Lessons from Private Equity Any Company Can Use - Bain

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MEMO TO THE CEO

Lessons from Private Equity Any Company Can Use
By

Orit Gadiesh and Hugh MacArthur

Harvard Business Press Boston, Massachusetts

ISBN-13: 978-1-4221-5136-5

10080

Publisher’s Note: Memo to the CEO

Authored by leading experts and examining issues of special urgency, the books in the Memo to the CEO series are tailored for today’s time-starved executives. Concise, focused, and solutions-oriented, each book explores a critical management challenge and offers authoritative counsel, provocative points of view, and practical insight. Also available: Climate Change: What’s Your Business Strategy? Andrew J. Hoffman, University of Michigan John G. Woody, MMA Renewable Ventures

Five Future Strategies You Need Right Now
George Stalk, the Boston Consulting Group

High Performance with High Integrity
Ben Heineman, former General Counsel of General Electric

Manage the Media (Don’t Let the Media Manage You)
William J. Holstein, award-winning writer for the New York Times, Fortune, and Barron’s

MEMO TO THE CEO

Lessons from Private Equity Any Company Can Use

Orit Gadiesh Hugh MacArthur
Bain & Company, Inc.

Harvard Business Press Boston, Massachusetts

Copyright 2008 Bain & Company, Inc. All rights reserved

No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.

Contents
Introducing the Private Equity Advantage What Is Going On in Private Equity? How Can PE Lessons Apply to You? Define the Full Potential Develop the Blueprint Accelerate Performance Harness the Talent Make Equity Sweat Foster a Results-Oriented Mind-set Conclusion Lessons Notes About the Authors

1 7 14 26 47 59 75 91 104 114 120 122 124

Introducing the Private Equity Advantage

Private equity (PE) has dominated the business headlines in recent years. Once a relatively low-profile, even exotic industry, it has moved into a significant position in the U.S. economy, is playing a prominent role in the rest of the developed economies around the world, and is quickly assuming more importance in some of the largest and fastest-growing developing markets. As the first management consulting firm to develop a global PE practice, Bain & Company has quite literally grown up with the industry. Today, our practice is the largest of its kind. We conduct detailed strategic due diligence on hundreds of targets annually and work in depth with portfolio companies and their management teams to boost performance. We are not simply on the outside looking in, either. Bain & Company partners have invested over $500 million of their own capital in private equity funds and deals over the last few years, with top-quartile results. 1

Lessons from Private Equity Any Company Can Use

From a very granular and unique perspective, we have come to understand what PE leaders are particularly good at, and also what they are not so good at, as it pertains to creating more valuable companies. So what is this memo about? It’s about how to make businesses more valuable, regardless of who owns them. While much has been written on this topic, and no memo, however well intentioned, will provide a panacea for value creation to all executives across all industries, we feel strongly from our many years of working with the best PE executives and the most capable chief executive officers that the PE industry can offer some general lessons that any business leader should consider to get the most out of his or her business. Having worked with thousands of CEOs of public and private companies, we fully realize that some CEOs have used the same approach to the topic we will...
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