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Private Equity Acquisition — The New Finance-Centric Company
In the past, we may have thought of the company as being one or more of the following: customer-centric, product-centric, or process-centric. Now that we’ve been acquired by a PE firm, we need to think of the new company as being finance-centric.
With the private equity acquisition comes a new context. They have invested millions to billions with an internal plan to hold the company for about 3–5 years and drive annual growth at around 20–30%. To achieve their aggressive goals, we can expect a strong emphasis on increasing profits through growing revenue and cutting costs.
In the old company we had profit centers and cost centers. A profit center is aligned with products and revenue. It should be straightforward transition into the new company. But what about our cost centers?
We had assigned a seemingly broad scope of effort to cost centers and accepted this as necessary overhead to run the company. It was a little loose but provided some flexibility. Every year we’d assess the magnitude of this effort and allocate tighter budgets or cost-cutting challenges to tighten scope and reduce overhead.
All that said, welcome to the new finance-centric company. Overhead costs are a drain on profit and are constant targets for reduction. It’s a brave new world where there…
