP and CRM. It went from founder-led to PE-backed when that same PE group, Tailwind Capital, took a stake in the business in 2017. At that time, it was running on a smorgasbord of technology: QuickBooks Desktop, QuickBooks Online, Xero, and spreadsheets for accounting; a homegrown system for invoicing and project tracking; and ADP and more spreadsheets for HR.

These disconnected systems meant financial reporting, client billing, and project reporting were all time-consuming processes. Employee records and data were spread across five systems, so hiring or terminating an employee, for example, required logging in to each one. HR managed employees’ time off in a sprawling spreadsheet that had a separate tab for each employee.

“You were constantly doing things in Excel, trying to pivot data, and the most important thing is you didn't believe the validity of the data,” AST Chief People Officer Teresa Stanula says.

A new CEO selected by the PE firm knew this could not support a buy-and-build approach.

AST sought systems capable of delivering trusted, up-to-date data in this fast-moving environment. It needed technology that could quickly and reliably onboard the entire workforce of an acquired company.

“When the new CEO came on board, he started asking questions—like, what are you going to do if 500 new employees show up? How are you going to handle this level of data? And it, became very clear there was no way we could handle that data,” Stanula says.

It selected NetSuite ERP for financials, NetSuite OpenAir for professional services automation, and Oracle Fusion Cloud HCM for HR. The tight connection between the systems helped automate and simplify much of the work that went into onboarding new employees after AST acquired three companies in 18 months. New employees were in the HR system within hours rather than the week or more it took in the past. The Tailwind-backed company could also quickly see the impact of additional staff on bookings and forecasts after uploading the acquirees’ employee, project, and customer data into NetSuite.

Having all employee data in one place translated to far less administrative work for the HR team as well. The department could pull necessary data about employees in minutes, which previously required filing a request with an offshore team and waiting hours or until the next day to hear back. HR then had more time to focus on training, talent development, succession planning, and culture.

“It just feels like night and day,” AST VP of Marketing and Communications Melissa Sider says. “For our HR team, the whole operation has been elevated to a new level of corporate expertise. We're able to do things like succession planning and have data at our fingertips, and we're working on dashboards where we're looking at all of our teams and rating them on skill levels.”

For PE firms, better data supports successful exits

When it comes time for PE investors to exit these investments, having comprehensive, up-to-date, and accurate business data in one place is critical and can provide a major advantage. These businesses found they could close their books much faster, even as the businesses got ever-more complex. For Core BTS, OpenAir made project accounting and time reporting easier and more accurate, allowing for deeper and more accurate reports on profitability by project. Closing the books went from 15 days to 10 soon after implementing the new ERP, and now it takes just four days.

AST saw a similar impact, shortening the month-end close process from three-and-a-half weeks to six business days by using NetSuite to automate previously manual revenue recognition, invoicing, and currency conversion processes. In addition, OpenAir made it much easier for the services organization to make the most of its resources and track the status of projects.

Core BTS also integrated its CRM and workflow automation systems with NetSuite to keep all critical data in one platform. Having all that data accessible meant the company could quickly answer questions that came up during the due diligence process, making them that much more attractive to buyers.

“If every time you ask a question, it takes a company two weeks to respond, it's kind of concerning,” Thimjon says. “We were typically on a next-day basis with the information that we were being asked to provide.”

Tailwind completed a very successful exit with Core BTS when it sold the company to Nomura Research Institute (NRI), a multibillion-dollar Japanese research and consulting firm, in 2021. Just a couple months later, Tailwind landed another successful exit when it sold AST to Recognize Partners, a new technology services-focused PE group.

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