Turnaround at PE Portfolio Company

Financial statements are the ultimate scorecard for all businesses.  You cannot argue with the objective and very tangible dollars and cents that are meticulously counted through financial systems.  Delivering the bottom line, however, can be an exercise that is much more intangible—and one that often is hampered by a lack of good information about the intangible aspects of the business.  That’s what was happening with this firm.

The company, which is owned by a private equity (PE) firm, is in the telecommunications industry.  It was underperforming its original projections for both growth and profitability.  But it was hard to figure out what was going on.  The PE firm commissioned an IC Rating™ to get a better handle on the company’s prospects.  The rating showed that the company had underestimated cultural differences across different groups, had unused potential in its existing customer base, and was not delivering on several business critical processes.

The bottom line—in order to influence tangible profits, you often have to look at intangible business issues.  Since most companies don’t regularly assess culture, relationships, and processes, these issues don’t get the degree of attention that they should. But this is the kind of issue that has the power to derail success of any plan, however well considered.  In this case, IC Rating gave the management and PE firm a clear view of the issues that were holding back performance.  They immediately set up a focused 100-day plan to solve these issues by improving internal communications, cross-selling to existing customers and addressing process weaknesses—and bringing the lagging performer back on track again.

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