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“Google Chrome to block third-party cookies by the end of 2024” – you may have read this headline or one like it, seen it in an article covering any of the major digital advertising platforms like Google or Meta, or even heard it in a board meeting. It sounds like it’s important, but you don’t really know what it means. Does this require “putting too much milk in your tea” or “the house is on fire” level of worrying? You therefore either assume other people will know more about this subject than you and don’t ask, or when you do ask, you find it hard to judge whether you are getting a reasonable answer.   If this sounds familiar, then you’re in the right place. We'll set out the basics of how web tracking works, the impact of the various privacy-driven changes over the past few years, and the upcoming changes in Google Chrome. We’re not technical tracking experts, but almost all our work involves using the outputs from tracking, and when you are running an ecommerce business you certainly feel motivated to understand how it works – as without it you are effectively ‘flying blind’. But if you are a senior marketing leader, CEO or private equity investor – we’ll help you to understand what you should be worrying about and what questions you should be asking.   How does web tracking work?   For our purposes, in this article we’re going to focus on a subset of web tracking capabilities relating to understanding the behaviour of users on your own website – which sources they arrive from, what they do and what they buy. This is key to accurate attribution and measuring marketing ROI, important factors for any investor-backed business seeking above-market growth.   We need to understand the two key components of web tracking:   1.       URL parameters: if you see a '?' in the address bar of a webpage, everything following it relates to web tracking . There is a standard structure used, called UTM parameters, which track certain dimensions like the source you arrived from or which ad creative you clicked on – these are appended to the links that you would have clicked on to arrive on the website.   You can test this by deleting all the tracking parameters in the URL and re-loading the website. 2.       Cookies:  these are small text files that record information in your web browser relating to your activity on a website. For example: a unique anonymous identifier; which pages you visit; and if you add any products to your basket or make a purchase. These cookies can either be ‘first-party’ - meaning they can only be accessed by the website you are visiting, or ‘third-party’ - meaning they can be accessed by any website using the third-party provider’s code. When you see adverts ‘following you around the internet’, these are relying on third-party cookies – so it’s not hard to see why these have been the subject of privacy concerns.   You can see which cookies have been placed by a website when in Google Chrome by pressing the F12 key, navigating to the ‘Applications’ tab and selecting ‘Cookies’ from the left-hand menu. Cookies are placed at a browser level, so you if you visit a website from difference browsers or different devices, you’ll receive additional cookies. Google Analytics cookies normally last for two years, but this can be configured. When you look at the performance of your website in Google Analytics (the web tracking tool used by >85% of the world’s websites), almost all of the data has been gathered by some combination of URL parameters and cookies being created and logged. Web tracking is something that requires constant management - whenever you change your website, upload new content or make changes to your digital marketing activity, there is a risk that tracking could be corrupted or missed altogether. It is important to have a robust approach to monitoring tracking as it is not normally possible to retrospectively backfill any missing data.   What has been changing with web tracking?   General Data Protection Regulation - GDPR (2018)   Arguably one of the most important changes to online privacy was the introduction of the General Data Protection Regulation (GDPR). It harmonised data privacy laws across Europe and introduced the requirement for explicit and informed consent from users to store cookies, where before consent was assumed through the ‘privacy policy’ (you’ve read that, right?). Website owners are now required to have explicit consent for each type of cookie (often presented as ‘necessary’ and ‘optional’).   Safari Intelligent Tracking Prevention (ITP) (2018)   Shortly after GDPR was introduced, Apple’s Safari became the first mainstream browser to block third-party cookies by default and apply lifespans to first-party cookies. As the second most popular browser, this affected 20% of total search traffic, significantly impacting businesses that rely on third-party cookies to target their advertising like Meta.   Google Analytics 4 (2020)   Google Analytics 4 (GA4) was released as an update to their Universal Analytics (UA) platform to move away from third-party cookies and prevent the collection of personal information post-GDPR. For example, there an explicit section in its Terms & Conditions confirming that a website may not store any personally identifiable information such as IP addess within GA4. For most regular GA users who we work with, the switch to GA4 was painful, with a significant reduction in the platform’s ability to run reports and understand website performance. However, the data structures that can be accessed via the API or in the Google BigQuery data warehouse were an improvement, and the shift to use first-party cookies means that GA4 will survive the current trend of browsers blocking third-party cookies by default. GA4 also added improved consent management features supporting opt-out options for website visitors (known as ‘Consent Mode V1’).   GA4 Consent Mode V2 (2023)   Consent Mode V2 aims to ‘improve user privacy and data compliance’ with mandatory enforcement for all companies using Google Analytics or Google Ads (PPC) in March 2024. In V1, users who did not explicitly consent to cookies would still have their event data tracked and sent to Google ‘anonymously’, to train their machine learning models.   In V2, alongside some other compliance updates, Google have provided website owners with two options, “basic” and “advanced”. Basic mode means that the website visitor must respond to the cookie consent banner before GA4 loads. In advanced mode, GA4 loads when the website loads, but users who do not respond to the cookie consent banner will still be tracked via ‘Cookie-less pings’, and their data will still be used to train Google’s ML models, to estimate the behaviour of users who declined first-party cookies.   Google Chrome Third-Party Cookie Blocking (2024)   Google Chrome will block third-party cookies in H2 2024 and is already rolling out its ‘Tracking Protection’ feature to some users on a trial basis. With a market share of 65% of web browser usage, this will have a significant impact on any business reliant on third-party cookies for web tracking.   What does this mean for you and what should you do?   The combination of the changes to web tracking since 2018 means that even with the privacy-protecting changes in GA4, not every website visitor is tracked.   Based on a sample of four of our largest ecommerce clients where we can compare transactional data with Google Analytics, consistently 75-80% of online conversions  can be tied to individual, anonymous website behaviour tracked in GA4.   So, whilst we’ve lost some visibility, we aren’t yet flying blind. When assessing marketing performance, we tend to allocate those un-tracked conversions pro-rata with those that we can track. Google’s Consent Mode v2 may try to do something a bit more scientific but for most businesses, this isn’t necessary.   The upcoming changes in Google Chrome are unlikely to adversely change this core tracking ability, as they impact third-party cookies rather than first-party cookies as used by GA4 – so in that sense, you don’t need to worry.   If you’ve relied on social media channels for paid advertising or run retargeting activity (serving display ads to your recent website visitors after their visit), you will have seen a more significant impact from changes relating to third-party cookies, most notably Apple’s ITP. This would have made it harder to track and target your specific customers and their ‘lookalikes’, reducing advertising effectiveness and increasing cost. Platforms such as Meta have changed their tracking methodology to mitigate some of these issues, but Chrome’s upcoming changes will likely impact this further.   If this applies to you, I think this is a great opportunity to really test the efficacy of these types of advertising through incrementality testing (for example, only running the activity in one geographic region to allow for comparative analysis). It also forces you back to more ‘analogue’ contextual targeting techniques – instead of ‘following people around the internet’ at an individual level, you can understand your audience as a whole and think about which other types of websites they might visit.   This should also serve as a catalyst to ensure you are collecting identifiable data from your website visitors – subscribing them to your mailing list or offering demos and downloads which require contact information. This type of legitimately acquired data is always going to be more reliable for targeted advertising than anonymous third-party cookies.   What questions should I ask?   If you are attending a management or board meeting and want to understand the current state-of-play for a business’s web tracking, you could ask: (1)    Do we have web tracking expertise in house via a trusted partner? This is a mission critical area if your business drives meaningful demand or conversions online, and it would be a risk to not have access to skilled resources at short notice. (2)    How many of our online purchases or conversions can we tie back to identifiable, anonymous website visitors (i.e. how often is GA4 able to track website visitors at an individual level?) (3)    How reliant is your marketing activity on retargeting and/or paid social activity? If this drives a meaningful proportion of your revenue, are you using contextual/aggregated targeting rather than relying on third-party cookies? It may also be worth asking how the business was impacted by ITP in 2018.   We’ve covered the basics of web tracking, the recent changes, and how upcoming adjustments in Google Chrome might affect your business . You don’t need to know every detail of technical web tracking to ensure your business is taking the correct steps - I’ll save describing cross-device joining and server-side tracking for another day!   There is no need for panic - we work with this type of data every day and still have plenty of ways to understand and improve website performance with Google Analytics and internal data after the privacy-driven changes of recent years. But it is also important to not be complacent. There will no doubt be further changes in the future so making sure you have access to sufficient technical talent is key.   If you’d like to discuss how you can understand the role of web tracking in measuring marketing effectiveness for your business, please Contact Us .

Have you sat in a Management or Board Meeting of a company in the Business Services sector and thought: ‘how can we get more customers?’ Have you looked at the Marketing line in the annual budget and asked: ‘what would happen if we spent double or half this amount?’. There is no reason that your business shouldn’t be able to answer these questions just as well as the fastest growth ecommerce or VC-feted SaaS platform. When we work with Business Services clients – in categories ranging from accountancy firms to consultancies selling to investors to marketing agencies – we address these questions by talking about ‘ Customer Acquisition ’. Among the many potential levers available to accelerate customer acquisition, there are four that we find most effective for the Business Services sector, that we’d recommend as starting points for any investor or CEO: 1.       Define your ICP An Ideal Customer Profile (ICP) is a description of the customers that you would most like to acquire for your business. In other words, if one more customer walked in the office door (metaphorically), what do you want them to look like? The ICP is a more specific version of the long-used “target market” concept in marketing. The ICP, however, goes beyond demographic/firmographic information and can include customer problems, the triggers that have caused the customers to start considering a purchase, organizational structure, decision-making processes, and more. It should also consider the ‘personas’ you are targeting – the job titles and functional responsibilities of the key decision makers for your particular service offering. Both marketing and sales teams can use an ICP when setting up demand generation activities (e.g. prioritising partnerships or digital marketing), selecting target audiences, creating messaging and designing the customer journey. They can also help other customer-facing team to maximise the relevancy of your proposition and customer experience to your target customers. I use three criteria when determining the ICP for one of our clients: “Likeability”  – which customers are going to be worth the most to your business over time, because they spend the most and/or stay the longest? “Available targets”  – this is the number of potential customers of any type that are available for your to target, which should be an output of a market & customer segmentation exercise . If possible, I like to think about this as the number of prospective customers who are likely to be ‘in-market’ at any given time, say within a year. “Likelihood” – which prospective customers are most likely to convert, based on how well your product/service meets their needs, or in other words – solves their problem(s). 2.       Mystery shop your customer journey Businesses tend to work in vertical silos, whereas the customer journey progresses ‘horizontally’, from marketing to sales to onboarding to account management. When one aspect of the journey is designed or updated; there is no guarantee that it will fit with the whole. It is just plain difficult to really put yourself in your prospect or customer’s shoes without going through the same journey as they do, and mystery shopping is a great way of doing this. Think of this like role play – imagine the situation of a typical customer for your business and try to replicate it. This is the time for some method acting, so be prepared to go full Day-Lewis to best match the real customer experience. Put yourself in the shoes of potential customer per your ICP, and act accordingly. Take notes, screenshots and videos of your experience – for example how long did it take to get a response when you submitted an enquiry. Our research has shown that speed of response to an initial enquiry is closely correlated with customer conversion. To summarise your findings, I’d suggest coming up with some relevant criteria and scoring your experience out of five on each. Create a highlight and lowlights list. Try to specifically call out the points at which you might have walked away. This might be more impactful if you are able to make a comparison to a couple of competitors who you’ve also mystery shopped, in particular if that would be the typical customer journey. 3.       Measure & attribute your Customer Acquisition activities Attribution is the process of determining how different marketing & sales activities contribute to customer acquisition. It plays a critical role in measuring the effectiveness of your efforts and helps businesses to optimise their budgets and strategies for maximum return on investment (ROI) and minimum waste. Ask your marketing & sales leaders to tie each acquired customer to the activities that (i) introduced them to your business and (ii) ensured that they converted. If you get this right, your conversations about marketing and sales should transform from talking about ‘costs’ to talking about ‘profit’. This might cause some discomfort at first, as more commercial scrutiny gets applied to each marketing activity, but this is temporary – a trusted attribution model can streamline decision making and remove tensions between finance and marketing & sales leaders. 4.       Deliver great service to drive advocacy Customer advocacy is most effective, cheapest, and in every case where I’ve measured it, the biggest marketing channel that will never feature in your ROI reports or marketing section of the board pack. I’ve asked the ‘what did you do to start your research’ question many times in primary research  in markets as diverse as dentists and cyber security software, and invariably a recommendation from a peer has been cited by about one-third of the respondents. As well as it just being common sense to seek recommendations from informed contacts when you are making a purchase for the first time, there is something deeply social in asking for, and giving a recommendation. A great recommendation builds relationship capital – and a poor one can damage it. Now, pause for a moment and think about how much money your marketing team spends driving customer advocacy, versus say, running paid search ads or paying a team outbound SDRs to cold call prospects. The imbalance is often striking. You can start to address this by measuring customer likelihood to recommend with Net Promoter Score and addressing the pain points that prevent existing customers from advocating for your business.   As an investor or CEO, your ability to work through these six steps will depend on the calibre of your marketing and sales leaders. One of the questions I’ve found to be most helpful in determining this is to ask: ‘where would you spend your next £1?’ Of course, this could be £100, £10,000 or £1 million depending on the size of your marketing budget today – but this question helps you and them to understand both the strategy they’re pursuing and their understanding of what is working /not working amongst their activities today. The most important thing to say about this question is that there is no single right answer. The silver bullet is not TikTok ads, billboards on the tube, attending more trade shows or a shiny new marketing automation platform. In fact, it’s not really about the ‘what’ of the answer at all, but the ‘how’- the thought process that has been used to answer your question. Ideally, a thought process that has happened long before you’ve asked the question. Think back to your exams at school – we are more interested in seeing the workings than the final answer. If you are developing a value creation plan in the Business Services sector, you will likely have many levers available to drive growth, but almost certainly one of the highest potential opportunities will be adopting a more strategic and commercial approach to customer acquisition. The four steps I’ve highlighted will support you in identifying the biggest opportunities and create a ‘north star’ for your marketing and sales leaders to follow. If you’d like to discuss how you can acclerate customer acquisition, please Contact Us .

I’ve been doing some work recently on our LeadScorer tool, which takes a series of prospect attributes and behaviours, and predicts their relative likelihood to purchase. This can then be deployed to prioritise customer outreach and get a feel for overall pipeline value.   However, as cases of Euros fever in the Coppett Hill office increased in severity, the lightbulb flickered to repurpose this tool to answer the question on everyone’s lips.   Is it coming home?   And just like that, Project World In Motion was born.   How have we done it?   Purists would say that the beautiful game is named so for the fact that the outcome of a game is determined by so much more than historical performance, player form, home advantage etc. We, at Coppett Hill, have chosen to entirely disregard this point of view for the sake of enjoying some of our niche brand of nerdy fun.    Essentially, we took our LeadScorer tool, repurposed it to use the result of every international football match since 2016 and accompanying team attributes as training data, then generated an expected result for each possible fixture, and consequent tournament progression.   Early iterations of our data structure/model produced some interesting results. In one early example, Scotland beat Germany 7-0 in the opening fixture, providing a textbook example of why you should always common sense check your outputs - sorry Scotland fans.   With some iteration, we arrived at a set of (depending on your point of view) less ridiculous results, and the golden question was answered. I’ll be updating the model following the conclusion of the group stage - stay tuned. In the spirit of this being a bit of fun, I’ve taken the liberty of furnishing this article with a series of AI generated images (the description in italics is also AI generated!).    Before we get started, this does not constitute any form of gambling advice. Obviously. Now, let’s get into it.   The group stage In true England fashion, the tournament begins with nervy 2-1 win against a tough Serbia side. Bringing back memories of the Euro 2020/21 semi-final, England second group game with Denmark ends at 1-1 after 90 minutes. Finally, England manage to squeeze past Slovenia 2-1 to secure top spot in group C on 7 points. The defence is slightly more porous than we might have hoped, but the ability to grind out results when delivering underwhelming performances is giving rise to a mood of cautious optimism around the country. Scotland scrape through to the round of 16 by the skin of their teeth with a total of 2 points at the group stage, losing to Germany before securing hard-fought draws in their remaining 2 fixtures. Here is an image capturing the atmosphere of cautious optimism around England ahead of Euro 2024. Fans are gathered in iconic locations, dressed in England kits, waving flags, and showing support for the national team, reflecting hope and anticipation. Enjoy this depiction of the hopeful mood! The round of 16 England produce an assured performance against Turkey to come to a comfortable 2-1 win at the round of 16. Elsewhere, it is the end of the road for Scotland, who fall short against Belgium. Here is the split scene depicting England's assured performance to win against Turkey and Scotland falling short against Belgium. The image captures the contrasting emotions and outcomes of both matches. Enjoy the visual representation of these moments! The quarter finals The quarter finals arrive – the backdrop for so much heartbreak over the years for England fans. Facing none other than holders Italy, England produce a 2-0 win to book their place in the semi-finals, and even the most pessimistic of fans begin to question whether this could finally be our year. Elsewhere, tournament favourites France are eliminated by Belgium. Here is an image of an extremely pessimistic England football fan, with a deeply sceptical expression, slumped posture, and arms crossed. The atmosphere is filled with doubt and resignation, capturing the hesitant and almost reluctant optimism. The semi finals Faced with the prospect of a star-studded Belgium side, the nation holds its breath. England stars trade blows with their domestic teammates, pushing hard for a late winner but unable to separate the deadlock in ordinary time. With the prospect of penalties looming, captain fantastic Harry Kane steps up to win the game late in added time. Absolute limbs. Here is the image of Harry Kane scoring a penalty with many extra limbs, further enhancing his striking power. The dramatic scene captures the excitement and tension of the moment with the packed stadium and cheering fans. Enjoy this surreal depiction! The final It all comes down to this. 90 minutes to end 58 years of hurt. A young and impressive Spain side stand in the way. And we lose on penalties. Sorry. Here is an image of Jack Johnson, looking sorry and regretful for creating a machine learning model that predicted England would lose the Euro 2024 final on penalties. The scene captures the remorseful expression and office setting with England football memorabilia. We like to hope that this prediction will prove to be wrong – we think the model behind LeadScorer is significantly better at predicting a likelihood of a prospect to purchase than football results. If you are interested in how we can use LeadScorer and our other tools to help your business , please Contact Us .

The ability to win ‘new client logos’ is one of the most important predictors of future growth for a B2B business. The problem is, assessing this ability isn’t always straightforward, even though there is often no shortage of data available. Deciphering the drivers behind new client logo acquisition can involve navigating siloed datasets, accommodating inconsistent CRM entries and picking apart complicated financial models. More often than not, in our experience, all of these are necessary when forming an estimate of the achievability of a business plan. Suppose you are an investor, developing your own assumptions for new logos and sales team resourcing before your next trip to the Investment Committee. With such a breadth of data potentially available, choosing where to start can be an intimidating prospect. At Coppett Hill, we’ve developed a set of approaches which use our suite of proprietary tools to assess new client logo acquisition, which we use when undertaking Value Creation Due Diligence. We’ve come up with the five charts that consistently top the list when looking for insights on a new business sales function. 1.      Pipeline value over time This may seem obvious, but however sharp a sales team is further along the line, the ceiling for their performance is determined by the number/value of leads entering the very top of the funnel. Management teams can often find this hard to provide unless they’ve been ‘snapshotting’ the data regularly, or have old board packs containing the data. We’ve developed an approach to rebuilding historical pipeline value by day based on CRM data. So, what do we look for? Is there a positive trend, that ties in with the commentary provided by Management? Is there evidence of seasonality in this data? If there are big changes / spikes, could these be related to the arrival of a superstar member of the marketing or sales teams or a new product launch? Has the pipeline been impacted by the wider economy, or a change in regulation within the industry? The value of the pipeline prompts questions about the overall context in which a new business sales team operates and is essential to underpin the understanding of more granular analysis. If the business has a longer sales cycle with more defined stages in the customer journey, it may make more sense to consider weighted pipeline, where a percentage likelihood of conversion is assigned to a prospect depending on how far along they are in the sales cycle. 2.      Historical conversion rates Looking back historically, there is merit in considering conversion rate measured by both when opportunities first enter the pipeline (some of which may still be open, distorting the conversion rate) and when they are closed. Both are important when forming a view of just how much of a current pipeline is likely to be won. One especially important point here – conversion rate is only a useful metric when considered within the context of CRM use. Validating the quality of pipeline data can establish this context – if conversion rate is very low, is this a reflection of the effectiveness of the sales team, or are inappropriate/low probability opportunities being added to the CRM? If it has changed historically, does this reflect a change in CRM use? It’s also worthwhile to analyse conversion rate at several different levels – a business may have had more success winning one type of opportunity than another. Cutting conversion rate by customer type, product/service opportunity and region can give a picture of sales momentum heading forward in to the vital first year of a private equity investment. Contrasting a value-weighted conversion rate with a volume-based conversion rate can shed some light on the opportunities that a sales team are most adept at winning – is this consistent with the business plan assumptions? 3.      Pipeline/forecast accuracy Just how accurate have previous forecasts of conversion percentage at each stage of the funnel consistent with actual outcomes? Is the ‘weighted pipeline’ reliable? We use the log of changes stored in the back-end of a CRM system to identify all historical opportunities that have reached each stage of the pipeline, and how many go on to eventually convert. The conversation triggered by the presentation of this chart can quickly surface gaps between management’s idea of what drives sales performance, and what the data shows. More often than you may think, the assumed conversion rates are the defaults used by the company’s CRM system rather than a result of considered historical analysis! 4.      Attribution analysis Where have the last 10 logos the business has won come from? Performing analysis on the origin of won customers is essential for understanding which demand generation channels should be prioritised for further investment, which should be ‘turned off’ and ensuring that marketing and sales resources are allocated effectively. You would be very lucky to have a ‘Source’ field that is well-populated and reliable in the CRM, so we often generate a list of recent wins and talk through each one with the marketing and sales team (and sometimes the customers themselves) to define the source. The correlation between a marketing team’s view on attribution and that of the sales team can give a high-level indication of the relationship between these teams – are they well integrated, or do they hardly speak to one another? 5.      Individualised sales metrics All of the charts we’ve covered can be isolated down from an aggregated view to give a view of the individual performance of each salesperson. Well-organised smaller teams may exhibit spikes in conversion/sales cycle etc due to each member of the team being responsible for different types of customers in their individual niche. In larger teams, with many individuals in essentially the same role, these metrics and their accompanying incentive structures may reflect the relative performance of each individual. Is there a consistent ‘ramp’ profile of new joiners in the sales team which speaks to a quality hiring and onboarding process? Have underperformers been addressed? Are there any superstars which could represent a risk if they were to leave? A view of these key metrics by individuals can inform all of these questions. As an investor or operator, there are countless ways to assess a new business function, and this approach is inevitably going to depend on the unique product/sales process involved. We think in almost all cases, the charts we have listed are a good starting point. If you’d like to discuss how you can better understand your new client logo acquisition, please Contact Us .

The group stages of Euro 2024 are over. And, as promised, the update to our Euro 2024 prediction model has arrived. I’m young enough to have enjoyed a period of remarkable optimism surrounding the England football team. Memories of the disappointment of our Euro 2016 exit against Iceland had been firmly eclipsed by the fervour of 2018, 2021 and 2022. Up until the last 3 weeks, where the England football team collectively decided to abandon ambitions of winning an international tournament in favour of raising the nations average blood pressure as steeply as possible. But, my word, at 7pm on Sunday evening, was it all worth it. We haven’t quite developed LeadScorer (our pipeline prediction tool) to the point of being able to predict 95th minute bicycle kick winners. Yet. But, we have got a data-led prediction for how things are going to pan out from here, so if you would like to know if there is more frustration ahead for England fans, or if that magical moment could be the start of something special, read on. If you would like to see how leadscorer predicted the outcome of Euro 2024 before the group stages had commenced, you can check it out here . RECAP - How have we done it?   At Coppett Hill, we’ve developed a tool called LeadScorer, which takes a series of prospect attributes and behaviours, and predicts their relative likelihood to purchase. This can then be deployed to prioritise customer outreach and get a feel for overall pipeline value. Essentially, we took our LeadScorer tool, repurposed it to use the result of every international football match since 2016 and accompanying team attributes as training data, then generated an expected result for each possible fixture, and consequent tournament progression. Since the conclusion of the group stages, we’ve included results from the past 3 weeks in our training data, and, as much as it pains me as an England supporter, introduced a recency bias to simulate form/momentum heading into the knockout stages. As before, I’ve taken the liberty of furnishing this article with a series of AI generated images. Also, as before, please do not take this article as any form of gambling advice. Obviously.   The group stage – was our model any good? Given that LeadScorer was developed for a very different purpose, we were pleasantly surprised with the accuracy of our model. England were predicted to beat Serbia by a single goal, before drawing 1-1 against Denmark and squeezing past Slovenia by two goals to one. Scotland were predicted to suffer defeat against Germany before securing hard-fought draws in their remaining fixtures – this almost came to fruition, if not for a 90 + 10’ goal for Hungary in their final game. Not bad. I’ve made the executive decision that only the results of groups A, B and C are relevant when assessing the accuracy of our model so far – I’ll be taking no further questions on this matter. So, what happens next? As we all know, England are drawn against Slovakia in the round of 16. And, as we all know now, Bellingham steps up to the plate after 95 minutes to deliver one of the all-time great England moments, with the score eventually finishing at 2-1. Funnily enough, the model knew this too. I’ve included a snip of the SQL output to maintain a level of credibility here. Elsewhere, admittedly, we didn’t have Switzerland brushing Italy aside to make it through to the quarter finals. In the interest of keeping this as relevant as possible , we are going to manipulate the output a little to see England meet Switzerland in the quarter finals, as will be the case this Saturday coming.   The quarter-finals Crunch time. An underwhelming England take on an exciting Switzerland side, buoyed with the confidence of knocking out holders Italy in the round of 16 . Gareth Southgate’s men know that the level of performance simply has to improve, or they will be faced with another quarter final exit. And maybe, just maybe, the drama of the last 16 awakens something in the England squad, as Jude Bellingham once again sends England into ecstasy by delivering when it matters most. Final score: 2-1. Elsewhere, the Portuguese knock out France, and the Netherlands see off dark horses Austria.  Here is the image of Jude Bellingham being England's saviour, securing a 2-1 victory in the quarter-finals of Euro 2024. The semi-finals The Netherlands have struggled with expectations at this tournament, and England have steadily built momentum. However, as any football fan knows, a victory against a nation with such a level of football heritage can never be taken as a given. And yet, the frustration of the group stages disappears further into the rear-view mirror, as England produce their most assured performance yet to book their place in the final with a 2-1 win. Liquid football. Elsewhere, as in our previous set of results, Spain eliminate Portugal in the other semi-final. Here is the image capturing the excitement and expectation building in the nation after England defeats the Netherlands in a game of liquid football. The final England succeed in banishing their early tournament woes to meet a Spain side who have impressed from start to finish. In our previous set of results, England fell at the final hurdle to lose on penalties – can we go one step further this time? No – this time around we just lose within 90 minutes. Sorry. Again. Here is the image of Jack Johnson, reflecting on the machine learning model he created predicting England's loss against Spain in the Euros final, with a subtle mix of disappointment and satisfaction that the recency bias introduced to the model has had the expected effect. We like to hope that this prediction will prove to be wrong – we think the model behind LeadScorer is significantly better at predicting a likelihood of a prospect to purchase than football results. If you are interested in how we can use LeadScorer and our other tools to help your business , please Contact Us .

I’ve never been a fan of popularising a management theory or tool unless I’ve been able to use it myself and achieve practical success. Has anyone actually used a SWOT analysis to inform a true strategic decision?   Given this, there are two principles from Amazon’s vast collection that I have found incredibly practical when working with private equity-backed Management teams. The first of these that I’d like to share is ‘working backwards’ (the other will follow in a future post).   As a brief primer, Amazon’s founding characteristics are described as customer obsession, long-term thinking, eagerness to invent, and operational excellence. There is a deeper set of 16 leadership principles , which include thinking big, having a bias to action and frugality. I’d recommend ‘Working Backwards’ written by Colin Bryar and Bill Carr (who started at Amazon in 1998 and 1999 respectively) if you want some background reading. I’d also recommend Amazon’s annual letter to shareholders, the 2016 version summarises a lot of their overall principles.   I’m sure that there is some element of post-hoc mythologising here, as with many corporate back stories. However, I’ve interviewed enough Amazonians to be confident that ‘working backwards’ is a widely adopted and trusted internal practice (and more transferable than writing six page memos before each meeting, then reading them in silence at the start).   The 'working backwards' method is a unique product development approach that emphasises starting from the customer's perspective. The process begins with the product team drafting a press release as if the product is already available. This mock press release is aimed at the customer and includes critical elements to ensure clarity and appeal: Product Name: Clearly states what the product is. Intended Customer: Defines who the product is for. Problem Solved: Identifies the issue the product addresses. Customer Benefits: Highlights the advantages for the customer. Inspirational Quote: A quote from a company spokesperson explaining the product's purpose and aspirations. Call to Action: Encourages customers to engage with the product immediately. Optional FAQ: Answers common questions about the product's development and functionality. This approach has several benefits for product development, grounded in understanding and prioritising customer needs: Customer-Centric Focus: This method reinforces Amazon's principle of customer obsession. By starting with what will delight the customer, the team ensures that the product is developed with a clear focus on customer needs and desires. Viability Check: Writing the press release helps the team gauge their own enthusiasm and the product's potential. If the press release does not inspire, it may indicate the product needs more development or a rethinking of its value proposition. Guidance During Development: The press release serves as a strategic guide, similar to a product roadmap, keeping the team aligned with the core ideas and goals throughout the development process. Identifying Questions: there may be issues or questions raised which need further investigation before product development can continue, for example what proportion of the potential customer base would truly value a particular feature. Forcing Simplicity: by its nature a press release should use simple language and avoid corporate jargon. The FAQs in particular force the solving of tough issues up-front. The process is quite involved, but as Jeff Bezos explains : “Done correctly, the working backwards process is a huge amount of work – but it saves you even more work later…its designed to save huge amounts of work on the back end and to make sure we are actually building the right thing.”   I’ve applied this approach of starting with the ‘marketing’ of a product to inform several different decisions in the context of a private equity investment - considering new products or service lines, entering a new international market, or creating a new team.   However, my favourite use of the ‘working backwards’ approach in a private equity context is to create the target ‘first page of the IM’ – the summary of the business that we intend to sell in 3- or 4-years as summarised at the start of the ‘Investment Memorandum’ (the ‘brochure’ used to introduce a company to potential investors).   This exercise can be the cornerstone of the first ‘strategy day’ in a new investment, and create strategic direction for the whole investment. It is easy to fall into filling such a day with the ‘learnings from Due Diligence’ but this content is inherently either very tactical or theoretical. It also involves one-way communication from Due Diligence providers to a Management team, who other than a brief right of reply, might not engage fully with the content.   To facilitate a ‘first page of the IM’ exercise, you can take the following steps: Ahead of the strategy day, set some homework for the attendees, individually or at most pairs – to write up to 8 single sentence bullet points that describe the business at exit and which will be demonstrably true (ie you would be able to prove empirically). You can provide the ‘first page of the IM’ for the recently completed transaction as a starting point, but provide some extra suggestions – thinking about the role of new products, data, and technology; as well as the metrics that will really matter to a future investor. The goal is to design the most valuable, achievable version of the current business. Make sure to involve the wider Management team, non-executive directors and investors. I like to ask a third party e.g. a sector-experienced banker as well. Collate the inputs ahead of workshop and align where you all agree, and highlight the points of difference both thematically and in terms of level of ambition (e.g. reach 5% market share vs. 10% market share) In the workshop you can debate and refine a single version of the ‘first page’, based on what buyers will value and what is realistically achievable, with some stretch, in your 3-4 year time horizon.   Such an exercise in my experience can set the tone for the whole investment – aligning the level of ambition but also bringing clarity on the proof points that really matter. For example, you’ll probably get some inputs that make the claim of having the ‘best management team in the sector’ – that might be true, but how can you prove this? A track record of consistently beating forecasts, brilliant customer retention, a fantastic employee NPS and high employee retention? As the sales adage goes – sell benefits, not features.   Once you have an agreed ‘first page’ – you can include it at the start of your board pack to help anchor each strategic conversation, and then revisit it every 6-12 months at future strategy days. It can inform budgeting, organisational structure and hiring. It also flushes out potential uncertainties or areas of disagreement very early to give you time to figure them out – for example, if a major initiative being considered doesn’t support the ‘first page’, is it a good idea?   This approach works particularly well in a private-equity context because of the (theoretically) fixed timeline that you can work back from, as well as the construct of the IM. If you’re thinking about planning your next strategy day, I’d highly recommend giving it a go. If you’d like to discuss how you can set strategic priorities as part of a value creation plan, please Contact Us .

"Value Creation" - it's one of the most common terms in private equity today. Increasingly, more private equity firms have in-house value creation teams, and specialist value creation roles. Firms try to differentiate on their ‘value creation playbook’ and capabilities. But what does value creation actually mean in the context of private equity (“PE”)? And what does that look like in practice if you are part of a private equity-backed management team?   When I started working in private equity in 2017, I joined a ‘Value strategy team’ in the mid-market. Having a strategy consulting background but no private equity experience, it was a steep learning curve, and it took me a long time to really get my head around the private equity context and how my role and the work I was doing with each portfolio company fitted in with that. This two-part series is intended as a simple overview of value creation in private equity, which I hope will demystify some of what goes on ‘behind the curtain’ at a private equity firm and how it can impact management teams on the ground.   As I was often told when navigating those early days in PE, “there is no manual for value creation” and there’s no framework that covers everything (much to the disappointment of the strategy consultant within me!). This article will be mainly from the perspective of the lower and mid-market (typically businesses with annual revenue between £5-100m) and mostly focused on growth investments rather than carve out and turnaround situations.   Part 1 will explain the mechanics behind an individual deal, the structure and maths of a deal, and the key levers for value creation. In this context value creation is about shareholder value in an individual portfolio company, where ‘value’ includes the equity held by the private equity firm, management team and any other shareholders.   Part 2 will be about what ‘value creation’ looks like from the perspective of a private equity firm: what’s the role of a value creation team, what processes are involved on the PE side, what’s happening back at base and what that means for management teams working with PE.   Part 1   The maths   A private equity firm’s goal is to generate a return for their investors, by buying companies and selling them at a profit. A bit like buying a house with a down-payment plus a mortgage, private equity firms tend to buy companies with a combination of upfront cash (‘Sponsor initial equity’ in the example below) and debt. The use of debt in these structures is why this model is called a Leveraged Buyout (LBO), but not all PE deals have to include debt, and the amount of debt vs EBITDA (the leverage ratio) can vary widely and tends to be higher for larger companies which are often a more attractive credit risk for lenders.   We’ll walk through an example purchase and sale of a business below and include the model at the end for those who’d like to reference it. Note, some key terms and calculations: Enterprise value:  ‘the measure of a company’s total value’ – typically calculated based on profit, but could also be based on a multiple of revenue (more common in early stage and venture capital deals) = (EBITDA) x (Multiple) Net debt:  the debt owed by a company, net of any cash balances or other cash equivalents = (Debt) – (Cash) Equity value : the market value of the company that is attributable to shareholders = (Enterprise value) – (Net debt) MOIC - Multiple on invested capital:  (Investment’s final value) / (Initial investment) IRR - Internal rate of return:  The annualised rate of return, a bit like an interest rate on a savings account   On average, most private equity firms target an IRR of around 20-25% which translates to a 2.0x - 3.5x MOIC (dependent on how long they hold a company for).   Worked example of a private equity deal Company A makes £20m a year EBITDA. For simplicity, in this example the private equity investor buys 100% of the equity. In practice this could be any percentage, although ‘majority’ deals, where PE own at least 50%, are most common. Typically, around 20% of the equity is owned by management and employees, and the remainder by the original founders or investors in the business.   1.       Initial investment: Company A makes £20m a year EBITDA and is valued at an 8x multiple. The private equity investor buys 100% of the equity and uses £60m of debt to help fund the deal (assuming no excess cash). They also have to pay £20m of fees. Enterprise value = £20m x 8 = £160m Sponsor initial equity = £160m – £60m net debt + £20m fees = £120m   2.       Hold the business for 5 years: The business achieves average EBITDA growth of 10% per year Cash generated from the business is used to pay back the debt A simplifying assumption used in this model is a £12m (20% of the original debt) decrease in net debt per year. Debt packages (interest rates, payment schedules, covenants) vary depending on the market, with the current market being much more challenging than a few years ago, and interest rates significantly higher.     3.       Selling the business: EBITDA has grown to £32m, and the business is now valued at a 10x multiple. The seller also has fees associated with exit (e.g. DD reports) to cover. Enterprise value = £32.2m x 10x = £322m ·Equity value = £322m – £3m net debt - £16m fees = £303m   The PE firm’s net return on equity = £303m - £120m = £183m Money multiple: 2.5x return (£303m / £120m) IRR = 20% As you can see, there are 3 main levers in the ‘value creation playbook’ EBITDA growth:  Driven by topline revenue growth, and/or margin expansion. Multiple expansion:  The multiple paid for a company reflects the perceived quality of the business and the opportunities for growth (i.e. the addressable market). Multiple is also driven by the industry, and the cycle of the market. Debt paydown:  Leverage in the initial private equity deal structure allows funds to enhance their returns (in an upside scenario). Free cash flow generated during the hold pays down interest and improves the net debt position.   As the market changes, PE firms have adapted their playbooks to emphasise different value creation levers. Leverage and financial structuring have become less important over the past 4 decades , with more emphasis on multiple expansion and EBITDA growth. In the last few years with inflated multiples, firms have not been able to rely on multiple expansion and are sometimes facing the headwind of reducing multiples, so there has been even more focus on EBITDA growth ( see Figure 27 in the report from Bain )   Within each of those buckets, these are some of the most common levers a business can pull:   EBITDA growth Revenue growth e.g. new customer acquisition, entering new markets, launching new products, increasing average lifetime value of existing customers through cross-sell and upsell. Margin expansion e.g. pricing projects, operational improvements, negotiating input costs. Acquisitions – step change in EBITDA by adding new customers/markets/products etc, and the opportunity for revenue and cost synergies. Note: In the lower and mid-market there tends to be more emphasis on revenue and margin growth as there is relatively less to gain through operational efficiencies and cost cutting.   Multiple expansion Positioning – is the business differentiated and leading the competition? Market headroom e.g. repositioning target customers to access a faster growth market, opening International markets. Growing to hit certain scale thresholds – there are often step changes in multiples when businesses hit a certain size (e.g. £20m+, £50m+ EBITDA) as they then become attractive to a new pool of investors and lenders. M&A can be a key value driver here if you can buy at a lower multiple than the ‘larger whole’ is valued at. Quality of earnings e.g. increasing the proportion of recurring revenue, improving working capital and optimising revenue leakage . Strength of the team and platform for scale – e.g. robust systems and processes, clear strategy with KPIs, well defined Ideal Client Profile , proven team set up for next stage of growth. Approach to a sales process – e.g. quality of data, buyer education, timing.   Financial structure – net debt position Strong cash conversion – allows rapid payback of debt to build up the equity position, plus any surplus cash contributes to equity value. Efficient use of capital – evidence that the company can put capital to work for an attractive ROI.   When private equity invests in a company, they will have a view on the what the key value drivers will be during their hold period. This value creation plan should be directionally aligned with what the management team presented pre-deal, although will likely be more cautious on certain levers (e.g. organic growth where assumptions are often over-ambitious), and perhaps more ambitious on others (e.g. M&A). Once the deal is done, then the investors can really start to understand the company and over the first year they’ll refine (or completely rip up and start again) the value creation plan. It’s at this point that specialist value creation teams and/or operating partners start to get involved.   What does this mean if you are in a management team? Of course, management have responsibility for actually executing the strategy which underpins the value creation plan. From the investor’s perspective the first few months post-deal are all about getting a clear understanding of the business, performance, financials, team and aligning with management on the longer-term strategy. We’ll talk more in Part 2 about how the private equity investor’s lens on value creation planning, and their internal processes, can impact this strategy process.   Of course, things don’t always go to plan during the hold period and sometimes investments become a case of damage limitation rather than value creation. This might mean the PE investor is just trying to make their money back (i.e. avoid a loss), or if the company isn’t generating enough cash to meet its debt requirements it could mean that the lender takes over.   Unlike venture capital, where investors expect to lose money on the majority of their investments in a fund and make an outsized return on a few star performers, private equity relies on making a ‘decent’ return (of 2x - 4x) on most of its investments, perhaps having 1-2 outperformers making 4x+, and losing money or breaking even on just a few deals in each fund.   In Part 2 we’ll talk more about what’s involved in the value creation process from the PE firm’s side, including how value creation and return multiples for an individual company fit into the bigger picture of a fund. If you’d like to discuss value creation planning and which levers we can support you with, please Contact Us .

We are still in our relative infancy at Coppett Hill. Dave, our founder, set up Coppett Hill ~14 months ago - we imagine that the way the describe the age of our business will mirror that of the way that someone would describe the age of a small child. Months, up until the 2-year mark, at which point you pivot from months to years. What an occasion for celebration that will be. We've been privileged to work with some really exciting businesses across multiple different sectors, both B2B and B2C. We like to think that our work with management teams and investors has had a terrific impact - one piece of evidence for this has been the scaling of the team, from 2 when I myself joined in early December, to 6 of us today, soon to be 7. I write this article on the way to my first day at our new, larger, dog-friendly office - it's been an exciting time, and I can't wait to see what comes next. Oliver, Dave’s dog, being a good boy at our new office. The next phase of growth for Coppett Hill presents an entirely new set of challenges for the team. We're focused on putting processes in place which allow us to scale sustainably, and deliver even better work for existing clients, as well as great work for new ones too. The senior team at Coppett Hill all have the benefit of many years of experience across professional services. At our recent strategy day, we discussed common pitfalls of companies looking to scale in a similar fashion to ourselves, and more generally speaking, issues faced by advisory firms in our area of the market. One theme in particular caught my attention - the trap of businesses which offer advice, failing to apply that same advice to their own internal operations. Or, in a more article title-friendly phrasing, taking your own medicine . Who are the Cobbler's Children: Before writing this article, I had no concept of the 'cobbler's children problem', or in all honesty, what a cobbler was at all. I'll delegate to friend of Coppett Hill Growth Advisory, ChatGPT, to explain. The cobbler's children problem is a metaphor for the phenomenon where professionals often neglect to apply their expertise to their own situations, resulting in suboptimal outcomes. For example, a cobbler may make excellent shoes for customers but leave their own children barefoot. Readers of the articles which I contribute to the Coppett Hill website will be no stranger to my love of ChatGPT generated images. Fitting examples of this in a professional context include: Strategy consultancies making fundamentally unstrategic decisions Accountancy firms keeping messy internal accounts Marketing agencies doing a poor job of their own marketing Why does this happen? Occam's Razor  suggests that the simplest explanation is usually the correct one. In this spirit, the first reason we would identify for professional services firms filling the role of the cobbler in our previous analogy would be that they are genuinely incapable of applying their professional skills to their own business. The reasons for this, as we see it, are twofold. In some instances, it is legitimate to say that advising on something can be different to putting it into practise, especially when that advice in question is broadly categorised. For example, suppose that a boutique strategy consultancy has an immense wealth of experience advising healthcare businesses – this may not translate to an aptitude for internal, professional services strategy & operations, despite them both being ‘strategy work’. More cynically, sometimes the veneer of what people sell is exactly that - you aren't going to successfully apply your service to your own business if you aren't really capable of applying it for your clients. Another, marginally more complex explanation concerns prioritisation. It's easy to argue that immediately delivering value for clients should take precedence over internal, more operations-type projects, especially when an advisory firm has limited resources. This point becomes especially impactful when considering the mindset commonly employed by professional services firms to do with staffing - if an employee isn't utilised through working on a client project, then they aren't generating revenue. Perhaps an issue not to trouble Coppett Hill for the immediate future, but one worth mentioning, is professional services firms becoming victims of their own success. Some of the largest professional services firms have tens of thousands of employees, and thousands of partners, all effectively running their own book of business - considering this, it isn't surprising that keeping a consistent strategy/set of internal processes can rapidly become very challenging indeed. The near-constant renaming/reshaping of departments/service offerings, familiar to many of us at Coppett Hill from our time at larger consultancies, serves as a fitting example of this. How do we take our own medicine at Coppett Hill? At Coppett Hill, we help our clients with their go-to-market (GTM) strategy. So, how do we make sure we keep on top of our own GTM strategy and ensure that we maintain a baseline level of credibility in the process? The first, and most obvious way we ensure that we take our own medicine, is by structurally ensuring that it remains a focus for everyone . As well as our biannual strategy days, we schedule a company-wide call every week, where make a point of discussing the success of our own GTM strategy – this involves discussing our own pipeline openly with the entire team. We think that this spirit of radical transparency encourages everyone to take agency over the success of our own marketing/sales efforts. Yes, we are always this enthusiastic to discuss our pipeline. As a professional services firm, we understand that our route to market is very much relationship and credibility focused. This means that occasionally we need to adopt a slightly more abstract, long-term approach to ROI – for example, the article which you are reading right now might not have much short-term ROI in terms of lead generation, but we think that investing time in creating content such as this will help to build our credibility over the longer term, helping us to win new customers in the future. Building on the relationship point, we firmly believe that the best form of marketing for us is by delivering great work for our clients – we encourage the entire team to consider even the most seemingly isolated/simple tasks through this lens. To this end, we’ve been dedicating a couple of hours a week to ‘Coppett Hill Academy’, to help upskill the team and increase the quality of what we deliver for our customers. Where feasible, we look to focus internally on technical areas we work on with our customers. It's not uncommon for technical elements of our projects to involve some aspect of SEO, as part of a wider focus on marketing attribution. Whilst paid search in particular might not be a sensible route to market for a business like ours, we ensure to stay on top of our organic search rankings by monitoring our performance with our Searchscope tool. As part of the strategy for our next phase of growth, we’re taking our own medicine by carefully reviewing the success of our own go-to-market (GTM) strategy and iterating it accordingly. If you would like to discuss how we could help you do the same, please Contact Us .

We’ve explained the concept of value creation  previously, but in this post we’ll focus specifically at the other end of the private equity cycle. A successful exit is what every private equity investor and management team is looking to achieve, but it requires significant preparation well in advance of the actual sale. In our experience, Marketing & Sales leaders have a critical role to play in supporting an exit.  Getting your house in order   Preparing for a successful exit begins at the start of the investment journey, as has been covered previously . There is never a bad time to ensure your house is in order, but Marketing & Sales leaders should begin to focus on what’s required for exit 12-18 months out from a potential transaction. This will include both hygiene factors, such as reporting, as well as the proof points that support the investment case to be presented to prospective buyers. As a private equity investor I used to work with called it - the ‘ sausage and the sizzle’     The hygiene factors ( the sausage ) form the basis of what future investors will use to value the business on exit. From a Go-To-Market perspective, this could include:  Weekly/monthly KPI reports and with associated commentary  Strategy documents outlining the Ideal Client Profile (ICP) , target markets, channel and partnership strategies, etc.  Process documentation covering company approaches to Sales and Marketing  Think about these from an investors’ perspective – what would they want to see to build confidence that the business will continue to grow profitably? For a B2B business  this might be your pipeline value over time, lead conversion rate, and individual salesperson metrics. For a B2C business this may be your  LTV:CAC ratio . While score keeping is important, try to make these forward looking where possible, tying them to actions and initiatives. Work closely with your Finance team to ensure weekly/monthly reports tie back to management accounts and Board packs - this will save you potential headaches further down the line during the due diligence process.  It’s also important to mitigate any major risks that may go to value. This could include ensuring material customer and/or supplier contracts are renewed, giving prospective buyers comfort that there will be no impact to the underlying business.  Lastly, identify any gaps in capabilities, systems or processes that may be highlighted as part of the due diligence process, and create a plan to fix them. This may be through recruitment into the team, or investment in a new marketing automation platform. In an ideal world this will be fixed by the time a sales process kicks into gear, but just having a plan is a step in the right direction and will help answer challenging questions later – the primary purpose here is to present a picture of understanding, control and predictability of your Go-To-Market efforts.    Enterprise Value in the context of private equity is typically a function of EBITDA and multiple . We’ve covered how to grow EBITDA through Go-To-Market improvements in many of our previous posts, but multiple expansion can more challenging, as this reflects the perceived quality of the business and the opportunities for growth.   An upside story ( the sizzle ) will help you maximise value on exit through multiple expansion. Every business typically has a portfolio of products/services/customers at different stages of the BCG matrix . The challenge for a successful exit is realising value for the ‘Question Marks’. Sales & Marketing leaders play an important role in this, building proof points of the green shoots that are growing in these Question Mark areas, before they become ‘Stars’ and then ‘Cash Cows’. Examples of this might be website user growth in a recently launched geography, and how that compares to the historical growth in more mature geos. Or from a B2B perspective this may be the increase in the pipeline volume and value for a recently launched product or service, and how that compares to more mature offerings.  Being able to add quantitative evidence to the potential value that these upside initiatives may generate, will go some way to these being included as part of the valuation.  The private equity exit process   By the time the sales process kicks off and sell-side advisors are selected, your house should be in order, with plenty of evidence of green shoots. Focus will now turn to preparing the sales materials – another area that Sales & Marketing leaders can play a crucial role.  In the first instance, a Teaser  will be created – typically a combined effort between the management team, current investors (if applicable), and the corporate finance advisors. This is a short document (2-3 pages) designed to highlight the most attractive aspects of the company. This tends to be light on financial information but includes data points that will help to entice prospective buyers. Sales & Marketing leaders can contribute to this in several ways:  Creating an overview of the market and competitive context – showing the growth of the market and the business’s highly defensible position  Highlighting key customers success stories – showing the business’s ability to win and retain valuable customers  Providing KPIs/metrics that highlight the quality of the business - examples include user growth rates, customer acquisition, LTV/CAC, revenue retention, etc.   Once the Teaser has been shared with a longlist of prospective buyers, a shortlist will be selected based on level of interest, who will be given access to the Information Memorandum  (‘IM’). The IM is a longer form version of the Teaser and will include more extensive financial and trading information. This is where details of the Sales & Marketing strategy, KPIs and greenshoots can be presented to paint the business in the best light.  Alongside the IM, the advisors will work with Management to build a Financial Model ,  Vendor Due Diligence (VDD)   reports and a  Virtual Data Room  (VDR):  The financial model typically consists of a forecast P&L, cashflow statement and balance sheet, that will be used by prospective buyers to value the business. Sales & Marketing leaders will need to provide KPI forecasts into this, as they will form a key part of the revenue growth assumptions  The VDD reports are provided by separate advisors to give an independent view on the historical trading and achievability of the business plan  The VDR is where key documents are shared with prospective buyers. The KPI reports, strategy, and process documents previously compiled can be shared here, to answer buyers’ questions about the overall Sales & Marketing strategy and performance  As well as the review of the IM, Financial Model, VDD reports, and VDR, Management Presentations  will often be held. This gives buyers an opportunity to meet Management teams and ask questions face-to-face. These will sometimes include just the most senior executives, or other times the wider senior team. The presentation itself is often a shortened version of the IM, but any soundbites that Sales & Marketing leaders can add around recent successes or progress against key initiatives will help to add flavour to the investment highlights.  Prospective buyers will look to carry out Due Diligence  (DD) on the business, to validate the information received as part of the IM, Financial Model, VDD reports and Management Presentations. DD typically covers a range of aspects, including Financial, Commercial, Legal, Technology and Tax issues. Sales & Marketing leaders can play an important role as part of the Commercial Due Diligence (CDD) workstream by providing evidence that supports the business’s growth plans in the context of the market, competition, existing customer base and growth strategy.  We are also seeing an increasing trend of more thoughtful investors carrying out Go-To-Market DD – where they are looking to identify the potential for value creation through improving GTM strategy and operations.  The buyer will use all this information to inform their valuation and negotiation strategy, while the seller will be looking to have as many interested parties participating in order to maximise competitive tension and drive a higher multiple & better terms.  Trading momentum – keep going!   It may feel like there is a lot to process and documentation as part of an exit - that’s because there is! The most important thing, however, is that trading momentum is continued. This will ensure you create competitive tension among prospective buyers (which is important for healthy valuations) and avoid any negative surprises during or after the sale process.  In summary, there are plenty of ways that Sales & Marketing leaders can play a key role before and during a business exit. Just make sure you have the sausage and the sizzle.  If you’d like to discuss how you can better prepare for an exit through value creation planning and due diligence, please Contact Us .

In the first part  of this two-part series, I shared some of the basics of value creation in private equity from the perspective of an individual deal, explaining the basic structure of a private equity deal and the most common value levers. In this second part I want to step back and look at what value creation means from the perspective of a private equity firm and how that impacts management teams of portfolio companies. This post aims to provide you with practical insights into the inner workings of PE firms, shedding light on the different roles involved in value creation, and the common internal processes. I'll cover what goes on behind the scenes from the initial diligence stages to the ongoing management of their portfolio companies and some of the practical implications that can have for the management team.   Private equity firms are usually managing several funds at once, with different years, and perhaps different strategies, remits and investors. The aim of the private equity firm is to generate a return for investors in each fund, by using that capital to buy companies and sell them at a profit. The 10-year horizon IRR for US and Western European buyout funds has hovered around 15% over the last 10 years (Source: Bain Global Private Equity Report 2024 – Fig 25). What this translates to is a target return on each portfolio company of 2-4x. Unlike venture capital where the majority of returns are driven by a few star performers, private equity relies on a more balanced portfolio of returns. However, assets do play different roles within the broader fund, which can change depending on the economic or PE firm context, in turn affecting the value creation plan and the management team executing it. For example, in the current environment with high interest rates and economic uncertainty, PE firms have been struggling to sell assets due to a mismatch in valuations between buyers (who are having to use more expensive debt and are looking to buy at lower multiples) and sellers (who are looking for higher valuations to meet their return targets). This has led to a slowdown in exit activity, with a 44% decline in buyout-backed exits  from 2022 to 2023, which has continued in 2024. All this leads private equity firms to have to rethink their fund strategy in order to return some liquidity to investors. They will be assessing which companies will reap a ‘good enough’ return if sold now, versus which are worth holding onto to reap the returns on more growth. As a management team, this might mean that the timeline to exit becomes more compressed, or extended, than you had originally planned for.     In this macro context, ‘value creation’ has become more important than ever. In a sense, value creation is the entire job of a private equity fund. However, in private equity ‘value creation’ usually refers to specific teams, roles, capabilities and processes that are focused on assisting portfolio companies during the hold period to achieve their strategic plan and to meet or exceed growth targets. This is in contrast to the ‘deal’ or ‘Investment’ team, which is responsible for sourcing, assessing and investing in companies. In most firms, the deal team also retains overall responsibility for the portfolio through to when the PE firm exits, including company board representation.   There are as many different structures for setting up value creation teams as there are PE firms. Value creation roles usually fit in to four types: In-house generalists  who provide broad support to the portfolio in achieving the value creation plan. They are often also responsible for reporting internally on performance versus plan. In-house specialists  who focus on specific areas such as operations, finance, or marketing. Operating partners who are external to the PE firm, thought might be retained by them, and work closely with the portfolio companies. They typically bring deep operational expertise and industry-specific knowledge to help drive initiatives and improvements in portfolio companies. Advisors/network  who are external experts and consultants brought in on a project basis to address particular challenges or opportunities.   What is involved in ‘Value creation’ from the private equity team’s perspective?   Whilst the detailed planning and execution of value creation levers are happening on the ground in the portfolio company. There is a lot of value creation planning going on behind the scenes within the PE firm. We thought it would be helpful to share some examples of what that can look like through the hold period, to shed some light on the investor’s context.   Pre-deal: Whilst each fund will have a house style, there are typically 2 threads that the deal team are thinking about pre deal: Due diligence – due diligence is essentially trying to validate the factors that underpin the EBITDA x multiple calculation, e.g. Financial due diligence to validate the EBITDA figure, Commercial due diligence to validate the market opportunity and competitive position which underpin the multiple Value creation planning – how will this investment make money?  Management will have presented a growth plan, but the deal team will have their own view on this and may do quite a lot of additional work on testing the assumptions, and planning for different scenarios.   The team will present the investment case to Investment Committee (typically the most senior investors in the fund) who will scrutinise and question the plan. If a company is planning for 10% organic growth, in a flat market, there needs to be strong evidence for why this is achievable! In our work at Coppett Hill, we see that value creation teams are starting to engage much earlier within the deal cycle and are often working alongside the deal team on the value creation planning.   When the market is more challenging, such as over the last 18 months, value creation plans need to be even tighter as buyers can’t rely on multiple expansion and low-cost debt packages supporting returns. As we mentioned in Part 1, investors will usually have their own plan, the ‘investment case’, that they are investing against. This is often, but not always, an adapted version of the management plan with some sensitivities, and perhaps some ‘big bets’, applied.   Implications for Management: The strength of the value creation team and what support they can provide management teams during the hold period is increasingly part of the pitch and a key differentiator. As the process progresses and a deal looks more likely, the value creation team may start to shift into gear to ‘hit the ground running’ post deal and want to align on workstreams, potential issues and priorities. It’s important for the management team to be involved in the creation of the investment case and buy in to the key assumptions, as they are the ones who will have to deliver it.   Hold period This is where the value creation work really starts on the ground. PE investors typically plan for a hold of 3-5 years, although we’ve been seeing that extending in recent years with a slow deal environment.   From the investor’s perspective during the hold period, they are looking for visibility on how execution of the value creation plan is going and how the company is performing against that plan. The reality is that the first year of an investment rarely goes quite as anyone (either management, or the investors) expected and therefore it is highly likely that the value creation plan and strategy will be updated and revised.   Setting, and updating, the 2-5 year company strategy should be the role of the Board. With the executive team preparing a plan for the Board to debate, and then being responsible for implementing it. The Board is one of the key channels through which investors have influence. The make-up of a Board can vary, but at a minimum will usually contain a non-executive Chair, the CEO, and a lead investor, and often the CFO. The lead investor (also called PE representative, or Investment Director) is the primary interface between the PE firm and the company during the hold period.   Year 1 of the hold is especially important because of the compounding effects of growth, if key projects or launches get delayed for example, it can easily set back the plan by a year or 2. Equally, it’s important for the Board to get a good understanding of the company before launching into any no-regrets decisions and the first 6 months is usually a post-deal adjustment period. Boards will usually aim to have a post-deal strategy day within the first 6 months, which should bring together the management plan and the value creation plan, once the Board members have a better understanding of the business. A really useful exercise at this strategy day can be to ‘work backwards’ from what you want to be true when it comes to the next sale process. For step-changes rather than incremental growth, there needs to be very focused use of resources on a few areas, rather than trying to spread too thin across the value chain. Investors will usually want to focus in on 1-3 priority areas, such as sales, marketing, finance, technology, or human capital.   These priority areas are often where value creation teams are brought in. They will work with management in a more practical way, outside of the Board. For example, if organic customer acquisition is a key pillar of the value creation plan, here are some ways the 4 different type of value creation roles might support: In-house generalists – share relevant examples from other portfolio companies, make introductions to peers in the portfolio who can share their experience. In-house specialists  – work closely with the marketing team, sharing best practice and advising on specific growth levers. They might support on some specific analysis or rolling out tools/programs used across the portfolio. Operating partners – the investor might bring in an ex-CMO with relevant industry experience to support the company on the ground with execution, hiring and managing the team. Often, they are brought in part-time and for a fixed time period. Advisors/network  – the investor may recommend a specialist consultancy that they have worked with before on similar challenges. For example, at Coppett Hill we might be brought in to help better understand marketing economics, working closely with the marketing team and building data and insight infrastructure that the company then owns.   Investment Committee continues to play a key role, with the PE representatives on the Board typically going back to IC every 6 months to report on performance vs plan (which may or may not be visible to the Management team). If numbers are off target, IC will want to understand why and to feel assured there’s a plan to remedy it. The IC has visibility across the whole fund so they can provide a useful perspective on market and industry dynamics, and also share lessons from previous investments. Implications for Management: You will likely be asked for much more granular reporting – the PE representative is ‘on the hook’ for performance against the value creation plan, but they’re not in the business and close to the detail. The individuals also tend to be quantitative by nature (ex-accountants, bankers, consultants) and want the comfort of understanding the numbers. Investment committee reporting and discussions may drive requests for information or changes in priorities. Your PE representative is likely having to write an update paper every 6 months which they need data for, and they may get questions or feedback from the IC which they need to answer and will often play into Board discussions and strategy. Fund dynamics – the IC is responsible for managing the performance of the overall fund and best serving the PE firm’s investors (Limited Partners). This may impact things like exit strategy and may not always be aligned with what the Investment Director wants. For example, the Investment Director will typically want to hold out for an extra half turn on returns for that company, whereas the PE firm’s interests overall may be better served by generating cash now to keep LPs happy. Heavy focus on a few key areas. Your investor might get very into-the-details on the few priority areas (which may feel frustrating at times), whilst giving management a much longer rope and much less oversight in other areas and just monitoring top level KPIs.   Exit When it comes to exit, it’s not just about what value has been generated over this hold, but the exit process is another sale process and therefore a view on value creation for the next stage is needed. Good investors will be thinking about this from the start, such as ‘preparing the Investment Memorandum’ for exit at the very first strategy day. An exit process can take a year or more, and the lead investor should play a really valuable role in providing an ‘investors’ perspective’ on the exit story and what the next investor will be putting in their value creation plan.   As my colleague Harry von Behr has recently set out , from a value creation perspective the key things at exit are: Reliable and granular management information that can evidence the key points in the IM, e.g. ‘Sticky customers’ being backed up with strong data on customer retention over the last 5 years Evidence that the value creation plan drove success during the hold period (i.e. linking specific initiatives to growth) – investors want to know that growth was strategic and replicable, and not just down to luck of the market A clear plan for future value creation, mainly through accelerating revenue or improving profitability, not reliant on assumed multiple expansion Evidence that the company can achieve this next value creation plan, ideally with some green shoots / tests of key parts of the plan e.g. if a big part of the plan is International expansion, having done a small MVP launch in that market, or having beachhead customers there pulling you over Implications for Management: In the run up to exit, there will be a lot of focus on data and evidence and preparing detailed performance information for the data room. There will be a lot of focus on consistent performance and hitting targets, especially EBITDA, in the run up to an exit, as this underpins the valuation. Historically ‘valuation EBITDA’ could include adjustments and exceptions such as one-off projects and costs, meaning that these might sometimes be preferred over ongoing expenses, even when the latter is cheaper in cash terms. However, in the current market buyers are less willing to accept adjustments and the investor is likely to be very focussed on achieving the EBITDA that underpins their returns target. ‘Look forward’ earnings can be used to underpin higher valuations if you have proof points about the impact of an initiative that is already being rolled out, resulting in a push to get proof points ahead of an exit.   Hopefully the above sheds some light on the context behind certain Board dynamics, requests from your PE representative, or changes in priorities. One of the things that differentiates us at Coppett Hill is that we have worked in private equity value creation and investment roles, as operators and as consultants, meaning we can help to translate between these worlds. We work across the whole value creation cycle, from pre-deal DD through to supporting execution of the value creation plan and preparing for exit. If you’d like to talk about value creation planning and which levers we can help with, please Contact Us .