New ThoughtSpark report focuses on skills gaps typically found by PE investors in portfolio companies

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Business development consultancy ThoughtSpark has released a new report on the skills levels in PE-backed companies. The report – based on a medium-range study conducted throughout 2020 and into 2021 – reveals the collective view of top PE firms on skills in the companies in which they invest. The report reflects PE professionals’ views across the recent global pandemic period, as well as anecdotal comments from leaders of PE-backed companies.

The new ThoughtSpark study is timely in that PE firms have been raising record funds, but now have the challenge of applying those funds in particularly turbulent markets. The current economic situation makes it even more important that all key operating skills are in place to offer the best chance of successful rapid business development in PE-backed companies. Any significant operating skills gaps increase risk of failure.

The study found that some skills are well-developed – including product innovation and sales. This is perhaps not surprising where many invested companies are being run by entrepreneurial owner managers. Digital transformation, transparent performance management and financial skills were seen to be distinctly average, requiring sharp scrutiny from PE investors. The ability to develop talent, achieve growth at scale, and implement effective marketing and communications were all seen as typically weak areas demanding urgent attention.

Paul Lindsell, Managing Director at ThoughtSpark, comments: “This study reveals danger zones for PE firms in the assets in which they invest. It provides a lens for urgent skills audit, an investment of time and effort that is likely to pay dividends (literally) down the line. Some of the likely skills gaps are ones that PE firms can cover with their existing native skillsets – such as financial strategies and robust performance management. In other areas, such as digital transformation, marketing and talent management, the available body of specialist consultants – especially those with direct experience of PE-backed firms – come into play. In some cases, in-house skills may be hired, but much of the experienced talent pool has already been soaked up by established enterprises.”

“As we move gradually into a ‘new normal’, investors cannot afford to neglect any of the key skills areas. Markets are tight and competition is even more fierce than usual. Nobody should be fooled by the current ‘health’ of the public markets – commercial success has to happen in the real economy, and there are some very obvious further challenges for business coming down the track. Only a chain with no weak links will succeed in these tough times.”