Private Equity and Procurement: Getting Operational

Yesterday on Spend Matters PRO, Jason focused on how private equity firms can leverage procurement techniques to improve earnings within their portfolios. An excerpt from the article can be found below:

Recently, Spend Matters was quoted in what we believe was a well-researched article in NYT DealBook on how the top private equity (PE) firms are getting operational with procurement inside their portfolio companies, specifically investing in group purchasing organizations (GPOs) to drive cross category savings and leverage (among other strategies outlined in the article. As someone in the industry remarked to us after reading the article, "I've only seen procurement [treated] in a serious way two other times [in the top news], in the medical space (NYT) and ATT (WSJ). In both cases, they present the buyer as a real villain."

In other words, the NYT really did its homework this time, presenting a ... into an important procurement topic... Still, as the Times notes, GPO "savings can add up. Blackstone says it has saved $600 million since 2006 through CoreTrust, direct supplier relationships and an equity health care group, which applies the same group purchasing principles to employee health insurance plans. K.K.R. pegs its total savings at north of $700 million."

Here at Spend Matters, we believe that PE firms should consider GPOs ... Based on our recent research into the topic, we've seen a diverse set of broader cost savings and related procurement/operational investments and programs made by PE firms to improve earnings within their portfolios. Private equity portfolio strategies we've seen include the use of...

In the next installment in this research series, we will turn our attention to some of the new strategies that PE firms are starting to deploy or consider to drive incremental savings across their portfolio companies.

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