Fail to Plan, Plan to Fail: FP&A in Private Equity

The private equity industry has been on an upward trajectory for several years, with remarkable amounts of capital flowing into this sector. As the industry evolves, so too does the importance and complexity of financial planning and analysis. 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.

Given the complexity of private equity and inherent market uncertainty, there are significant risks to financial performance. Effective financial planning and analysis are critical for PE firms to draw insights and produce meaningful forecasts taking into account both internal and industry-wide dynamics.

The Role of FP&A in Value Creation

A PE firm's goal is to create value within portfolio companies. FP&A aids in developing and implementing financial strategies, budgeting, and forecasting-all of which contribute directly to value creation.

FP&A also plays a crucial role in exit planning by providing insights into optimal timing and method of exit. Through scenario analysis and financial modelling, FP&A helps estimate portfolio company future performance and worth, supporting PE firms in maximising return on investment.

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 helps firms gain competitive advantage by automating financial analysis and providing predictive insights, allowing FP&A teams to make more accurate forecasts and data-driven decisions.

Connected Planning for Portfolio Management

With information available at everyone's fingertips, being able to respond quickly to opportunities is critical in maximising return. With integrated planning systems, it's easier than ever before to provide full automation solutions to remove the time burden of manually updating data or running scenarios.

The ability to quickly create scenarios within planning models means you can be informed on a range of options before making decisions. This agility proves particularly valuable in volatile markets where conditions change rapidly and waiting for manual analysis means missing opportunities.

By combining feeds of data from various systems into a centralised repository, you can consolidate information to provide the business with a single source of truth. By utilising tools such as data hubs, integrations, and other master data techniques, you bring all your systems into one, creating a single source of truth.

Automation and Efficiency

Systems like Anaplan or Pigment have 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, manual processes become a thing of the past.

Some tasks, such as changing a business hierarchy, can cause significant manual work across all systems and spreadsheets in use. 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.

EPM software helps teams of finance professionals, operational analysts, and geographically dispersed stakeholders collaborate effectively. Real-time visibility into the same data ensures everyone works from consistent information.

Platform Capabilities

Anaplan is a leader in providing high-quality EPM cloud platforms, helping businesses of all sizes improve decision-making, optimise operations, and achieve business goals. It's a powerful tool that can be tailored and built to suit company structure, solving problems like financial planning and budgeting, sales and operational planning, supply chain planning, workforce planning, risk management, and compliance reporting.

It's a flexible platform that can be customised to specific needs while being scalable to allow for business growth. Some of the world's leading companies have trusted Anaplan for their planning needs and are adding value with its fantastic toolset.

Pigment is a cloud-based planning and budgeting platform that is paving the way in AI technology to enhance analysis and user interaction. It's a user-friendly platform that can be used by anyone within the business and covers all the same use cases. Its modern interface reduces training requirements while delivering sophisticated capabilities.

The Competitive Advantage

For PE firms, the difference between adequate and excellent financial planning capability can translate directly into returns. Firms with sophisticated FP&A processes identify opportunities faster, assess risks more accurately, and make decisions with greater confidence.

This capability becomes particularly important during due diligence, where rapid but thorough financial analysis informs acquisition decisions. Post-acquisition, robust planning processes help drive the operational improvements that generate returns.

At exit, the quality of financial planning and reporting affects buyer confidence and, consequently, valuation multiples. Portfolio companies with professional planning capability command premiums over those relying on spreadsheet-based approaches.

Getting Started

If you're in the private equity business and want to find out whether an EPM solution could work for you, the first step is understanding your current state and future requirements. An assessment of existing planning processes, data quality, and system landscape provides the foundation for informed decision-making.

The investment in proper planning technology typically pays for itself through improved decision-making, reduced manual effort, and enhanced portfolio company value. In a competitive market where margins matter, these advantages compound over time.