Shiv interviews Amanda Good, Partner and Head of Value Creation at Searchlight Capital Partners.
In this episode, Amanda shares practical strategies to transform good companies into great ones through operational excellence, team enhancements, and a disciplined planning process. Learn how to balance quick-win initiatives with longer-term strategic plays, the importance of linking value creation plans directly to EBITDA impact, and how to overcome resource constraints through talent planning and external partnerships. Plus, find out why smaller, highly experienced value creation teams can often outperform larger ones by staying close to the investment thesis and company leadership.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hey everybody, before we jump into today's episode, I just
want to point out a few ways in which you can work with us here
at How to sass #1. If you're an investor and you're
in the middle of a transaction and you want to figure out what
is the marketing potential of the targeted investment that I'm
looking at, you can engage with us in the due diligence
engagement or within two weeks, we can give you a very clear
picture of all the levers withinthe marketing function of that
(00:23):
organization for them to drive more revenue and pipeline for
the business while being incredibly efficient #2.
If you're the founder, CEO, operator, or investor of a
company or marketing is just under leveraged and it's seen as
a growth lever where that requires more investment.
We can come in and do a deep dive across three to four months
and analyze all the opportunities within that
(00:43):
business on the marketing side by looking at demand Gen. paid
media, account based marketing, content marketing, product
marketing, SEO, website, and much more.
And come back with a set of recommendations and a road map
for what marketing needs to execute against to drive more
enterprise value for that business.
And #3 if you're the CEO of a company that doesn't have a CMO
(01:05):
right now or there is a gap in the organization because VP
Marketing CMO was recently transitioned out.
We can come in in a fractional CMO capacity and partner with
you on that business and lead the internal team and the
operational plan. So that the marketing function
continues to make progress and drive more pipeline and revenue.
And will also help you hire yournext CMO by being part of that
(01:28):
hiring process and on board thatnew person once they're ready to
join the organization so that they get a running start.
These three types of engagementsare some of the most common ways
in which investors, CEOs and companies work with us.
And we have a proven track record of driving a ton of
enterprise value and revenue growth across those companies.
To learn more, go to www.howdessas.com where you'll
(01:50):
get a lot more information in terms of the types of
engagements I've described. And you can see case studies and
other examples of the work that we've done.
So you have a lot more confidence in partnering with
us. And with that said, let's get to
the episode. Enjoy the show Welcome to the
Private Equity Value Creation podcast where we interview
leading investors, operators, bankers, and advisors to help
(02:12):
you answer one question. How do we increase the
enterprise value of our companies?
My name is Shiv Narayanan and each episode I will dive deep
with a guest to help you become a better value creator and.
Capital allocator. So with that said, let's jump
right in and let's get started with today's episode.
My guest today is Amanda Good and she's the Head of Global
(02:35):
Value creation at Search Like Capital.
And what I really liked about the conversation with Amanda is
that a lot of private equity firms are now trying to build
value creation teams. And not all of them have a
process and a framework to thinkabout value creation outside of
some of the big firms that have extensive OPS teams to work with
their portfolio companies. And I really liked Amanda's
(02:57):
perspective on this and how to build a small but efficient team
that can help deals and the dealteams as they're making
investments and also help in the1st 100 days and to drive
enterprise value post close in all areas, especially on the
people side. And Amanda had a lot of great
perspectives on how to build outexecutive teams, how to layer in
(03:17):
different types of human resources and capital and
different executives that can actually help you talent inside
the organizations and integrate teams together and find a lot of
value creation opportunities. So I think there's a lot to take
away from it, especially as you're thinking about your own
firm and how you're thinking howto build out your own value
creation team. So with that said, I'll leave
you to it. Enjoy the episode.
(03:46):
Alright, Amanda, welcome to the show.
How's it going? Yeah, very well.
Nice to see you. Yeah, excited to have you on.
So why don't we start with your background and Searchlight and
then let's go from there. Absolutely.
So I guess I'm one of those rarepeople that have spent a career
in value creation and private equity almost 25 years.
Started that at Bain and Companyin very early 2000 and from
(04:09):
there spent about 15 years traveling with that with Bain
across a couple of continents and working with all different
kinds of private equity funds, different sizes, different
industries, different investing strategies.
Then went on to one of my favorite clients at the time, HG
Capital in London, the enterprise software B2B services
(04:30):
investor and there helped to really build out the portfolio
value creation team and spent the better part of seven years
there in London. And then recently have now been
about five years with Searchlight Capital, both on the
London side of the Atlantic and and and now in New York leading
our our value creation Searchlight mid market investor.
(04:53):
We invest up and down the capital structure.
So not only direct for control buyouts that we do do credit
positions as well and really take on multiple different parts
of of structuring our deals. We're currently investing about
a 3 1/2 billion dollar fund. We're on our 4th fund
searchlights of 15 year old institution now.
(05:15):
And we really started in the world of TMT, telecoms, media
and have evolved into all types of services, mostly B2B, more
recurring type services businesses.
Awesome. Yeah.
And and by the way, she's one ofour closest partners.
So what a small world. Tell me a little bit more of the
Valley creation side, because itmeans so many different things
(05:37):
and in different firms. How do you guys look at value
creation insight search? Like what are some of the key
areas that you're focusing on? Yeah, I guess the first thing I
would say is, you know, the firm's been around 15 years.
I've been the first official hire in value creation five
years ago. But there were ten years in
there were searched like, you know, really had some very
successful investments and some great funds.
(06:00):
And and that's because for us value creation is the culture
and it's a way of working. It's not necessarily a function
that sits off to the side. And so, you know, when we're
talking about what we do, it's Searchlight and what kind of
deals we look at, you'll always hear us talking about what's the
value creation thesis. And because we are often
(06:21):
investing in businesses at the lower ends of valuations,
sometimes 678 times EBITDA businesses, there's always
opportunity in these businesses to take a much more maturity
view of it. How can we take this business
and mature what is a good business, move it towards great?
We're not a great to excellent type investor.
(06:41):
We are very much a a good to great investor.
And so, you know, we always see multiple levers for value
creation that could be operational, it could be
strategic, it could be M&A. But we are never looking at an
investment and saying we're gonna back the management team
with exactly what their investment, you know, strategy
is and exactly how they see it. We really do try to bring some
(07:01):
differentiated ideas, some connections, some out-of-the-box
thinking. And so for us, you know, value
creation is how we lift the multiples on these businesses
and how we really drive above market growth.
Yeah. And given your size and and kind
of how you look at these companies, how are you doing
that, especially in the in the 1st 100 days, Talk to me about
(07:22):
the plan and how you kind of make that a reality.
Yeah, the plan is everything forus.
And I would say that's kind of what we do specialize in, you
know, within our value creation effort is making sure that
there's a plan that has a coupleof elements to it.
The first one is alignment. And so you can have a lot of
different plans. You can have an IM, you can have
(07:43):
a management plan, you might have a base case within our
fund. You know, you might have a
different shareholder in there that has a different idea for
it. Trying to understand exactly
what the one version of the three to five year plan looks
like often takes a lot of massaging and a lot of meetings
and facilitation to figure out which way are we going to really
be going. Are we going to break into that
(08:05):
new market? Are we going to try out this new
idea? Are we going to stick to our
knitting? You know, we go through a lot of
incarnations until we have one version of that ambition and
financial plan. Yeah.
And underneath all of that, we make sure that, you know, the
priorities to get there are exceptionally clear.
And when I say that, it means, you know, there's there's
(08:26):
possibly 3456 initiatives that we're trying to to drive in our
companies. And underneath all of that is
all of the activity that has to happen over the next week,
month, year. What resources are required?
What data are we going to look at to track them?
And almost most importantly, whoin the management team is
(08:48):
responsible for driving those different initiatives?
And do they have the capabilities, do they have the
background and do they have the authority to really, you know,
drive all those initiatives successfully?
So for us that's the combinationof of the plan as we, you know,
as we all describe it generically.
And how do you figure out thoughthat that short list because I
(09:09):
think companies are often drowning an opportunity, right?
And there's a ton of different value equation things that you
can do, pricing initiatives, sales efficiency, marketing
efforts, product mod map items. So like M&A obviously isn't, is
a common area. So how are you prioritize
prioritizing against all of these different initiatives?
And then how are you determiningthe amount of resourcing or
(09:32):
effort you're putting behind each so that you're not you're
not caught up in almost distracting the business too
many? Things, right?
Yeah, this is something I learned really well at HG
because at HG we were buying companies on the more expensive
end and sometimes we had to buy into our multiples quite
quickly. And in order to do that, you had
to run fast in the first year and you had to find those
(09:53):
accelerating initiatives that were going to drive, you know,
organic growth. And that was really the only way
to sort of walk into some, you know, forward leaning multiples,
which is what we often did HG. So we've brought that to
Searchlight and when you ask about how we prioritize it, we
make sure there's a nice combination of early
accelerators, you know, different initiatives that are
(10:13):
going to get out of the gate quickly.
And you're right, you called outsome of the the main ones,
pricing sometimes cost optimization, always something
around Salesforce and funnels and management and conversion.
So we will pull a bunch of thoselevers in the first year almost
regardless of what the company is doing.
And that's kind of our our B2B heritage.
(10:33):
And then there's a series of medium to longer terms
initiatives and you know, we make sure that there is a
balance of those near term, you know, medium term and then
longer term initiatives. And, and, and every company has
a slightly different shape, but it's really important.
I think that the the priority list has some of those first
year get out of the gates fast type type of priorities.
(10:57):
And and I guess there's a balance, right, Because some of
those initiatives need to be implemented in the 1st 100 days
so that you can capture value inthat first year.
And then some initiatives take time to implement.
So how do you balance resources between those two?
Because this is the reason I askthis is because in a lot of
cases were brought into engagements or like a firm like
HG or other forms of people paying us on the marketing side.
(11:21):
And then we come into these meetings and there are all kinds
of initiatives going on. And then there's still a limited
executive team and they're responsible for kind of doing
all of it. So how do you balance that to
make sure that the team actuallyhas the bandwidth to make?
All of this a reality. Yeah, I'm gonna plug for a, for
a, another advisor out there, the idea of talent to value.
(11:44):
It's a sort of Sandy Hog framework, which I absolutely
love because what it does is it takes all of your value
initiatives and then it obviously looks at all the
people responsible underneath it.
But then you take that and you flip it the other way around.
And so you've got initiatives with people, but then you see
that suddenly John's name is written 7 times across the page
(12:06):
across multiple initiatives. And then you look at John's
priorities and suddenly you stack them all up against each
other. And no human is going to be able
to sort of achieve all of those what we call jobs to be done.
And if you look at all the jobs to be done that you've given a
specific individual in the company, you then quickly find
those resource constraints. And you know, we facilitate
(12:28):
workshops where we'll hand John the entire list of initiatives
and say, John, how achievable isthis in the first year?
You know, and you and you can watch and, you know, witness the
reactions of these visuals and you start to realize all of the
holes that you have to plug if you really want to get all those
initiatives done. But this idea of not just
looking at the head of sales as an individual, but looking at
(12:50):
all of the people that are required and looking at all of
the initiatives and stacking up the cards that they have on
their plate to get done. It starts to create a really
different view of the world. And our CEO's, you know, have
loved that sort of framework to think about things.
It really breaks things into a much more personal can they
achieve sort of dialogue? Yeah.
(13:11):
And I've, I've seen this inside companies where like one or two
people will be kind of like these linchpin folks inside the
organization. And then everybody is kind of
like a supporting cast member tothose linchpins and nothing's
going to get done unless it moves through those individuals.
So talk about the people side, because I'm imagining that
that's the case in a lot of yourcompany.
So how do you transform that to make the value creation plan a
(13:34):
reality? Well, I think there's always
room for outside help in almost any company as well.
And so when you find those bottleneck people, there's
almost always an opportunity to enhance.
And you know, I'll give an example.
I feel like our, our, our poor finance teams, you know, no
matter what the initiative is, we're trying to put in a data
warehouse or we're trying to do a, you know, a new flip of our
(13:59):
CRM, somehow it always comes back to a couple of people in
FNA or finance. And so, you know, we we've tried
to develop deep standing partnerships with whether it be
extra finance support, extra sales support, sales operations
is a big area, extra data support.
We have a lot of, you know, datacapability providers as well.
And so trying to find, you know,the right partners to use
(14:22):
repeatedly is kind of step one in that organization.
And Step 2 clearly is enhancing and growing the team.
So you know, making sure that you can up tier a lot of the
folks in the organization. So if there really are those
bottlenecks, can they step up a level and get people underneath
them to, to do their jobs? But that's, that's a journey we
go on over the first, say 12 to 18 months to figure out, you
(14:45):
know, who needs more support. And it's one of those things
that we're happy to do because we're always trying to find ways
to, you know, again, create morevalue in these companies.
And part of that is you have to enhance and and build the team
up. Right.
Yeah, I, I, I can totally see that like the leveling up from
the in internal team and itself is, is super important.
(15:06):
At the same time, sometimes I find that when we come into
these companies, people are in the wrong seats.
Do you, do you see that often and kind of how do you handle
that? Yes, you know, I think that the
first place that comes to is CEOawareness and trying to make
sure that we have a relationshipwith our our chief executives
(15:27):
where they understand that we really want to partner with them
as they explore, you know, the team's full capabilities, what
is the potential truly of this team that we're working with.
And you know, our, our very bestCEO's are the ones that say, OK,
Sally was great to get us from here to there.
She's not the right person to get from the next spot we're
(15:48):
trying to go to. And so we, we do have tools for
this as well. I mean, this is all part of the
value creation approach. So we have assessment tools, we
have capability tools. You know, one of the, the
easiest, most simple things to think about is people's
motivation and ambition. Do they want to do the job?
And so we, you know, we use Hogan as a as another tool just
(16:09):
to say what really gives this person energy and and you know,
what kind of skills do they cometo work with every day?
You know, and if people are veryoperational and suddenly asking
them to do something much more strategic, it comes out pretty
clearly in these people's own sort of assessment of
themselves. And so depending again, how
forward thinking the CEO is, youmight need to to give them more
(16:31):
frameworks and tools. But oftentimes we just do the
simple quarterly talent review, the 9 box model where you go
through all of the people and you say you know what's their
potential, where they performingtoday.
Right. And how often are you would you
say like leveling up the particular seat and saying, OK,
like we have some internal talent, but where we need to go
(16:51):
to, we need an entirely different level or or capability
of an executive in that seat? I can't think of a single
company in the five years that we have entered and exited with
the same management team fully where you know the top three or
four people are still the same, top three or four people.
So I would say in 100% of our situations we are up leveling
(17:15):
certain roles and I think like many other PE funds, probably
the most common of that is the CFO.
Depending whether it is a secondary or tertiary private
equity buyout. Oftentimes you have CFO's that
have not yet experienced what wewould consider to be a little
bit of a higher performance environment than say a privately
(17:38):
held non private equity backed company where our timelines, our
debt levels, our covenant needs,all of those things around our
capital structure. The M&A that we put on to these
companies you know are are quiteas fast and furious as as
someone like Searchlight would demand.
And so I would say that role gets you know probably up
leveled about half of the time. Another common one is we, we
(18:00):
very often try to put a proper strategic CHRO into the
business. We find there's incredible
leverage for our chief executives when we can put a Chr
next to next to them to try and really take on that kind of
talent planning, workforce planning, recruiting, just
again, performance management inthe business.
(18:21):
So I would say a lot of the searches I've supported lately
across our our teams have been around that CHRO.
Is there a certain size at whichthat becomes important as I'm
thinking about larger companies or clients that we have where I
can see a need for that, But let's say you're sub 50 million,
it may not be the most immediatehire.
Like, is there a stage at which you think it's more applicable?
(18:43):
Start with how many hires we have to make every year for our
growth plan and how much M and Aare we doing.
And so, you know, we, we have a,you know, businesses and
industrial services, which, you know, we're hiring significant
amount of local labour to help in machine repair or warehouse
distribution, You know, and trying to keep that workforce
(19:04):
full is our, you know, our biggest constraint to driving
value in those companies, makingsure that we've got the head
count in those businesses to do so.
So, you know, having someone strategic to think about how do
we do, you know, local hiring and all of these different
markets were in. And then on M&A, you know, as
we're consistently throwing new teams at our, at our company,
(19:26):
oftentimes our, you know, our, our, our Csuite doesn't have the
bandwidth to go and evaluate allof the individuals that, that
we're acquiring. And so having to see HRO kind of
put systematic frameworks in to drive that M and a valuation is
often another trigger for that. So I would say somewhat less
size related more just really how critical is the workforce
(19:51):
specifically, you know, to the value creation plan.
Yeah. I think that's a great point on
integrations. I guess when there's overlapping
roles, integration opportunitiesin different areas of expertise
or creating a centre of expertise for the business, HR
can be a significant value driver on that side.
So yeah, you were going to jump in.
Oh, no, I and I would say that, you know, the oftentimes them
(20:14):
we're thinking about, again, going from from good to great
and trying to trying to make exceptional workplaces.
And you know, we, we don't take that lightly.
It's actually an incredibly important, incredibly important
attribute of what we do. I really believe in the
statistics around the success ofcompanies that can drive human
productivity at a faster rate. And I think there's some studies
(20:37):
out there that show that less than 50% of most workforces are
considered to be actively engaged in their job day today,
which means they, they come to work, they know the jobs that
are required to be doing. They do them with, you know,
their best intentions. They complete as much as they
can. You know, oftentimes it's, it's
no fault of the employee, but often the jobs are overlapping
(21:01):
or there's blockages in the system.
They haven't gotten what they needed from somebody else in the
organization. And so trying to increase the
productivity of, you know, all of our workforces, I just
believe drives, you know, tremendous value across the
business. It can't can't be kind of
overstated. Yeah, totally.
I think that's that's just so important as as you're kind of
investing more on the people side and IT culture is a great
(21:24):
area, but just even executives, it ends up ramping up investment
on the human capital side of thebusiness.
How do you balance that with thefinancial objectives or
covenants or even the targets that you want to have?
Well, listen, you're hitting on one of the important topics now,
which is automation, right? And driving, driving more
productivity with the same amount of resources.
(21:46):
So that's one of the things thatwe're most excited about, you
know, in a, in a fully AI world,is that, you know, we, we, we
can keep the same workforce or again, give those, those folks
in our companies higher level jobs while trying to, to
maintain, you know, the, the productivity and the automation
needs to happen underneath them in order to do so.
And so certainly, you know, that's one thing we're looking
(22:07):
at in all of our companies is how do we help these individuals
to take on larger tasks and and more work, you know, without
trying to continually increase the overall headcount.
You know, we've seen some companies kind of go all the
way, like in Klarna, got rid of a bunch of their support staff
and then kind of rehired them back because they they felt
(22:30):
like, yeah, I wasn't ready first.
They thought it was. And so I guess there's that risk
as well. So when you think about AI and
finding efficiency, especially on the human capital side, where
are you seeing some of the some of the biggest opportunity
areas? You know, finance has been a
really interesting one for us. We've managed to really look at
all of the manual tasks around collections, working capital,
(22:53):
invoicing, you know, all of those very more manual tasks.
And I feel like AI has given us a super boost in trying to take
some of those tasks out of the hands of people that are quite
honestly frustrated with doing them anyway and would rather be
doing different tasks. So I would say, you know, our
earliest quick wins have probably been around those
(23:16):
finance teams. And then secondarily, I would
say not so much headcount savings, but productivity lifts
for sure on sales. And so, you know, whether we're
using tools for call recording, which are predicting, you know,
what word choices are more or less effective, We're able to,
you know, get more sort of bang for the buck out of, of sales
(23:38):
calls and sales motions and marketing efforts, you know, due
to, due to some really interesting kind of AI tools.
Yeah, yeah. And, and beyond AI, when you
think about just efficiency in general and meeting financial
expectations, because all of these transformational things
are happening at the same time, right?
There's a value creation plan, there's changes to the team,
there's integration opportunity,there's a, there's a, I like,
(24:00):
how are you thinking about hitting those financial numbers?
Because that is obviously what'sthe underlying item inside the
investment thesis to to make theinvestment actually worthwhile.
One of my favorite topics because I try to avoid looking
at the financial results as muchas possible.
And what I mean by that sort of tongue in cheek, I'm, you know,
are my colleagues on the, on thepure investing side are, are,
(24:23):
are looking at that, you know, sort of results all the time.
You know, I, I have a almost religious excitement about
operational KPI. And so when you're talking about
efficiency and the leading indicators that are going to
produce those financial results that you'd like to see whether
it's, you know, orders per salesperson, calls per sales person,
(24:48):
different funnel ratios, throughput in our factories, you
know, the KPI's that we need to be watching most aggressively
and most often are those operational ones.
And so, you know, we, we, we have a, a small data team and we
have, I guess there's a lot of outsourced data support for our
companies because we want to make sure that we've got real
(25:11):
time dashboarding around those operational metrics.
So that most importantly the management team, but also our
team can see before it happens that we might have, you know, a
financial result coming out nextmonth that was suboptimal,
whether it be, you know, revenuecost, etcetera.
But you know, it's a journey. You know, some companies we
(25:32):
invest in even struggle to tell us the headcount in the company
overall. You know, they have so many
subsidiaries or whatever it is, just how many active employees
do we have at the company is a really basic example of
something that's going to be driving our, you know, our
margin in these businesses. And you know, sometimes the, the
hiring of individuals is not centrally controlled and so
(25:55):
their local teams are out there hiring and suddenly costs go up
in Cleveland and we're kind of surprised why.
Well, we weren't watching even, you know, headcount hiring.
So again, the some of the companies we buy are in those
positions where just some simpleoperational KPI reporting is a
is a great way to make sure thatwe're helping to control what
the output is, which is really the financial results.
(26:17):
And how important is that as you're looking at, because
bringing a little bit full circle as you're thinking about
the plan in the 1st 100 days along with the team and
organizational transformations, like how closely are you tying
that together through to you? OK.
This is going to be the impact of these initiatives on our
EBITDA over the next few years. And also the process
(26:41):
improvements that we need to make or infrastructure
improvements we need to make even enable that kind of
thinking because maybe the company is not even looking at
the data. Yeah, Yeah.
So I always joke one of one of my love languages is a really
good EBITDA bridge. So you know, starting from
investing Evita to our exit Evita and if you go through, you
(27:03):
know, all of those initiatives, again, we start that as you said
in the first hundred days, what,what, what is our focus getting
through every initiative tied toa financial EBITDA number isn't
critically important to us. And so if, if you were to see,
and we do this in every control investment, if you were to see
our investment thesis and what we start to build in, in, in the
(27:24):
1st 100 days, you can see international expansion is going
to provide us 8 million of Evita.
You know, moving that manufacturing centre from here
to offshore is going to produce 4 million in Nevada.
And so as we were talking about how many priorities are on the
page, part of the reason that wecan more easily prioritize them
(27:44):
is because we can see the actualreal EBITDA impact.
And at the end of that Evita bridge is always an offsetting,
you know, negative EBITDA driver, which is all the
operational costs that we need to put into the business.
So you know, a series of positives brought down by a
series of let's call it it investments or people
(28:05):
investments, infrastructure investments, whatever they are.
But when we do our hundred day planning, we try to plan all of
that through with management teams.
So we're critically clear how weget from starting EBITDA to exit
EBITDA and you know all the steps and the waterfall from
here to there. What type of time horizon do you
look at for that type of a plan because some some investments
(28:27):
take time to realize, right? And one of the things that I've
seen inside companies is especially that are being
acquired or have just been acquired, there's a lack of
patience because you need to getthe outcomes as quickly as
possible. And some initiatives take more
time than that. So how are you looking at those
initiatives and making sure like, OK, we make an investment
today, maybe it requires a key hire, that person needs three
(28:49):
months to on board and then there's time to impact like for
ramp up and all of that. So how do you look at that?
Overall, in the majority of our investments, I have, you know,
patients only to a three-year horizon.
And so we will, we will try to drive a three-year sort of view.
Of course, you know, five years,the standard sort of, you know,
private equity. But if, if you're three years in
(29:09):
and you haven't gotten yourself well on the way towards a 2X,
you know, it's, it's, it's gonnatake a, a Herculean J curve at
the end. So we, we, we usually do three
years. I will say we also replan the
plan every year. So it's, we have a strategic
planning process where we, you know, revisit that.
You know the exception is and that's what makes I think
(29:30):
Searchlight sort of unique and interesting is we do have a DNA
towards the longer term sort of telecommunications and
infrastructure type investments as well.
And so some of our most successful investments have
been, you know, sort of longer term, you know, rolling out
(29:50):
fiber, for example, to rural locations.
And obviously that's not something you can drive any
faster than than humans can produce that.
And so those have had a longer and more steady return profile
where you really see the fruits of your labour in years kind of
four and five, but that would bekind of slightly more of the
majority. But certainly where our, our
(30:11):
core DNA came from was a lot of our, our telecoms and, and, and
some of the more infrastructure methods.
How are you tying accountabilitythat of course three years, I
agree it's a completely a fair amount of time, but there needs
to be accountability account along the way where there's
leading indicators that you're looking at and key people are in
charge of specific areas of the business.
So how are you tying that together?
(30:32):
Big believer in annual performance reviews for
individuals. So, you know, we, we subscribe
to the OKR approach, you know, where everyone has those key
jobs and they're the indicators of what they're supposed to
achieve. And then again, you know, the
role of a CEO or CHRO really driving end of the year annual
review processes. It's, you know, it's like any,
(30:53):
any good business, if you, you want to measure it, then you can
actually manage it. And so trying to to link people
to outcomes and those key resultindicators are something that we
try to instill in all of our companies.
Yeah, that's that's great. What, what?
What do you? How?
Quickly, are you to let's say. You've identified certain
(31:13):
initiatives in your value creation plan, and let's say one
of them is not working, or at least doesn't seem to be working
6 months in, which is totally normal.
How quick are you to pull the plug on some of those types of
initiatives? Well, I think it's it's the
question between who and the what is the initiative, the
wrong initiative? Or is the, you know, the team
behind it, you know, struggling.And listen, our markets move.
(31:36):
I mean, this is this is a world of incredible volatility and our
competitors move fast, you know,so sometimes best laid plans to
to try a new product or a new feature or, you know, something
that's a little bit out-of-the-box.
Well, maybe a competitor beat usto it, you know, that's also
very real. So in situations like that,
that's, you know, more than whatis the problem and maybe we do
need to pull back on that initiative.
(31:57):
But I can give you know, both simple examples of times where
we the initiative was still the best laid plan, but the team
really, you know, oftentimes didn't know how to get their
hands fully around it. And sometimes that's capability
and sometimes that's, you know how much resource we talked
about already. So I would say we are, we are
(32:18):
patient, but we are fairly quickto to to swap out again, you
know different teams or situations where we think the
initiative is absolutely the right one for the value creation
plan, but potentially the the team that we have behind it.
Hmm. Yeah, that's great.
Now, as we're coming up on time here, there are tons of PE firms
(32:39):
that look at value creation but don't have the kind of team that
you have over at Searchlight. Any advice for firms like that
that are thinking about buildingtheir own internal practice?
I would say start small. I mean, our head count on the
books at Searchlight is is five of us.
You know, we're we're a small, Iguess, but but mighty
organization against over, you know, 100 employees at
(33:02):
Searchlight. So I think it's again, it's a
it's a great way to sort of cometowards the end because it's
where I started. It really becomes about a
capability. And so if you're gonna if you're
going to hire value creation it it absolutely needs to have a
seat at the table. It needs to be an experienced
team that's, you know, very usedto private equity.
(33:23):
Quite honestly, this isn't something that, you know,
consulting teaches you all the skills for.
It takes a while to, to think like an investor.
And so I think it's about again,trying to make sure you, you,
you hire the right folks into your team that are going to have
a voice at the table that the firm genuinely believes are
going to drive investment returns.
But I think it's, it's about the, the right folks rather than
(33:46):
an army. I don't, I, I don't think the,
the approach of large value creation teams which works for
some funds is really the way forthe majority of the funds.
I think for the large majority of PE funds you can be
incredibly effective with say 3 to 5 individuals and then a
whole web of, you know, suppliers and advisors and
(34:09):
outsourced partnerships. Yeah, talk about that a little
bit more is because we've seen that as well where you have
Insight and Vista and some of these firms that have large
value creation teams. But most of our partners have
maybe one or two OPS operating partners inside.
But even then they don't have they haven't figured out the
system to build a value creationteam.
(34:29):
So talk about how your team is structured and how kind of you
work with the portfolio companies to give them as much
value as possible and how are you how you're leveraging
outside resources to find scale.Yeah, I would say the main role
of everyone on my team with the exception of 1.
So there's, there's four of us that I would consider all to be
architects or or quarterbacks, however you want to think of us.
(34:52):
But we are very much, you know, alongside of the chief executive
driving, building, scaffolding, the entire value creation plan
in the beginning. And that works for us because we
do about four control deals a year.
And so if you think about four control deals on both sides of
the Atlantic, so that's two and two or maybe 3 and one in a
(35:14):
given year and there's four of us, we can really give very
dedicated attention to those newdeals.
And so I think that that ratio of sort of one to two new deals
a year per experienced executiveand value creation is, is the
right one. And you know, spending a
significant amount of our time trying to get those plans built
(35:37):
and then monitoring them in the first year is, is the way we we
mostly spend our time. Now, the way we keep that small
as well is that we all have our spikes.
And so each of us comes from a slightly different background.
Obviously coming from HG, I havemore of the the growth sales
marketing mindset. So I know how to do more of the,
the high growth. My colleague in in London comes
(35:59):
more from the turn around side. And so his background is very
much about trying to deal with cost optimization.
And so we could lean on each other.
Well, and then, you know, we have folks with more role in
procurement or in areas like finance.
And so we all sort of keep our different spikes going, but we
can all play the generalist withthe exception of one.
(36:20):
As I said earlier, data is trulya must have in any value
creation data and technology, having an in house person that
can take management teams on thejourney.
So there's no friction. You don't have to say, oh, go
talk to our friends at this partner, that partner.
No, this person is free. They're Searchlight ready,
they're on the plane, they're probably there in diligence
(36:41):
helping to to create a vision around what data can do for
these companies. And that individual on on our
team and some of the contractorsthat support him are truly
specialist and kind of world class that enterprise data
reporting and increasingly AI. Yeah, yeah, that's that's
fantastic advice. And I think actually even a lot
of PE firms that are thinking about this should be thinking
(37:04):
about their value creation teamsin this way.
So appreciate you sharing that, Amanda, as as we wrap it, as
we're wrapping up, like what is,what is the best way people that
are listening get a hold of you and learn more about
Searchlight. Yeah, I think Linkedin's always
the best. I'm an avid user, start my day
kind of every morning looking ata new connections and what's
happening on LinkedIn. So I think I'm pretty easy to
(37:25):
find there. So anyone that wants to reach
out, very happy to. And again, as I said in the
beginning, I've spent 25 years thinking how value creation
through multiple downturns and you know, recessions and then up
ticks in the market. So it's certainly something that
that I enjoy having conversations with and never
stop learning some other folks in the in the field.
(37:47):
So appreciate listening to your podcast and getting to know
other people's thoughts. So always, always excited to
share ideas. Awesome.
And with that, Amanda, thanks for coming on and sharing your
wisdom. Really grateful because there's
a lot of PE firms that I know that are trying to figure out
this area and don't have a fullybuilt out value creation team.
And I think you shed a lot of light into how you're able to
add value at Searchlight and howthey can do the same.
(38:09):
So appreciate you doing this. Great.
Thanks. Thanks for listening to today's
episode. Before you take off, just a few
requests from our side #1 if youhaven't done so already, please
subscribe to the podcast on iTunes or Spotify or YouTube or
wherever you go to listen to your podcast #2 if you are in
the market for due diligence services, strategy consulting,
(38:33):
or fractional CMO services, please get in touch with us at
www.hassas.com. And 3rd, please buy a copy of my
new book, Exit Ready Marketing. It covers a ton of concepts that
we take our customers through private equity investors, B
company, CEOs, operating partners and marketers and
there's a ton of great value in there.
(38:53):
That expands on my previous bookpost acquisition marketing as
well. So with that said, I hope you
enjoyed today's content and we'll see you on the next
episode.
Hey everybody, before we jump into today's episode, I just
want to point out a few ways in which you can work with us here
at How to sass #1. If you're an investor and you're
in the middle of a transaction and you want to figure out what
is the marketing potential of the targeted investment that I'm
looking at, you can engage with us in the due diligence
engagement or within two weeks, we can give you a very clear
picture of all the levers withinthe marketing function of that
(00:23):
organization for them to drive more revenue and pipeline for
the business while being incredibly efficient #2.
If you're the founder, CEO, operator, or investor of a
company or marketing is just under leveraged and it's seen as
a growth lever where that requires more investment.
We can come in and do a deep dive across three to four months
and analyze all the opportunities within that
(00:43):
business on the marketing side by looking at demand Gen. paid
media, account based marketing, content marketing, product
marketing, SEO, website, and much more.
And come back with a set of recommendations and a road map
for what marketing needs to execute against to drive more
enterprise value for that business.
And #3 if you're the CEO of a company that doesn't have a CMO
(01:05):
right now or there is a gap in the organization because VP
Marketing CMO was recently transitioned out.
We can come in in a fractional CMO capacity and partner with
you on that business and lead the internal team and the
operational plan. So that the marketing function
continues to make progress and drive more pipeline and revenue.
And will also help you hire yournext CMO by being part of that
(01:28):
hiring process and on board thatnew person once they're ready to
join the organization so that they get a running start.
These three types of engagementsare some of the most common ways
in which investors, CEOs and companies work with us.
And we have a proven track record of driving a ton of
enterprise value and revenue growth across those companies.
To learn more, go to www.howdessas.com where you'll
(01:50):
get a lot more information in terms of the types of
engagements I've described. And you can see case studies and
other examples of the work that we've done.
So you have a lot more confidence in partnering with
us. And with that said, let's get to
the episode. Enjoy the show Welcome to the
Private Equity Value Creation podcast where we interview
leading investors, operators, bankers, and advisors to help
(02:12):
you answer one question. How do we increase the
enterprise value of our companies?
My name is Shiv Narayanan and each episode I will dive deep
with a guest to help you become a better value creator and.
Capital allocator. So with that said, let's jump
right in and let's get started with today's episode.
My guest today is Amanda Good and she's the Head of Global
(02:35):
Value creation at Search Like Capital.
And what I really liked about the conversation with Amanda is
that a lot of private equity firms are now trying to build
value creation teams. And not all of them have a
process and a framework to thinkabout value creation outside of
some of the big firms that have extensive OPS teams to work with
their portfolio companies. And I really liked Amanda's
(02:57):
perspective on this and how to build a small but efficient team
that can help deals and the dealteams as they're making
investments and also help in the1st 100 days and to drive
enterprise value post close in all areas, especially on the
people side. And Amanda had a lot of great
perspectives on how to build outexecutive teams, how to layer in
(03:17):
different types of human resources and capital and
different executives that can actually help you talent inside
the organizations and integrate teams together and find a lot of
value creation opportunities. So I think there's a lot to take
away from it, especially as you're thinking about your own
firm and how you're thinking howto build out your own value
creation team. So with that said, I'll leave
you to it. Enjoy the episode.
(03:46):
Alright, Amanda, welcome to the show.
How's it going? Yeah, very well.
Nice to see you. Yeah, excited to have you on.
So why don't we start with your background and Searchlight and
then let's go from there. Absolutely.
So I guess I'm one of those rarepeople that have spent a career
in value creation and private equity almost 25 years.
Started that at Bain and Companyin very early 2000 and from
(04:09):
there spent about 15 years traveling with that with Bain
across a couple of continents and working with all different
kinds of private equity funds, different sizes, different
industries, different investing strategies.
Then went on to one of my favorite clients at the time, HG
Capital in London, the enterprise software B2B services
(04:30):
investor and there helped to really build out the portfolio
value creation team and spent the better part of seven years
there in London. And then recently have now been
about five years with Searchlight Capital, both on the
London side of the Atlantic and and and now in New York leading
our our value creation Searchlight mid market investor.
(04:53):
We invest up and down the capital structure.
So not only direct for control buyouts that we do do credit
positions as well and really take on multiple different parts
of of structuring our deals. We're currently investing about
a 3 1/2 billion dollar fund. We're on our 4th fund
searchlights of 15 year old institution now.
(05:15):
And we really started in the world of TMT, telecoms, media
and have evolved into all types of services, mostly B2B, more
recurring type services businesses.
Awesome. Yeah.
And and by the way, she's one ofour closest partners.
So what a small world. Tell me a little bit more of the
Valley creation side, because itmeans so many different things
(05:37):
and in different firms. How do you guys look at value
creation insight search? Like what are some of the key
areas that you're focusing on? Yeah, I guess the first thing I
would say is, you know, the firm's been around 15 years.
I've been the first official hire in value creation five
years ago. But there were ten years in
there were searched like, you know, really had some very
successful investments and some great funds.
(06:00):
And and that's because for us value creation is the culture
and it's a way of working. It's not necessarily a function
that sits off to the side. And so, you know, when we're
talking about what we do, it's Searchlight and what kind of
deals we look at, you'll always hear us talking about what's the
value creation thesis. And because we are often
(06:21):
investing in businesses at the lower ends of valuations,
sometimes 678 times EBITDA businesses, there's always
opportunity in these businesses to take a much more maturity
view of it. How can we take this business
and mature what is a good business, move it towards great?
We're not a great to excellent type investor.
(06:41):
We are very much a a good to great investor.
And so, you know, we always see multiple levers for value
creation that could be operational, it could be
strategic, it could be M&A. But we are never looking at an
investment and saying we're gonna back the management team
with exactly what their investment, you know, strategy
is and exactly how they see it. We really do try to bring some
(07:01):
differentiated ideas, some connections, some out-of-the-box
thinking. And so for us, you know, value
creation is how we lift the multiples on these businesses
and how we really drive above market growth.
Yeah. And given your size and and kind
of how you look at these companies, how are you doing
that, especially in the in the 1st 100 days, Talk to me about
(07:22):
the plan and how you kind of make that a reality.
Yeah, the plan is everything forus.
And I would say that's kind of what we do specialize in, you
know, within our value creation effort is making sure that
there's a plan that has a coupleof elements to it.
The first one is alignment. And so you can have a lot of
different plans. You can have an IM, you can have
(07:43):
a management plan, you might have a base case within our
fund. You know, you might have a
different shareholder in there that has a different idea for
it. Trying to understand exactly
what the one version of the three to five year plan looks
like often takes a lot of massaging and a lot of meetings
and facilitation to figure out which way are we going to really
be going. Are we going to break into that
(08:05):
new market? Are we going to try out this new
idea? Are we going to stick to our
knitting? You know, we go through a lot of
incarnations until we have one version of that ambition and
financial plan. Yeah.
And underneath all of that, we make sure that, you know, the
priorities to get there are exceptionally clear.
And when I say that, it means, you know, there's there's
(08:26):
possibly 3456 initiatives that we're trying to to drive in our
companies. And underneath all of that is
all of the activity that has to happen over the next week,
month, year. What resources are required?
What data are we going to look at to track them?
And almost most importantly, whoin the management team is
(08:48):
responsible for driving those different initiatives?
And do they have the capabilities, do they have the
background and do they have the authority to really, you know,
drive all those initiatives successfully?
So for us that's the combinationof of the plan as we, you know,
as we all describe it generically.
And how do you figure out thoughthat that short list because I
(09:09):
think companies are often drowning an opportunity, right?
And there's a ton of different value equation things that you
can do, pricing initiatives, sales efficiency, marketing
efforts, product mod map items. So like M&A obviously isn't, is
a common area. So how are you prioritize
prioritizing against all of these different initiatives?
And then how are you determiningthe amount of resourcing or
(09:32):
effort you're putting behind each so that you're not you're
not caught up in almost distracting the business too
many? Things, right?
Yeah, this is something I learned really well at HG
because at HG we were buying companies on the more expensive
end and sometimes we had to buy into our multiples quite
quickly. And in order to do that, you had
to run fast in the first year and you had to find those
(09:53):
accelerating initiatives that were going to drive, you know,
organic growth. And that was really the only way
to sort of walk into some, you know, forward leaning multiples,
which is what we often did HG. So we've brought that to
Searchlight and when you ask about how we prioritize it, we
make sure there's a nice combination of early
accelerators, you know, different initiatives that are
(10:13):
going to get out of the gate quickly.
And you're right, you called outsome of the the main ones,
pricing sometimes cost optimization, always something
around Salesforce and funnels and management and conversion.
So we will pull a bunch of thoselevers in the first year almost
regardless of what the company is doing.
And that's kind of our our B2B heritage.
(10:33):
And then there's a series of medium to longer terms
initiatives and you know, we make sure that there is a
balance of those near term, you know, medium term and then
longer term initiatives. And, and, and every company has
a slightly different shape, but it's really important.
I think that the the priority list has some of those first
year get out of the gates fast type type of priorities.
(10:57):
And and I guess there's a balance, right, Because some of
those initiatives need to be implemented in the 1st 100 days
so that you can capture value inthat first year.
And then some initiatives take time to implement.
So how do you balance resources between those two?
Because this is the reason I askthis is because in a lot of
cases were brought into engagements or like a firm like
HG or other forms of people paying us on the marketing side.
(11:21):
And then we come into these meetings and there are all kinds
of initiatives going on. And then there's still a limited
executive team and they're responsible for kind of doing
all of it. So how do you balance that to
make sure that the team actuallyhas the bandwidth to make?
All of this a reality. Yeah, I'm gonna plug for a, for
a, another advisor out there, the idea of talent to value.
(11:44):
It's a sort of Sandy Hog framework, which I absolutely
love because what it does is it takes all of your value
initiatives and then it obviously looks at all the
people responsible underneath it.
But then you take that and you flip it the other way around.
And so you've got initiatives with people, but then you see
that suddenly John's name is written 7 times across the page
(12:06):
across multiple initiatives. And then you look at John's
priorities and suddenly you stack them all up against each
other. And no human is going to be able
to sort of achieve all of those what we call jobs to be done.
And if you look at all the jobs to be done that you've given a
specific individual in the company, you then quickly find
those resource constraints. And you know, we facilitate
(12:28):
workshops where we'll hand John the entire list of initiatives
and say, John, how achievable isthis in the first year?
You know, and you and you can watch and, you know, witness the
reactions of these visuals and you start to realize all of the
holes that you have to plug if you really want to get all those
initiatives done. But this idea of not just
looking at the head of sales as an individual, but looking at
(12:50):
all of the people that are required and looking at all of
the initiatives and stacking up the cards that they have on
their plate to get done. It starts to create a really
different view of the world. And our CEO's, you know, have
loved that sort of framework to think about things.
It really breaks things into a much more personal can they
achieve sort of dialogue? Yeah.
(13:11):
And I've, I've seen this inside companies where like one or two
people will be kind of like these linchpin folks inside the
organization. And then everybody is kind of
like a supporting cast member tothose linchpins and nothing's
going to get done unless it moves through those individuals.
So talk about the people side, because I'm imagining that
that's the case in a lot of yourcompany.
So how do you transform that to make the value creation plan a
(13:34):
reality? Well, I think there's always
room for outside help in almost any company as well.
And so when you find those bottleneck people, there's
almost always an opportunity to enhance.
And you know, I'll give an example.
I feel like our, our, our poor finance teams, you know, no
matter what the initiative is, we're trying to put in a data
warehouse or we're trying to do a, you know, a new flip of our
(13:59):
CRM, somehow it always comes back to a couple of people in
FNA or finance. And so, you know, we we've tried
to develop deep standing partnerships with whether it be
extra finance support, extra sales support, sales operations
is a big area, extra data support.
We have a lot of, you know, datacapability providers as well.
And so trying to find, you know,the right partners to use
(14:22):
repeatedly is kind of step one in that organization.
And Step 2 clearly is enhancing and growing the team.
So you know, making sure that you can up tier a lot of the
folks in the organization. So if there really are those
bottlenecks, can they step up a level and get people underneath
them to, to do their jobs? But that's, that's a journey we
go on over the first, say 12 to 18 months to figure out, you
(14:45):
know, who needs more support. And it's one of those things
that we're happy to do because we're always trying to find ways
to, you know, again, create morevalue in these companies.
And part of that is you have to enhance and and build the team
up. Right.
Yeah, I, I, I can totally see that like the leveling up from
the in internal team and itself is, is super important.
(15:06):
At the same time, sometimes I find that when we come into
these companies, people are in the wrong seats.
Do you, do you see that often and kind of how do you handle
that? Yes, you know, I think that the
first place that comes to is CEOawareness and trying to make
sure that we have a relationshipwith our our chief executives
(15:27):
where they understand that we really want to partner with them
as they explore, you know, the team's full capabilities, what
is the potential truly of this team that we're working with.
And you know, our, our very bestCEO's are the ones that say, OK,
Sally was great to get us from here to there.
She's not the right person to get from the next spot we're
(15:48):
trying to go to. And so we, we do have tools for
this as well. I mean, this is all part of the
value creation approach. So we have assessment tools, we
have capability tools. You know, one of the, the
easiest, most simple things to think about is people's
motivation and ambition. Do they want to do the job?
And so we, you know, we use Hogan as a as another tool just
(16:09):
to say what really gives this person energy and and you know,
what kind of skills do they cometo work with every day?
You know, and if people are veryoperational and suddenly asking
them to do something much more strategic, it comes out pretty
clearly in these people's own sort of assessment of
themselves. And so depending again, how
forward thinking the CEO is, youmight need to to give them more
(16:31):
frameworks and tools. But oftentimes we just do the
simple quarterly talent review, the 9 box model where you go
through all of the people and you say you know what's their
potential, where they performingtoday.
Right. And how often are you would you
say like leveling up the particular seat and saying, OK,
like we have some internal talent, but where we need to go
(16:51):
to, we need an entirely different level or or capability
of an executive in that seat? I can't think of a single
company in the five years that we have entered and exited with
the same management team fully where you know the top three or
four people are still the same, top three or four people.
So I would say in 100% of our situations we are up leveling
(17:15):
certain roles and I think like many other PE funds, probably
the most common of that is the CFO.
Depending whether it is a secondary or tertiary private
equity buyout. Oftentimes you have CFO's that
have not yet experienced what wewould consider to be a little
bit of a higher performance environment than say a privately
(17:38):
held non private equity backed company where our timelines, our
debt levels, our covenant needs,all of those things around our
capital structure. The M&A that we put on to these
companies you know are are quiteas fast and furious as as
someone like Searchlight would demand.
And so I would say that role gets you know probably up
leveled about half of the time. Another common one is we, we
(18:00):
very often try to put a proper strategic CHRO into the
business. We find there's incredible
leverage for our chief executives when we can put a Chr
next to next to them to try and really take on that kind of
talent planning, workforce planning, recruiting, just
again, performance management inthe business.
(18:21):
So I would say a lot of the searches I've supported lately
across our our teams have been around that CHRO.
Is there a certain size at whichthat becomes important as I'm
thinking about larger companies or clients that we have where I
can see a need for that, But let's say you're sub 50 million,
it may not be the most immediatehire.
Like, is there a stage at which you think it's more applicable?
(18:43):
Start with how many hires we have to make every year for our
growth plan and how much M and Aare we doing.
And so, you know, we, we have a,you know, businesses and
industrial services, which, you know, we're hiring significant
amount of local labour to help in machine repair or warehouse
distribution, You know, and trying to keep that workforce
(19:04):
full is our, you know, our biggest constraint to driving
value in those companies, makingsure that we've got the head
count in those businesses to do so.
So, you know, having someone strategic to think about how do
we do, you know, local hiring and all of these different
markets were in. And then on M&A, you know, as
we're consistently throwing new teams at our, at our company,
(19:26):
oftentimes our, you know, our, our, our Csuite doesn't have the
bandwidth to go and evaluate allof the individuals that, that
we're acquiring. And so having to see HRO kind of
put systematic frameworks in to drive that M and a valuation is
often another trigger for that. So I would say somewhat less
size related more just really how critical is the workforce
(19:51):
specifically, you know, to the value creation plan.
Yeah. I think that's a great point on
integrations. I guess when there's overlapping
roles, integration opportunitiesin different areas of expertise
or creating a centre of expertise for the business, HR
can be a significant value driver on that side.
So yeah, you were going to jump in.
Oh, no, I and I would say that, you know, the oftentimes them
(20:14):
we're thinking about, again, going from from good to great
and trying to trying to make exceptional workplaces.
And you know, we, we don't take that lightly.
It's actually an incredibly important, incredibly important
attribute of what we do. I really believe in the
statistics around the success ofcompanies that can drive human
productivity at a faster rate. And I think there's some studies
(20:37):
out there that show that less than 50% of most workforces are
considered to be actively engaged in their job day today,
which means they, they come to work, they know the jobs that
are required to be doing. They do them with, you know,
their best intentions. They complete as much as they
can. You know, oftentimes it's, it's
no fault of the employee, but often the jobs are overlapping
(21:01):
or there's blockages in the system.
They haven't gotten what they needed from somebody else in the
organization. And so trying to increase the
productivity of, you know, all of our workforces, I just
believe drives, you know, tremendous value across the
business. It can't can't be kind of
overstated. Yeah, totally.
I think that's that's just so important as as you're kind of
investing more on the people side and IT culture is a great
(21:24):
area, but just even executives, it ends up ramping up investment
on the human capital side of thebusiness.
How do you balance that with thefinancial objectives or
covenants or even the targets that you want to have?
Well, listen, you're hitting on one of the important topics now,
which is automation, right? And driving, driving more
productivity with the same amount of resources.
(21:46):
So that's one of the things thatwe're most excited about, you
know, in a, in a fully AI world,is that, you know, we, we, we
can keep the same workforce or again, give those, those folks
in our companies higher level jobs while trying to, to
maintain, you know, the, the productivity and the automation
needs to happen underneath them in order to do so.
And so certainly, you know, that's one thing we're looking
(22:07):
at in all of our companies is how do we help these individuals
to take on larger tasks and and more work, you know, without
trying to continually increase the overall headcount.
You know, we've seen some companies kind of go all the
way, like in Klarna, got rid of a bunch of their support staff
and then kind of rehired them back because they they felt
(22:30):
like, yeah, I wasn't ready first.
They thought it was. And so I guess there's that risk
as well. So when you think about AI and
finding efficiency, especially on the human capital side, where
are you seeing some of the some of the biggest opportunity
areas? You know, finance has been a
really interesting one for us. We've managed to really look at
all of the manual tasks around collections, working capital,
(22:53):
invoicing, you know, all of those very more manual tasks.
And I feel like AI has given us a super boost in trying to take
some of those tasks out of the hands of people that are quite
honestly frustrated with doing them anyway and would rather be
doing different tasks. So I would say, you know, our
earliest quick wins have probably been around those
(23:16):
finance teams. And then secondarily, I would
say not so much headcount savings, but productivity lifts
for sure on sales. And so, you know, whether we're
using tools for call recording, which are predicting, you know,
what word choices are more or less effective, We're able to,
you know, get more sort of bang for the buck out of, of sales
(23:38):
calls and sales motions and marketing efforts, you know, due
to, due to some really interesting kind of AI tools.
Yeah, yeah. And, and beyond AI, when you
think about just efficiency in general and meeting financial
expectations, because all of these transformational things
are happening at the same time, right?
There's a value creation plan, there's changes to the team,
there's integration opportunity,there's a, there's a, I like,
(24:00):
how are you thinking about hitting those financial numbers?
Because that is obviously what'sthe underlying item inside the
investment thesis to to make theinvestment actually worthwhile.
One of my favorite topics because I try to avoid looking
at the financial results as muchas possible.
And what I mean by that sort of tongue in cheek, I'm, you know,
are my colleagues on the, on thepure investing side are, are,
(24:23):
are looking at that, you know, sort of results all the time.
You know, I, I have a almost religious excitement about
operational KPI. And so when you're talking about
efficiency and the leading indicators that are going to
produce those financial results that you'd like to see whether
it's, you know, orders per salesperson, calls per sales person,
(24:48):
different funnel ratios, throughput in our factories, you
know, the KPI's that we need to be watching most aggressively
and most often are those operational ones.
And so, you know, we, we, we have a, a small data team and we
have, I guess there's a lot of outsourced data support for our
companies because we want to make sure that we've got real
(25:11):
time dashboarding around those operational metrics.
So that most importantly the management team, but also our
team can see before it happens that we might have, you know, a
financial result coming out nextmonth that was suboptimal,
whether it be, you know, revenuecost, etcetera.
But you know, it's a journey. You know, some companies we
(25:32):
invest in even struggle to tell us the headcount in the company
overall. You know, they have so many
subsidiaries or whatever it is, just how many active employees
do we have at the company is a really basic example of
something that's going to be driving our, you know, our
margin in these businesses. And you know, sometimes the, the
hiring of individuals is not centrally controlled and so
(25:55):
their local teams are out there hiring and suddenly costs go up
in Cleveland and we're kind of surprised why.
Well, we weren't watching even, you know, headcount hiring.
So again, the some of the companies we buy are in those
positions where just some simpleoperational KPI reporting is a
is a great way to make sure thatwe're helping to control what
the output is, which is really the financial results.
(26:17):
And how important is that as you're looking at, because
bringing a little bit full circle as you're thinking about
the plan in the 1st 100 days along with the team and
organizational transformations, like how closely are you tying
that together through to you? OK.
This is going to be the impact of these initiatives on our
EBITDA over the next few years. And also the process
(26:41):
improvements that we need to make or infrastructure
improvements we need to make even enable that kind of
thinking because maybe the company is not even looking at
the data. Yeah, Yeah.
So I always joke one of one of my love languages is a really
good EBITDA bridge. So you know, starting from
investing Evita to our exit Evita and if you go through, you
(27:03):
know, all of those initiatives, again, we start that as you said
in the first hundred days, what,what, what is our focus getting
through every initiative tied toa financial EBITDA number isn't
critically important to us. And so if, if you were to see,
and we do this in every control investment, if you were to see
our investment thesis and what we start to build in, in, in the
(27:24):
1st 100 days, you can see international expansion is going
to provide us 8 million of Evita.
You know, moving that manufacturing centre from here
to offshore is going to produce 4 million in Nevada.
And so as we were talking about how many priorities are on the
page, part of the reason that wecan more easily prioritize them
(27:44):
is because we can see the actualreal EBITDA impact.
And at the end of that Evita bridge is always an offsetting,
you know, negative EBITDA driver, which is all the
operational costs that we need to put into the business.
So you know, a series of positives brought down by a
series of let's call it it investments or people
(28:05):
investments, infrastructure investments, whatever they are.
But when we do our hundred day planning, we try to plan all of
that through with management teams.
So we're critically clear how weget from starting EBITDA to exit
EBITDA and you know all the steps and the waterfall from
here to there. What type of time horizon do you
look at for that type of a plan because some some investments
(28:27):
take time to realize, right? And one of the things that I've
seen inside companies is especially that are being
acquired or have just been acquired, there's a lack of
patience because you need to getthe outcomes as quickly as
possible. And some initiatives take more
time than that. So how are you looking at those
initiatives and making sure like, OK, we make an investment
today, maybe it requires a key hire, that person needs three
(28:49):
months to on board and then there's time to impact like for
ramp up and all of that. So how do you look at that?
Overall, in the majority of our investments, I have, you know,
patients only to a three-year horizon.
And so we will, we will try to drive a three-year sort of view.
Of course, you know, five years,the standard sort of, you know,
private equity. But if, if you're three years in
(29:09):
and you haven't gotten yourself well on the way towards a 2X,
you know, it's, it's, it's gonnatake a, a Herculean J curve at
the end. So we, we, we usually do three
years. I will say we also replan the
plan every year. So it's, we have a strategic
planning process where we, you know, revisit that.
You know the exception is and that's what makes I think
(29:30):
Searchlight sort of unique and interesting is we do have a DNA
towards the longer term sort of telecommunications and
infrastructure type investments as well.
And so some of our most successful investments have
been, you know, sort of longer term, you know, rolling out
(29:50):
fiber, for example, to rural locations.
And obviously that's not something you can drive any
faster than than humans can produce that.
And so those have had a longer and more steady return profile
where you really see the fruits of your labour in years kind of
four and five, but that would bekind of slightly more of the
majority. But certainly where our, our
(30:11):
core DNA came from was a lot of our, our telecoms and, and, and
some of the more infrastructure methods.
How are you tying accountabilitythat of course three years, I
agree it's a completely a fair amount of time, but there needs
to be accountability account along the way where there's
leading indicators that you're looking at and key people are in
charge of specific areas of the business.
So how are you tying that together?
(30:32):
Big believer in annual performance reviews for
individuals. So, you know, we, we subscribe
to the OKR approach, you know, where everyone has those key
jobs and they're the indicators of what they're supposed to
achieve. And then again, you know, the
role of a CEO or CHRO really driving end of the year annual
review processes. It's, you know, it's like any,
(30:53):
any good business, if you, you want to measure it, then you can
actually manage it. And so trying to to link people
to outcomes and those key resultindicators are something that we
try to instill in all of our companies.
Yeah, that's that's great. What, what?
What do you? How?
Quickly, are you to let's say. You've identified certain
(31:13):
initiatives in your value creation plan, and let's say one
of them is not working, or at least doesn't seem to be working
6 months in, which is totally normal.
How quick are you to pull the plug on some of those types of
initiatives? Well, I think it's it's the
question between who and the what is the initiative, the
wrong initiative? Or is the, you know, the team
behind it, you know, struggling.And listen, our markets move.
(31:36):
I mean, this is this is a world of incredible volatility and our
competitors move fast, you know,so sometimes best laid plans to
to try a new product or a new feature or, you know, something
that's a little bit out-of-the-box.
Well, maybe a competitor beat usto it, you know, that's also
very real. So in situations like that,
that's, you know, more than whatis the problem and maybe we do
need to pull back on that initiative.
(31:57):
But I can give you know, both simple examples of times where
we the initiative was still the best laid plan, but the team
really, you know, oftentimes didn't know how to get their
hands fully around it. And sometimes that's capability
and sometimes that's, you know how much resource we talked
about already. So I would say we are, we are
(32:18):
patient, but we are fairly quickto to to swap out again, you
know different teams or situations where we think the
initiative is absolutely the right one for the value creation
plan, but potentially the the team that we have behind it.
Hmm. Yeah, that's great.
Now, as we're coming up on time here, there are tons of PE firms
(32:39):
that look at value creation but don't have the kind of team that
you have over at Searchlight. Any advice for firms like that
that are thinking about buildingtheir own internal practice?
I would say start small. I mean, our head count on the
books at Searchlight is is five of us.
You know, we're we're a small, Iguess, but but mighty
organization against over, you know, 100 employees at
(33:02):
Searchlight. So I think it's again, it's a
it's a great way to sort of cometowards the end because it's
where I started. It really becomes about a
capability. And so if you're gonna if you're
going to hire value creation it it absolutely needs to have a
seat at the table. It needs to be an experienced
team that's, you know, very usedto private equity.
(33:23):
Quite honestly, this isn't something that, you know,
consulting teaches you all the skills for.
It takes a while to, to think like an investor.
And so I think it's about again,trying to make sure you, you,
you hire the right folks into your team that are going to have
a voice at the table that the firm genuinely believes are
going to drive investment returns.
But I think it's, it's about the, the right folks rather than
(33:46):
an army. I don't, I, I don't think the,
the approach of large value creation teams which works for
some funds is really the way forthe majority of the funds.
I think for the large majority of PE funds you can be
incredibly effective with say 3 to 5 individuals and then a
whole web of, you know, suppliers and advisors and
(34:09):
outsourced partnerships. Yeah, talk about that a little
bit more is because we've seen that as well where you have
Insight and Vista and some of these firms that have large
value creation teams. But most of our partners have
maybe one or two OPS operating partners inside.
But even then they don't have they haven't figured out the
system to build a value creationteam.
(34:29):
So talk about how your team is structured and how kind of you
work with the portfolio companies to give them as much
value as possible and how are you how you're leveraging
outside resources to find scale.Yeah, I would say the main role
of everyone on my team with the exception of 1.
So there's, there's four of us that I would consider all to be
architects or or quarterbacks, however you want to think of us.
(34:52):
But we are very much, you know, alongside of the chief executive
driving, building, scaffolding, the entire value creation plan
in the beginning. And that works for us because we
do about four control deals a year.
And so if you think about four control deals on both sides of
the Atlantic, so that's two and two or maybe 3 and one in a
(35:14):
given year and there's four of us, we can really give very
dedicated attention to those newdeals.
And so I think that that ratio of sort of one to two new deals
a year per experienced executiveand value creation is, is the
right one. And you know, spending a
significant amount of our time trying to get those plans built
(35:37):
and then monitoring them in the first year is, is the way we we
mostly spend our time. Now, the way we keep that small
as well is that we all have our spikes.
And so each of us comes from a slightly different background.
Obviously coming from HG, I havemore of the the growth sales
marketing mindset. So I know how to do more of the,
the high growth. My colleague in in London comes
(35:59):
more from the turn around side. And so his background is very
much about trying to deal with cost optimization.
And so we could lean on each other.
Well, and then, you know, we have folks with more role in
procurement or in areas like finance.
And so we all sort of keep our different spikes going, but we
can all play the generalist withthe exception of one.
(36:20):
As I said earlier, data is trulya must have in any value
creation data and technology, having an in house person that
can take management teams on thejourney.
So there's no friction. You don't have to say, oh, go
talk to our friends at this partner, that partner.
No, this person is free. They're Searchlight ready,
they're on the plane, they're probably there in diligence
(36:41):
helping to to create a vision around what data can do for
these companies. And that individual on on our
team and some of the contractorsthat support him are truly
specialist and kind of world class that enterprise data
reporting and increasingly AI. Yeah, yeah, that's that's
fantastic advice. And I think actually even a lot
of PE firms that are thinking about this should be thinking
(37:04):
about their value creation teamsin this way.
So appreciate you sharing that, Amanda, as as we wrap it, as
we're wrapping up, like what is,what is the best way people that
are listening get a hold of you and learn more about
Searchlight. Yeah, I think Linkedin's always
the best. I'm an avid user, start my day
kind of every morning looking ata new connections and what's
happening on LinkedIn. So I think I'm pretty easy to
(37:25):
find there. So anyone that wants to reach
out, very happy to. And again, as I said in the
beginning, I've spent 25 years thinking how value creation
through multiple downturns and you know, recessions and then up
ticks in the market. So it's certainly something that
that I enjoy having conversations with and never
stop learning some other folks in the in the field.
(37:47):
So appreciate listening to your podcast and getting to know
other people's thoughts. So always, always excited to
share ideas. Awesome.
And with that, Amanda, thanks for coming on and sharing your
wisdom. Really grateful because there's
a lot of PE firms that I know that are trying to figure out
this area and don't have a fullybuilt out value creation team.
And I think you shed a lot of light into how you're able to
add value at Searchlight and howthey can do the same.
(38:09):
So appreciate you doing this. Great.
Thanks. Thanks for listening to today's
episode. Before you take off, just a few
requests from our side #1 if youhaven't done so already, please
subscribe to the podcast on iTunes or Spotify or YouTube or
wherever you go to listen to your podcast #2 if you are in
the market for due diligence services, strategy consulting,
(38:33):
or fractional CMO services, please get in touch with us at
www.hassas.com. And 3rd, please buy a copy of my
new book, Exit Ready Marketing. It covers a ton of concepts that
we take our customers through private equity investors, B
company, CEOs, operating partners and marketers and
there's a ton of great value in there.
(38:53):
That expands on my previous bookpost acquisition marketing as
well. So with that said, I hope you
enjoyed today's content and we'll see you on the next
episode.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!