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Paul Share: In-house operating partner or external professional: Which is right for your PE firm? –

Paul Share wrote an article for titled “In-house operating partner or external professional: Which is right for your PE firm?”

The operating partner’s role in private equity is a relatively new position. Industry firms differ about whether such a role should exist and, if so, whether an in-house operating partner (employee) or external operations professional (consultant) should be utilized.

Many PE firms need additional boots on the ground in some form during each operating company’s hold period. But they must consider a number of key issues, benefits and challenges before deciding to bring on that talent as an operating partner or external professional.

Expertise and Payment

When it comes to operations talent, expertise is one issue to consider. Specifically, limited partners may not see the need for operating partners. But those LPs may not understand that PE firms’ five highest values are finding the opportunity, negotiating the deal, pursuing bolt-on acquisitions, creating financial capitalization structures and finding the monetization strategy.

Using the theory that you should use the right tool for the job, PE firms should stay focused on their core strengths so they can add the most value. And that’s where operating partners or external professionals come in. PE firms recognize their core competencies and realize that experienced operations staff know what the firms’ investors, creditors and potential buyers will require to maximize value.

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