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Planning for the Future of Private Equity with Francisco Partners' Peter Christodoulo

Plan for the future of PE with 3 strategic ways from FP's Peter Christodoulo

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January 26, 2022

No text better describes the times than the opening lines of Charles Dickens' A Tale of Two Cities:

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us." 

From deal volume lows and dry powder highs to stock market twists and supply chain turns, it's no surprise that many firms are ready to get off this roller coaster. If the last several months have taught dealmakers anything, it's to expect only the unexpected.

Still, as we enter 2022, dealmakers must look for sustainable ways to plan for the future, beat the competition, and maximize their teams' time and resources. That's why for our newest webinar we brought in Sourcescrub's latest investor, Francisco Partners, to give their expert advice on how to find and win new opportunities "regardless of where the market is heading. 

Here are 3 strategic ways our guest expert, Peter Christodoulo, believes firms can successfully manage the inclines and falls the new year may bring while still filling their pipelines. Buckle up!

#1: Develop the courage to win

When deciding which deals to invest in, being okay with coming in second isn't an option. As all seasoned investors know, "If you're second, you're last." That's why dealmakers must dedicate themselves to developing the courage to win "  which is easier said than done in uncertain times.

Peter advises combining radical candor with self-assessment to ensure that your team is honest with itself about whether or not an opportunity is the right fit for the firm. If the answer is yes, this practice will also ensure your team has the confidence to fight hard for first place in spite of any past setbacks. "We actually sit down and say, 'Why do we have a right to win this thing?'" shares Peter. "Or 'Why should we be the ones to pay more? What do we have at our disposal to convince the company that we're the right partner, if we are?'"

Dealmakers are also turning to the latest technology and data to help them better understand whether a company is the right fit for their firm's investment thesis, and how they fit into the larger market landscape. Peter and his team at Francisco Partners use a private company intelligence platform to research opportunities and take a data-driven approach to building pipeline.

#2: Stay market neutral

Successful firms aren't letting the unprecedented times brought on by COVID-19 and its aftershocks interrupt dealmaking. "The market is the market. The multiples are the multiples. We're trying to buy companies that are good companies, that are quality businesses, that we think we can add value to," shares Peter. 

Having consistent benchmarks is the key to owning this strategy. "We try to do a similar number of deals each year in and out "we try to buy and sell about the same amount each year," continues Peter. As a result, "We stay roughly market neutral. The market goes up, the market goes down." 

Peter does acknowledge the need to find balance during particularly sharp short-term trends: "If things are irrationally up or down, human nature says, 'Let's try to do more.'"Still, staying market neutral as much as possible is a great way to stay sane."Otherwise you can drive yourself absolutely bonkers trying to worry about all that stuff," he says.

#3: Find your angles

Understanding how to differentiate your firm and effectively convey the unique value you bring to specific deals has become increasingly important "especially since most pre-transacted companies are now searching for more than a capital partner. "You can always dream up an angle, but then you need to think about whether they care about this angle," explains Peter.

Some of the most successful angles start with getting a feel for whether or not the founders would like to work with a hands-on firm. From there, details that explain how your firm can actually help are what make the angle unique. This means explaining what you've done in the space, the people you know, the expertise you bring, and the success stories of what you've done for others. 

Dealmakers like Francisco Partners know that finding the right angles will show founders they actually can and want to help. "I think it's about reading the situation, then figuring out what matters and do we have the tools in our toolkit to solve that equation."

Strategizing Your Firm's Success in 2022

Winning bids based on informed decision-making, staying market neutral through balanced goals, and adding true value to portfolio companies are just a few of the ways leading firms are strategically positioning themselves to succeed no matter what happens this year. 

For more actionable advice and tips for 2022 and beyond, watch the full webinar on-demand: An Inside Look with Francisco Partners' Peter Christodoulo.