NetSuite Gives Private Equity Healthier Margins, Less Waste and a Clear Exit Strategy
NetSuite Gives Private Equity Healthier Margins, Less Waste and a Clear Exit Strategy
When PE companies and their portfolio companies adopt NetSuite, both entities benefit from higher profit margins, less waste and a pathway to a successful exit strategy.
Private Equity (PE) investors and their portfolio companies (portcos) both need robust, centralized technology platforms to run their businesses on. The PE firms themselves have to be able to efficiently and effectively manage their various investment interests, and portcos need enterprise software that provides accurate financial reporting that supports continued growth and scale.
Historically, PE firms and the companies they invest in have relied on some combination of legacy systems like Sage, basic solutions like QuickBooks and Excel spreadsheets to run their operations. Without a centralized database to work from, these organizations must resort to sharing data via spreadsheets and email—all with the hopes of gaining a 360-degree view of either the PE company’s or portco’s operations.
These basic approaches can quickly become liabilities as a PE firm grows its portfolio and as its portcos take on new customers, move into new geographies and add new lines of business. “Basic solutions like QuickBooks and legacy systems like Sage can’t handle complex accounting processes like consolidations and eliminations,” says James Neal, Principal and NetSuite Practice Lead at BDO Digital, a NetSuite Solution Provider and SuiteCloud Developer Network (SDN) Provider.
“Portcos may also encounter issues when attempting to track and identify inventory statuses; manage intercompany transfers; and adhere to statutory reporting and global accounting requirements,” Neal continues. From a PE firm’s perspective, tracking pass-through costs and intercompany transactions is another requirement that can’t be handled properly using spreadsheets.
“The PE firm or ‘mothership’ must keep track of all the profit and loss associated with individual portcos and then report all of that back to their fund holders,” says Michael Lee, Principal and National Leader of PE and M&A at BDO Digital. “Doing that accurately both from a tracking and reporting perspective is critical, and it’s a major pain point for firms that are using gigantic, complicated spreadsheets or even multiple different legacy Enterprise Resource Planning (ERP) solutions across all of their different portcos.”
Financial Health Matters
When they replace their legacy systems and spreadsheets with NetSuite, PE firms and their portcos begin to see the benefits pretty quickly. “The biggest win is low to no maintenance,” says Neal. There is also the fact that neither the PE firm nor the portco needs a full-time IT staff to manage this aspect of their technology infrastructures anymore, and because BDO Digital provides full support even after the ERP implementation wraps up, PE firms can rest assure that they’re fully optimizing their NetSuite investments over time.
With NetSuite in place, PE firms and portcos can also handle more sophisticated accounting processes—intercompany, pass-through, etc.—that QuickBooks can’t manage. Specific to the PE firm itself, NetSuite users can readily view the financial health of every portco that’s also using the ERP. This all happens in real-time, and long before any quarterly reports are generated and shared.
From NetSuite, PE companies also get a proactive view of how their portcos are performing. And when they know the financial health of each of those entities, PE firms can respond accordingly when necessary. “This is a critical win because at the end of the day, if you don’t understand how a portco is doing from a cash flow perspective, you can get into trouble pretty quickly,” said Lee.
NetSuite and BDO also give PE firms something that they strive for from the day they invest in a portco: a viable exit strategy. When PE firms can show that they’ve eliminated technical debt, created efficiencies and replaced aging systems with a cloud ERP, they can easily show potential suitors and new buyers all the capabilities that have been put in place. “This effectively ‘de-risks’ the buyer from the visibility perspective,” says Lee.
Tackling All Aspects of the Private Equity Journey
Having worked with many different PE firms and portcos, BDO Digital and parent company BDO understand the PE ecosystem and the role that NetSuite can play in helping to increase accountability across the entire ecosystem. “We work with dozens of PE companies, both at the fund level and the portco level,” says Lee. “We help them tackle all aspects of the private equity journey, from due diligence and integration management to software implementation and exit readiness.”
As a NetSuite Solution Provider Partner, BDO Digital also provides the design, implementation and managed services that its customers need to be able to fully optimize their ERP investments. With BDO Digital in their corner, organizations also get a broad range of integration expertise focused on connecting any necessary third-party applications directly into NetSuite.
With internal experts in industries like manufacturing, supply chain management, life sciences, health care, financial services and technology, together BDO and BDO Digital understand the technology, tactical and business challenges that today’s companies are facing and help them solve those problems quickly and efficiently. As part of that process, the NetSuite Partner also provides the change management support required to advance those goals. “Beyond technology, we understand the complexities of the people and process elements that have to be addressed from the organizational perspective in terms of change management,” says Lee.
Equipped with a team of global resources located in the United States, Canada, Europe and Asia-Pacific, BDO Digital is a full-breadth supplier that can get most companies up and running on NetSuite within about 3-4 months. The company’s differentiator lies in its approvals module, which is a standard implementation approach based on past, successful projects. This effectively “de-risks” the ERP implementation process.
“Recently, we did an implementation for a public multinational pharmaceutical firm, and we did that in two months,” says Neal. “You just don't get that kind of speed without a few templates and ‘easy buttons,’ so to speak.”
NetSuite and BDO Digital Deliver
As a leading cloud ERP platform, NetSuite delivers on its promises. This is an important point for organizations of all types, particularly for those that may have encountered challenges with past ERP implementations. “Our customers are consistently surprised by NetSuite’s capabilities and how the ERP delivers at a very high level,” says Neal. “Companies have come to expect to be sold a ‘bill of goods’ with ERP and quite frankly, with NetSuite they're finding that the solution does deliver on what's being sold.”
This is an important win in a marketplace where investors have become increasingly discerning over the past few years. “To get their attention, companies must be able to demonstrate value that extends well beyond the typical,” says Lee. “Instead of waiting to fix some of the challenges that you've faced in terms of financial reporting and continuing to manage your business using spreadsheets, get the technical debt taken care of so you can show the buyers where you are and the maturity that you have as an organization using NetSuite.”
Lee’s advice also applies to the PE firms themselves, many of which continue to trudge along using their aging solutions, basic accounting systems and spreadsheets. These companies have to be able to select viable targets, add value for those companies over time and then profitably exit. PE firms also want to keep headcount down—something that’s nearly impossible when the company and its portcos rely heavily on manual systems.
“For most PE companies right now, it's either put in a system like NetSuite or increase headcount. The bottom line is that adding 10-20 more spreadsheets to the pile is not a scalable option for any company that’s trying to operate in a lean, mean manner,” says Neal, who sees the current economic uncertainty as yet another reason for PE companies to make the move to NetSuite now rather than later. “We’re in an era where no one wants to get stuck with a large, unmanageable headcount.”
By implementing NetSuite and working with an experienced, knowledgeable partner like BDO Digital, PE firms and their portcos can both avoid these challenges, simplify their operations, improve their financial reporting and get excellent visibility over their operations. This, in turn, leads to better decision-making and the ability to turn on a dime when the market calls for it.
Private Equity (PE) investors and their portfolio companies (portcos) both need robust, centralized technology platforms to run their businesses on. The PE firms themselves have to be able to efficiently and effectively manage their various investment interests, and portcos need enterprise software that provides accurate financial reporting that supports continued growth and scale.
Historically, PE firms and the companies they invest in have relied on some combination of legacy systems like Sage, basic solutions like QuickBooks and Excel spreadsheets to run their operations. Without a centralized database to work from, these organizations must resort to sharing data via spreadsheets and email—all with the hopes of gaining a 360-degree view of either the PE company’s or portco’s operations.
These basic approaches can quickly become liabilities as a PE firm grows its portfolio and as its portcos take on new customers, move into new geographies and add new lines of business. “Basic solutions like QuickBooks and legacy systems like Sage can’t handle complex accounting processes like consolidations and eliminations,” says James Neal, Principal and NetSuite Practice Lead at BDO Digital, a NetSuite Solution Provider and SuiteCloud Developer Network (SDN) Provider.
“Portcos may also encounter issues when attempting to track and identify inventory statuses; manage intercompany transfers; and adhere to statutory reporting and global accounting requirements,” Neal continues. From a PE firm’s perspective, tracking pass-through costs and intercompany transactions is another requirement that can’t be handled properly using spreadsheets.
“The PE firm or ‘mothership’ must keep track of all the profit and loss associated with individual portcos and then report all of that back to their fund holders,” says Michael Lee, Principal and National Leader of PE and M&A at BDO Digital. “Doing that accurately both from a tracking and reporting perspective is critical, and it’s a major pain point for firms that are using gigantic, complicated spreadsheets or even multiple different legacy Enterprise Resource Planning (ERP) solutions across all of their different portcos.”
Financial Health Matters
When they replace their legacy systems and spreadsheets with NetSuite, PE firms and their portcos begin to see the benefits pretty quickly. “The biggest win is low to no maintenance,” says Neal. There is also the fact that neither the PE firm nor the portco needs a full-time IT staff to manage this aspect of their technology infrastructures anymore, and because BDO Digital provides full support even after the ERP implementation wraps up, PE firms can rest assure that they’re fully optimizing their NetSuite investments over time.
With NetSuite in place, PE firms and portcos can also handle more sophisticated accounting processes—intercompany, pass-through, etc.—that QuickBooks can’t manage. Specific to the PE firm itself, NetSuite users can readily view the financial health of every portco that’s also using the ERP. This all happens in real-time, and long before any quarterly reports are generated and shared.
From NetSuite, PE companies also get a proactive view of how their portcos are performing. And when they know the financial health of each of those entities, PE firms can respond accordingly when necessary. “This is a critical win because at the end of the day, if you don’t understand how a portco is doing from a cash flow perspective, you can get into trouble pretty quickly,” said Lee.
NetSuite and BDO also give PE firms something that they strive for from the day they invest in a portco: a viable exit strategy. When PE firms can show that they’ve eliminated technical debt, created efficiencies and replaced aging systems with a cloud ERP, they can easily show potential suitors and new buyers all the capabilities that have been put in place. “This effectively ‘de-risks’ the buyer from the visibility perspective,” says Lee.
Tackling All Aspects of the Private Equity Journey
Having worked with many different PE firms and portcos, BDO Digital and parent company BDO understand the PE ecosystem and the role that NetSuite can play in helping to increase accountability across the entire ecosystem. “We work with dozens of PE companies, both at the fund level and the portco level,” says Lee. “We help them tackle all aspects of the private equity journey, from due diligence and integration management to software implementation and exit readiness.”
As a NetSuite Solution Provider Partner, BDO Digital also provides the design, implementation and managed services that its customers need to be able to fully optimize their ERP investments. With BDO Digital in their corner, organizations also get a broad range of integration expertise focused on connecting any necessary third-party applications directly into NetSuite.
With internal experts in industries like manufacturing, supply chain management, life sciences, health care, financial services and technology, together BDO and BDO Digital understand the technology, tactical and business challenges that today’s companies are facing and help them solve those problems quickly and efficiently. As part of that process, the NetSuite Partner also provides the change management support required to advance those goals. “Beyond technology, we understand the complexities of the people and process elements that have to be addressed from the organizational perspective in terms of change management,” says Lee.
Equipped with a team of global resources located in the United States, Canada, Europe and Asia-Pacific, BDO Digital is a full-breadth supplier that can get most companies up and running on NetSuite within about 3-4 months. The company’s differentiator lies in its approvals module, which is a standard implementation approach based on past, successful projects. This effectively “de-risks” the ERP implementation process.
“Recently, we did an implementation for a public multinational pharmaceutical firm, and we did that in two months,” says Neal. “You just don't get that kind of speed without a few templates and ‘easy buttons,’ so to speak.”
NetSuite and BDO Digital Deliver
As a leading cloud ERP platform, NetSuite delivers on its promises. This is an important point for organizations of all types, particularly for those that may have encountered challenges with past ERP implementations. “Our customers are consistently surprised by NetSuite’s capabilities and how the ERP delivers at a very high level,” says Neal. “Companies have come to expect to be sold a ‘bill of goods’ with ERP and quite frankly, with NetSuite they're finding that the solution does deliver on what's being sold.”
This is an important win in a marketplace where investors have become increasingly discerning over the past few years. “To get their attention, companies must be able to demonstrate value that extends well beyond the typical,” says Lee. “Instead of waiting to fix some of the challenges that you've faced in terms of financial reporting and continuing to manage your business using spreadsheets, get the technical debt taken care of so you can show the buyers where you are and the maturity that you have as an organization using NetSuite.”
Lee’s advice also applies to the PE firms themselves, many of which continue to trudge along using their aging solutions, basic accounting systems and spreadsheets. These companies have to be able to select viable targets, add value for those companies over time and then profitably exit. PE firms also want to keep headcount down—something that’s nearly impossible when the company and its portcos rely heavily on manual systems.
“For most PE companies right now, it's either put in a system like NetSuite or increase headcount. The bottom line is that adding 10-20 more spreadsheets to the pile is not a scalable option for any company that’s trying to operate in a lean, mean manner,” says Neal, who sees the current economic uncertainty as yet another reason for PE companies to make the move to NetSuite now rather than later. “We’re in an era where no one wants to get stuck with a large, unmanageable headcount.”
By implementing NetSuite and working with an experienced, knowledgeable partner like BDO Digital, PE firms and their portcos can both avoid these challenges, simplify their operations, improve their financial reporting and get excellent visibility over their operations. This, in turn, leads to better decision-making and the ability to turn on a dime when the market calls for it.
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