Protecting Portfolio Companies Against Black Swan Events

After this year, having 20/20 hindsight will mean something new. Rather than referring to the perfect vision everyone has in assessing the past, it will be used to comment on what we learned from living through the COVID-19 pandemic. So here is some 20/20 hindsight: Do not wait until a crisis to invest in technology for your portfolio companies.

Market volatility and economic uncertainty had a profound impact on dealmaking for most of 2020, leaving many private equity firms focused on creating value from their existing portfolio. Fortunately, strengthening the competitive position of portfolio companies during a recession can result in big gains. However, strengthening a competitive position is difficult when outdated technology platforms stand in the way of change.

Early in 2020, many organizations struggled to make the shift to a virtual workforce and maintain even the most basic operations. The inability to respond to the pandemic swiftly stemmed from rigid, disconnected systems ingrained with manual processes and workflows. On the other hand, companies already invested in modern cloud solutions with mobile access, scalability, integrated data and artificial intelligence were able to maintain business continuity while easily moving to the work-from-home business model.

A Real-Life 2020 Success Scenario

A supermarket goods distribution company pivoted successfully to supplying stores with critical products such as hand sanitizer, face masks and other high-demand items. This change required the company to find sources for new products and reengineer their distribution channel, all while shifting to a remote workforce.

While this change was taking place, operations and finance executives had to be mindful that, at some point, they would go back to distribution of their normal product lines, and they needed to plan accordingly. For example, financial data from 2019, based on the company’s standard business model, would look very different from financial data for 2020. But a likely return to standards in 2021 would require them to take both models into consideration.

Successfully undertaking and accounting for these business model changes without disrupting revenues was only possible with flexible, agile technology in place. The technology gave executives the ability to collaborate remotely using connected, real-time assessments of financial performance, as well as access to historical pre-pandemic data. Without the right technology already in place, this distribution company would not have been able to meet new market demands.

Protect Portfolios with Strong Technology Investment

Investing in the right systems and technology is one of the most overlooked strategies for private equity firms to protect their investment in portfolio companies. With 20/20 hindsight, it’s easy to see that modern, cloud-based technology not only better prepares organizations to weather future black swan events, it also positions them for innovation and progress. To learn five ways Velosio delivers for your portfolio companies, visit www.velosio.com/private-equity. Download a free e-book on making faster, smarter decisions through technology. And, when up against a crisis, it can mean the difference between new opportunities and lost profits.