PE Procurement Archives

Nov 28

Enhancing Value Creation through Strategic Procurement

By michael Private Equity No Comments

Executive Summary

For private equity entities, the amplification of EBITDA is not merely a financial target—it’s a strategic imperative that commands a premium in the capital markets and enhances enterprise value.

Procurement, often an overlooked lever, presents a substantial opportunity for operational improvements that directly contribute to the EBITDA margin.

Spend Analysis: The Bedrock of Procurement Intelligence

An exhaustive analysis of procurement spend underpins the strategic blueprint for cost rationalization and value generation.

This analytical exercise furnishes an X-ray view into spending patterns, enabling the identification of inefficiencies and non-strategic expenditures, thereby setting the stage for a disciplined procurement strategy.

Optimization: Engineering a High-Performance Procurement Function

The reengineering of procurement processes is essential to achieving operational excellence.

Employing sophisticated digital solutions like SAP Ariba™, private equity firms can automate and optimize their procurement workflows, enhance supplier selection, and ensure policy compliance—fundamental to driving EBITDA improvement.

Strategic Sourcing: Capturing Value across the Investment Portfolio

Granular visibility into procurement data unlocks the potential for strategic sourcing initiatives that consolidate spend and harness the collective bargaining power of the portfolio.

This strategic consolidation is instrumental in driving down costs and standardizing quality, yielding significant savings.

Contract Management: Fortifying Against Risk

In the volatile landscape of private equity, mitigating risk is of paramount importance.

Advanced contract management systems act as a bulwark against contractual non-compliance and supplier risk, safeguarding the firm’s interests and reinforcing the foundation for a resilient EBITDA.

Supplier Stewardship: Curating a High-Caliber Vendor Ecosystem

Effective supplier management transcends transactional interactions, focusing on cultivating strategic partnerships that deliver both qualitative and quantitative benefits.

Utilizing sophisticated supplier management tools, firms can elevate supplier performance, ensuring alignment with the firm’s strategic objectives.

Cost Savings Realization: The EBITDA Multiplier

In procurement transformation, the realization of cost savings is a critical outcome.

Leveraging the robust analytics of SAP Ariba™ enables firms to quantify and communicate these savings, reinforcing procurement’s role as an EBITDA multiplier to internal and external stakeholders.

Procurement Managed Services: Augmenting Capabilities

For private equity firms that may lack specialized procurement infrastructure, engaging with expert procurement managed services like PREMIKATI offers a strategic advantage.

These outsourced capabilities enable firms to navigate procurement complexities efficiently, ensuring that they realize the intended value creation.

Value Creation: Procurement’s Broader Economic Impact

Procurement’s potential extends beyond mere cost containment to encompass broader economic value creation, such as driving innovation, promoting sustainability, and enhancing product and service quality—factors that contribute to a superior competitive position in the market.

SAP Ariba™: Enabling a Digital Procurement Transformation

SAP Ariba™ represents a technological vanguard in procurement innovation. Its integrated suite empowers PE firms with seamless, end-to-end procurement operations, delivering actionable insights that inform strategic decision-making and operational agility.

The PREMIKATI Proposition

With a storied legacy of Fortune 50 procurement expertise and a proven track record in deploying SAP Ariba™ solutions, PREMIKATI is strategically equipped to guide PE firms through the intricacies of procurement transformation, driving both savings and sustainable growth.

Conclusion: Procurement as a Catalyst for EBITDA Expansion

In the quest for EBITDA expansion, procurement stands out as a catalyst for change within private equity firms.

The strategic integration of SAP Ariba’s technology with PREMIKATI’s consulting acumen positions PE firms to rapidly realize a return on investment, setting a new benchmark in operational excellence and strategic procurement.

Oct 12

Spend Analytics At The Private Equity Level Are Critical To Future Success

By Parker Sproul Private Equity No Comments

Keeping spend analysis at the portfolio company level results in data silos, missed savings opportunities, decreased negotiating power, increased compliance risks, and a negatively impacted valuation and EBITDA figures at the private equity level. Choosing a PE-level marketplace can eliminate these issues as well as provide long-term strategic perks that come with intelligent spend.

Spend analytics at the private equity level are critical to continued success. Running a business without data is a real shot in the dark—financial data being among the riskiest options to neglect. Data collection and analysis continue to reign supreme as a major business initiative in nearly all industries and sectors across the globe. Data silos are being eroded. Data is not only being shared between departments, but between brands, sometimes as a primary form of partnership. Continuing with business in the ‘20s without a comprehensive data analysis strategy nearly guarantees that your companies will soon be out of the game, replaced by spry, agile companies who blend numbers and instinct into something that grows like wildfire.

Choosing the strategy that best suits your business structure is an important step toward spend visibility. In this article, we will discuss spend analysis at the private equity and portfolio company levels.

Current State of Spend Analytics Across Portcos

Current processes for spend analysis across portcos today are likely to look like this:

Right, nothing. There’s no process. Portco spend analysis is usually siloed within the portfolio companies themselves, with no analysis of note at the private equity level. If anything exists at all, it’s probably being done manually via XLS—a wildly inefficient method with poor results compared to its alternatives. To swing the other direction, there may be no spend analysis going on whatsoever at either the portco or PE level, a high risk in 2020.

Problems With Keeping Spend Analysis at the Portfolio Company Level

If spend analysis is only happening at the portco level, then, by nature, there is no PE-wide spend visibility that reaches across portcos. As with siloed approaches in other operational aspects of business, there are costs that come with that level of “convenience.”

Without PE-wide spend visibility, there is also a loss of leverage—leverage which turns immediately into savings—during negotiations and multiple vendor communications.

This results in a loss of 3-5% of spend analyzed.

Benefits Of Analyzing Spend at The Private Equity Level

At its foundation, analyzing spend at the PE level offers a clearer picture into what is being purchased and from whom. With this information opens the opportunity to rationalize vendors and standardize, identify savings potential, and spot new sourcing opportunities.

At a deeper level, developing a spend analysis strategy that looks at all portcos can have a notable benefit on valuation and EBITDA figures, even within months of implementation. Having real-time spend analysis also offers clear visibility into rogue spend so that compliance issues can be tamped out swiftly before major damage is incurred. PE-level spend analysis also lays a solid framework for category management initiatives which are increasing in importance in the PE environment. Spend analysis underpins successful, optimized procurement strategies of all varieties.

How The Private Marketplace Model Enhances PE-Level Spend Analysis

Rather than organizations adopting purchasing software one at a time in a siloed manner that negates savings opportunities, a private marketplace can improve PE spend analysis opportunities. A PE Owned Marketplace, underpinned by SAP Ariba, is a solution that allows for centralized control with portco-level authority, simple methods to turn on/off portcos as they are acquired or sold, and PE-level-led purchasing that allows for maximization of savings. With immediate spend visibility and additional savings opportunities, businesses can expect to achieve rapid savings for near-instantaneous ROI plus long-term strategic perks.

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