Private equity firms are under more pressure than ever to generate measurable value, not just quick wins. As the market matures and diligence becomes more data-driven, traditional approaches to value creation are no longer enough.

In this interview, we sat down with Ernie Eichenbaum, a seasoned expert at Ultra Consultants, to explore how private equity’s approach to value creation is evolving, where firms still get it wrong, and what it takes to turn potential into performance. From overcoming outdated systems to aligning teams, Ernie shares his insights from working with some of the industry’s most demanding players, including a recent engagement, where Ultra succeeded where five other consulting firms had failed.

Read on to learn how a smarter, more operationally-focused approach to technology and transformation is helping firms build lasting value in their portfolio companies.

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Ultra Consultants: You’ve worked a lot in the private equity space. From your perspective, how has the approach to value creation in PE evolved over the last few years?

Ernie Eichenbaum: Private equity firms are now taking a longer view of their investments, and as part of this, they’re willing to invest time and capital in addressing technical debt correctly. While the urgency for value creation is still there, we are no longer seeing the push for quick-and-dirty solutions, in favor of more lasting and durable solutions to support sustainable growth.

UC: What are some common mistakes or outdated thinking you’ve seen PE firms still use when trying to create value in their portfolio companies?

EE: A common misstep is relying on temporary fixes to overcome inefficient business processes. This includes holding onto outdated systems, integrations and end-of-life tools, or creating forced data warehousing and inadequate reporting structures. Data quality often gets overlooked, but it plays a central role in understanding the value of the portfolio company and impacts the credibility of their financial statements.

PE companies also sometimes underestimate the value of insights available from the employees of the portfolio company. They know what good looks like and what they would like to have happen. Interacting with any of them in the due diligence/discovery phase will showcase the problematic nature of shortcuts. Finally, ignoring core issues like unsupported enterprise applications can expose the PE firm to a liability for misrepresenting risk.

UC: Why does the traditional ‘make it look good for resale’ model fall short?

This model is falling out of favor with the larger and more tenured PE firms. The ‘make it look good’ approach tends to backfire and tarnish the credibility of the firm. In our connected world, and more so with deep research tools becoming available to every analyst, the behavior is no surprise to anyone. As a result, the anticipated sale value of the business is corrected and adjusted downward once buyers realize real problems weren’t actually addressed.

UC: At Ultra, there’s a significant emphasis on operational excellence and leveraging technology. Can you walk us through how Ultra helps PE-backed companies build a real value creation plan?

The work Ultra does focuses on these very aspects of creating long-term value. By assessing multiple aspects of the company, we generate a snapshot of current performance and a blueprint for closing gaps. Our proven process evaluates Business Process (part of our Business Process Improvement efforts), system harmonization (part of our Systems Context efforts), data cleansing and maintenance (part of our Master Data Management effort), Management Capabilities and Change Readiness (part of our OCM effort). We also help companies craft a clear Vision of the Future, with a step-by-step, ROI supported blueprint to get there. All of this is thoroughly documented, giving both the PE firm and the future buyers third-party assurance the right problems are identified, and a credible, viable plan is in place to address them.

UC: What does “holistic support” look like in practice when Ultra is brought into a project?

EE: Ultra’s methodology drives predictable outcomes. One of the keys is the experience our analysts bring to each engagement. Our tools, methods, and materials are ‘battle-proven’ yet are fine-tuned to meet the culture of each portfolio company. A key aspect of our approach is relationship pairing at every level. For example, matching the portfolio company’s project manager with an Ultra project manager, or pairing their executive sponsor with an Ultra Managing Director.

UC: You recently worked with a client where five other firms had already attempted to solve the problem. What was the challenge they were facing when Ultra came in?

EE: The biggest problem was cross-functional alignment; not everyone was on the same page about what needed to be done and why. At the same time, competing priorities put an unacceptable burden on the key team members at the portfolio company and made it almost impossible for any one initiative to move to completion. Compounding the issue were ineffective methods used by previous consultants who did not have relevant executive experience or industry-specific insight.

UC: How did you approach that engagement? What were the initial objectives, and how did you align the stakeholders around them?

EE: We launched three parallel efforts for them. First, we led a company integration of their most recent acquisition. Second, we directed an initiative to establish a foundation for product data management. Then we conducted a full Business Process Improvement and Selection process for the portfolio company. This included all the risk mitigation elements and deliverables we previously discussed, providing structure from day one.

UC: What made Ultra’s approach succeed where the others didn’t?

EE: For us, our success in this project comes down to the fundamentals embedded in our professional DNA. We listened vs preached. We understood the company’s culture. We learned from the portfolio company’s prior experience and avoided recognized pitfalls. At every step, we were clear about what needed to be done and why. And we executed with the precision and discipline that comes from our depth of experience with Private Equity consulting and our proven process.

UC: What were some of the most important results from that engagement?

EE: The acquisition integration was done and moved successfully into go-live support. The selection process earned strong credibility from the cross-functional teams, and the final system selection was widely supported. The feedback from the portfolio company tells the story best: “The level of professionalism, knowledge, and willingness to be flexible has been the biggest benefit I have seen from the Ultra team. Your willingness to meet us where we were at and nudging us in the best-in-class direction was much appreciated and will have a lasting impact on us going forward.”

UC: PE firms often struggle with turning potential into real value. Can you outline the three key factors to making the transformation successful in the project?

EE: The three key success factors were clear goal definition, translated to approved actions; robust oversight in and executive support—both at the portfolio company, at the PE firm, and at Ultra; and assembling a disciplined, experienced team that understood how to manage risk and drive results.

UC: What’s one piece of advice you’d give PE firms when trying to drive transformation in their portfolio companies?

EE: Be sure what you want to accomplish. If you can define your goals, you can measure progress with a trusted team that will help you get there.

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About the Author

Ernie Eichenbaum

Ernie Eichenbaum brings over 30 years of project management, enterprise software application and business operations expertise. His background has afforded him the ability to truly understand how businesses can combine process improvements with their end-to-end business processes via software technologies, resulting in increased corporate performance and a competitive advantage. Ernie’s consulting experience centers on project and executive program leadership within industrial enterprises that have complex make, move and service operations. Ernie is known for leveraging his leadership skills and ability to recognize and respond to business challenges while providing his teams with the discipline, tools, methods, and materials necessary to meet client needs and project goals.