Why Financial Planning & Forecasting (FP&A) is more important than ever in Private Equity.
We take a look at why utilising EPM tools within the PE industry can help business create new revenue streams, optimise current ones, and add more value to their portfolios than ever before.
Introduction
The private equity (PE) industry has been on an upward trajectory for several years, with a remarkable amount of capital flowing into this sector. As the industry evolves, so too does the importance and complexity of financial planning and analysis (FP&A). Traditionally a staple of corporate finance, FP&A is now becoming increasingly relevant in private equity, providing crucial insights into investment decision-making, portfolio management, and exit strategies.
Shift in the Private Equity Landscape
The PE industry is experiencing a paradigm shift. Today, it’s not just about identifying promising investments and implementing leveraged buyouts; the emphasis has shifted to adding tangible value to portfolio companies.
Furthermore, the increasing competition and rising valuations have led to a need for more sophisticated financial management strategies. This shift has propelled the importance of FP&A, as it offers a comprehensive view of a firm’s financial health, performance metrics, and areas for improvement.
Here are just a few use cases:
Internal Planning
Internal planning is a critical function within organisations as it helps align financial goals with the company’s strategic objectives, enables effective resource allocation, and facilitates informed decision-making.
Investment Decisions
Robust financial analysis aids PE firms in selecting promising investments that align with their investment strategy and risk tolerance.
Portfolio Management
PE firm’s goal is to create value within that company. FP&A aids in developing and implementing financial strategies, budgeting, and forecasting – all of which contribute to value creation.
Exit Strategy
FP&A plays a crucial role by providing insights into the optimal timing and method of exit. Through scenario analysis and financial modelling, FP&A can help estimate the portfolio company’s future performance and worth, supporting PE firms in maximizing their return on investment.
Adapting to the Digital Age
In the era of big data and advanced analytics, PE firms are now leveraging technology to gain more profound and faster insights.
Planning software such as Anaplan and Pigment can help such firms gain a competitive advantage by automating financial analysis and providing predictive insights, allowing FP&A teams to make more accurate forecasts and make data-driven decisions.
So how would planning software like Anaplan or Pigment help solve these issues & help PE firms grow?
Let’s take a look at some of the system challenges faced by PE companies…
Complex calculations can be time consuming.
With many different variables to be considered during the buying process, Private Equity firms can save time by bringing their planning process into a solution like Anaplan, when compared with conventional spreadsheets.
Managing a portfolio means tracking lots of output.
With the development of automation technology, data can flow easily into a centralised system, giving a single source of consolidated truth. Systems like Anaplan and Pigment can be used to track all the KPIs in one place with intuitive dashboards and reporting.
Growing portfolios means more companies. More companies means more work.
The nature of the Private Equity world means that businesses need to be constantly looking for an edge, and as their portfolio grows, efficient planning and management of the overall portfolio can be managed through centralised hierarchies.
Should Private Equity companies consider investing in a planning solution like Anaplan or Pigment?
Centralising Data
By combining feeds of data from various systems into a centralized repository, we can consolidate it to provide the business with a single source of truth.
By utilising tools such as Data Hubs, integrations and other master data techniques you can bring all your systems into one creating a single source of truth.
Automating repetitive tasks
Systems like Anaplan or Pigment have a great ability to automate regular tasks, such as data flows, data cleansing, calculations, and updating of reporting suites.
With built in integrations that can run on schedule, means manual processes are a thing of the past.
Synchronising Changes
Some tasks, such as changing a business hierarchy, can cause a lot of manual work across all the systems and spreadsheets that are used.
A single change to the hierarchy in Anaplan or Pigment can adjust the entire model and reporting in an instant. This saves time and eliminates the possibility of errors.
Enhanced Collaboration
EPM software like Anaplan or Pigment can help teams of finance professionals, operational analysts, and geographically dispersed staff come together and work together effectively.
These tools are cloud-based and allow for selective security rules and access. They also allow staff in a remote production facility to communicate their finances to central finance staff in real time.
Save time with insightful analysis
The true value of these systems is that they free up time for team members to actually analyze and provide insights from the output.
By automating and streamlining tasks that can take many days and condensing them into automated workflows, we can free up time and resources for more value-added activities.
Tried & tested at thousands of companies
Even though the EPM space is moving quickly, and new technologies are coming out almost day by day, these two are proven in the marketplace and have track record of adding value for some of the largest businesses around the world. Take a look at just some of the companies that have managed to use these systems to their advantage over on our about page.
Implementing EPM isn’t cheap – but it pays for itself!
Implementing Anaplan or Pigment does come with costs, such as licenses from the vendor, and having a trusted partner to implement the technical aspects of the system correctly. Getting it wrong can be time-consuming and costly, which is why it’s worth talking to professionals with many years of experience implementing these systems, such as Bolt Consulting.
However, when it’s done right, having a system like Anaplan or Pigment will help lead to increased revenues, quicker go-to-market, more profitable promotional activity, lower costs, and higher business valuations. Many companies looking at investment or IPO will find that having a proper system in place is a prerequisite.
Let’s take a brief look at each system.
Leveraging Anaplan.
Anaplan’s platform stands out for its versatility, scalability, and collaborative features.
It allows for the integration of various data sources, enabling a single, unified view of financial performance across an entire portfolio. This integrated approach facilitates better financial planning, budgeting, and forecasting, which are pivotal in the PE industry.
Its sophisticated financial planning and analysis capabilities, coupled with its collaborative and technological features, make it an excellent tool for managing the complex financial requirements of the PE industry.
As PE firms grapple with increasing competition, rising valuations, and the need to add tangible value to their portfolio companies, tools like Anaplan can be game-changers, offering the depth of insight and agility required to succeed.
Pigment is rapidly growing with over 100+ clients around the world.
As a platform Pigment is rapidly evolving and they’re investing a lot of time and money into expanding functionality.
Key Overview
About Bolt Consulting
Bolt Consulting is a financial systems specialist that can help whether you need to implement general ledger systems, ERP such as SAP or Oracle, or EPM planning software like Anaplan or Pigment.
We’re run by ex-Big4 qualified accountants with the highest certifications available within each system, meaning we won’t let you down.
We can help.
Both platforms come as a shell out of the box, but Bolt Consulting has a library of accelerators that help speed up implementation, reduce implementation costs, and get these systems up and running quicker than most.
Solution Advisory
As an impartial implementation partner to a number of platforms, we’re able to advise which system suits your business best. We don’t guide you in any specific direction till we’ve understood your needs.
Technical Implementation
As certified and experienced implementation experts, we can help with full end-to-end delivery toward a successful implementation. We have a large team of consultants based around the world meaning time zone isn’t an issue.
Managed Services & Support
The real work starts once you’ve implemented a system, and we’re here for the long term. We never abandon any project once go-live has happened, so you always have our team of experts on hand to support. So whether you need help for tweaking the system or a full-on managed services approach, we’ve got you covered.
Who we’ve helped.
… Just a selection of clients and companies who’ve benefited from the power of what we can do. Want your company to be featured here too? Get in touch.
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