The middle-market private equity firm BV Investment Partners felt the finance teams at their portfolio companies were slow to scale and report data reliably. We spoke with Justin Kustka of the firm about what happened when they turned to Consero Global for help.
Industry observers like to stress that private equity firms can focus on long-term value creation at their portfolio companies, instead of facing the quarterly pressures that publicly-listed companies do. However, time is still of the essence. Their investment thesis often requires a radical transformation of the Company, or at least a radical uptick in growth and performance, all within the five to seven years that firms typically own
So for private equity, the time frame is longer, but the stakes are just as high. The industry has enjoyed a long fundraising boom largely because portfolio companies so often accomplish more in less time than their public peers, even if they don’t face a quarterly verdict. Therefore, anything that slows or hinders a strategic initiative can jeopardize the outsized returns that LPs have come to expect.
BV Investment Partners subscribes to this “move fast and build things” motto, and it’s what allowed this middle market firm to thrive since 1983, with a recent close on a $750 million fund. So we sat down with Justin Kustka, a Principal with the firm, and asked what role Consero plays in the firm’s success.
Q: What caught your firm’s attention about the finance function at the companies within
JM: One of the big pain points when we make an investment is the building and scaling of our finance teams. This includes the reporting of financial data, so that its streamlined and reliable. And our portfolio company CFOs can often get buried under a load of repetitive and less value-added tasks, so they don’t have a chance to address larger strategic issues.
Q: How did you address these problems in the past?
JM: Historically, if we wanted to improve the finance function from a talent perspective, we would look to recruit and to add to the team, most often through a recruiter, which would be a slow and prolonged process, adding a staff member one at a time.
The other piece of upgrading the finance function is technology. A lot of our portfolio companies don’t have particularly sophisticated systems, so right out of the gate, we think through the potential solutions, and scope out the different products we could implement. Then we select one option and go about implementing them, which can take almost a year.
The hardest part of this approach is we’d have to wait so long to discover if that system or new hire would work. Nine or ten months later, we might realize that this solution isn’t effective and have to start over, which is time we’d rather not waste.
Q: What made Consero intriguing to your firm?
JM: The Consero model was really interesting because it’s a solution that’s been fine-tuned over years and years. It’s purpose-built for addressing the pain points that I identified. They can come in and implement a system in months, and we can eliminate the sourcing of a given system and all the time needed get it up and running. And on the talent side, their team and resources can scale as quickly as we can grow. We’re not managing recruiters or wondering if the perfect candidate is even available.
Q: What’s Consero done for BV’s portfolio so far?
JM: So we’re using Consero at five or six of our companies at this point, which range from pure play technology or SaaS companies to tech-enabled services, of various sizes. These are often growing business that simply haven’t had the luxury of taking a close look at the finance function. Frequently, we’ll tap Consero right after the deal closes, but there are occasions where later in the life of an investment, we know the finance functions needs to grow and improve, so we bring in the Consero team then.
The fact is that Consero has allowed us to offload a lot of the back office and administrative workflows so the portfolio company isn’t burdened with the tactical elements of the finance function any longer. Now our CFOs are able to focus on more strategic decision making, and analysis, things like add-on acquisitions, enhancing growth strategies and providing better services for our customers. They get to collaborate with functional leaders to maximize value across the business. Everything from scaling the sales team, to developing the right marketing metrics, they can focus on the best ways to drive top-line growth.
For the portfolio companies using Consero, the biggest impact has been more timely and reliable reporting, which allows us to get info faster, and that translates into swifter and more consequential insights into the value creation at those businesses.
Q: How does Consero’s “Finance as a Service” approach differ from traditional
outsourcing of the accounting function?
JM: For us, “Finance as a Service” is a full solution as opposed to the traditional models that are more periodic or lumpier for the delivery of the solution. “Finance as a service” is repeatable, predictable and scalable and that’s a big differentiator in our mind.
We view Consero as a full finance factory for our portfolio company, from a people, processes and technology perspective. Here on the investment side, we don’t have to worry about it as we scale a portfolio company.
Q: What would you want a potential client of Consero to know?
JM: What stood out to us has been Consero’s user-friendly approach that starts at the implementation and the scoping of the project, but continues through the ongoing relationship management and day-to-day operations. It’s a big reason we’ve used them at so many of our portfolio investments, and why we refer them to our peers as well.