Private equity investments can have a big impact on the company being acquired. On the one hand, the injection of expertise and resources into a business can lead to massive improvements in operational efficiency. On the other, a private equity firm’s short-term goals don’t always align with what’s good for a business in the long run—not to mention what’s good for its clients.
When a vendor you work with is acquired in a private equity deal, you need to keep a close eye on service to make sure any changes maintain or improve your relationship and that their exit strategy won’t harm your business.
The Benefits of Private Equity Investments for Vendors
Private equity firms make large investments in a business because they believe they can make improvements that will allow them to exit profitably within a relatively short period of time—usually around three to five years. For most deals, their bet is that the resources they provide will lead to operational improvements that increase value.
If your vendor is acquired, there are several potential benefits for your relationship:
- Additional management resources – Changes to the management team, or even its approach, can make an acquired business more nimble and responsive.
- New infusion of investment – Acquisitions involve a substantial financial investment, leading to an increase in resources available for infrastructures like equipment, staffing, and more.
- New synergies and efficiencies that lower your cost – Private equity firms’ bread and butter is improving operational efficiencies, and you’ll often see streamlined processes and a more analytical approach going forward.
How a Private Equity Deal Can Hurt Your Service
While a private equity deal should result in a healthier business, it’s important to understand that a firm’s goal of exiting with a return on their investment means they’re often simply trying to look good on paper.
Changes made to pump up valuation in the short term can lead to corners being cut that impact quality of service and ultimately harm your reputation. Here are some things to watch out for:
- Exit windows – Private equity firms make their investment planning to exit, leading to more turmoil in the near future, especially if they hand off ownership to yet another private equity firm.
- Pressure to increase profits while cutting costs – Planning around an exit window, a private equity firm’s goals can have nothing to do with quality or consistency of service.
- Marketplace consequences – Private equity investments can often lead to major shifts in the marketplace, if a vendor ends up merging with a competitor, for example. You can get caught short if you don’t have knowledge of the space.
Make sure you have the option to opt-out of your agreement if service goes poorly so you don’t find yourself locked in a contract with a vendor who is constantly undergoing changes and shifting priorities.
How a Management Company Can Protect You
A vendor management company can give you a layer of protection from changes to vendors that might impact your service and, ultimately, harm your reputation. With proactive oversight from someone who understands both the equipment and the vendor landscape, you can get out in front of any problems that may arise.
Service level can be difficult to monitor, especially if a vendor is making changes throughout their organization. Processes are often impacted, and suddenly you have an equipment issue that lingers for months because your vendor made changes to their support system without telling you.
Equips gives you a buffer to make sure that everything remains consistent for your business, while proactively monitoring service and support from vendors to keep them accountable. Our software tools help you keep track of how your equipment is performing, how service calls are going, and much more. We keep an eye on indicators that corners are being cut or things are falling through the cracks before they become an issue.
Getting into a contract with a vendor who has been acquired is risky. You don’t know how their short-term priorities will impact your business and, more importantly, you don’t know what will happen once ownership changes again after the private equity firm exits. Working with Equips keeps the focus on service quality and maximizes flexibility for your business, with the expert knowledge to solve problems before they impact your reputation.
Equips is revolutionizing how Banks and Credit Unions manage, maintain, and protect critical branch equipment. Leveraging a network of 500+ vendors, experts at Equips help Financial Institutions respond to equipment problems quickly in one place: Equips.com. Active management allows Financial Institutions of all sizes to improve operational efficiency, cut costs, and streamline equipment inventory and vendor management. Our groundbreaking solution provides clients across 45 states with better insight and transparency into their critical equipment and enables employees to do their best work. To learn more visit equips.com.