The Treasury Management Playbook for Newly Minted Private Equity Portfolio Companies

Written by Blake Mulligan
April 13, 2023

You’re the Treasurer or CFO of a company that’s just been acquired by a PE firm. Congratulations! Getting acquired is a huge milestone for a company. But, let’s be real here. 

Being acquired, especially by a PE, can be a little nerve wracking. But it shouldn’t be, because at the end of the day, the PE execs want the same thing as you— a profitable business with a strong balance sheet, and exciting future prospects.

And these days, the best way to ensure that is by being data-driven. Like you, private equity firms make decisions based on numbers. No doubt you already noticed this during the due diligence process! 

So, when it comes to corporate treasury, one of the best ways to be a successful portfolio company is to ensure you’re providing them with all of the cash insights and data they need to make the right calls. The more up-to-date and granular, the better.

In this article, we’ll dive into what a private equity takeover really looks like, what you can expect, and how you can provide not only your treasury, but the entire organization with the best outcomes under new management.

the treasury playbook for newly minted pe portfolio companies

What is Private Equity?

Private equity, or PE, companies are investment firms that are in the business of buying and selling other companies. Think of them like the house flippers of the corporate world. They buy a company (called their ‘portfolio companies’) which they believe they can improve, using their expertise and contacts (and generally a reasonable dash of debt) to boost the bottom line, and then sell it off to someone else.

The holding period for PE firms obviously depends on each individual investment they make, but usually they like to be in and out within three to five years.

PE firms need to know the industry they operate in really well. They need to be able to look at the books and the way a company operates, and know for sure that they can provide additional revenue to increase the value of that company.

Some PE firms operate within specific sectors, such as healthcare, finance or real estate. Others specialize in particular types of takeovers, such as taking public companies back private.

And let’s address the elephant in the room. Private equity has a reputation. Their operating model and relatively short holding period means that many see PE as slash and burn doom merchants, arriving on the scene to cut a company to the bone before offloading it.

The reality isn’t quite so worrying.

According to research led by Jeff Lerner, Professor of Investment Banking at Harvard Business School, head count at companies which are taken over by a PE firm goes down by just 1.4% on average. Most of this is down to public to private transactions, with private company takeovers actually resulting in an average increase in headcount of 13%. 

Why Do Companies Get Acquired by PE Firms?

PE firms takeover companies that they believe could be improved. There are a million different reasons for this, and individual PE firms will have different metrics they look for based on their own expertise. 

Here are just a few scenarios:

Poor Management

Sometimes it all comes down to the fact that a company is currently being mismanaged. Perhaps they’re stuck in the stone ages with their data and analytics, operating their business on paper invoices and snail mail. Or they might have had a leader who made a big bet and it failed so the company now needs someone to facilitate a turnaround. 

Need for Support

Another common reason for being acquired by a PE is when a company has expanded its business beyond the core product or service, and now they’ve got a large number of unprofitable business units. They need expertise on their side to help them operate at a level they haven’t reached before.

Greater Access to Opportunity

Other times, it simply just comes down to the fact that a PE firm can improve margins through their network or opportunities for scale. For example, a PE firm may have two portfolio companies which make running shoes. They could acquire a third brand and immediately improve their margins by bringing down the production costs of the shoes because of the overall volume of the three brands combined. 

One thing is for sure, data, analysis, cash reporting, and cash flow forecasting are very high on the priority list. 

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Life After Being Acquired by a PE Firm

The bottom line is that when your company is taken over by a PE firm, there will be changes. That’s their whole business model, to take over and try to improve things. 

Change can be scary, but it’s also important to keep in mind the second part of the PE model: to improve the business.

And while there are likely to be some structural changes to the company (we’ll get to that next), for you as an employee, it’s an opportunity to be part of a company that is stronger and more profitable, which ultimately improves your job security.

And honestly, treasury teams are likely to be busier than ever when a PE firm takes over. As we’ll get into, understanding the day-to day-financial position of the company and being able to forecast cash flow will be a vital part of the PE investment process.

Changes to Expect When PE Takes Over

With changing management comes new priorities. Obviously these will depend specifically on your company and the PE firm taking over, but these are some common areas where changes are likely to be in the wind.

Leadership Changes

In many cases, a PE firm believes that a company could be run better or differently, so it makes sense that senior management would be some of the roles which they look to replace or consolidate.

As well as that, if the original founders of the company are still working in the business, they may transition out. 

Shifting Business Objectives

And with new management in place, business objectives could change as well. In the case of public to private transactions, this often comes in the form of streamlining the business, focusing back on the core profit centers.

For private company takeovers, it could mean the same, but it could also mean the opposite. The influx of cash from the new owners can provide private companies with capital to expand into new product lines, geographic areas, or service offerings.

New Systems and Processes

Whether they are minor systems and process tweaks (like moving from Slack and Google Suite to Microsoft software, for example) or a wholesale change of the tech stack and the operating model, expect some operational changes. 

This could include new suppliers, new inventory management systems or a change to your customer invoicing procedure.

Just know that, for treasury, your systems and processes will not be free from (constructive) scrutiny! They’re going to want to understand how you do things today and find opportunities to streamline your processes. 

Increased Focus on Data and Analytics

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Make sure you have an analytics tool that enables you to better manage and visualize data. 

Not only will they help you to be more efficient, they will also want to get you access to richer data, easier than ever before. 

One thing almost all PE firms have in common is a major focus on data. They buy companies based on the specific financials of both the company and the deal, and will have a detailed roadmap from acquisition to sale in about three to five years. In order to keep this plan on track, they need to measure the performance of the business very closely. 

For treasury teams, feeding PEs with the data they require, like forecasted cash flows, means more frequent reporting and more granular detail. At the end of the day, the better the data, the better the decision-making and the easier it will be for your business to thrive under the PE firm.

You’ll want to find an automated cash management tool that scales with you during your next growth phase and enables you to quickly calculate things like cash position, while checking all of your bank balances in one place.

Performance Metrics

If you’ve managed to escape Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs) so far in your career, first tell us your ways, but second, that’s about to change.

PE firms want to see results. They not only want to know that their new plan is working, but that the strategy is making the company more efficient and more profitable. To do this, they need metrics. This means that, if you don’t already, you’ll likely have specific objectives you’ll need to meet each month or each quarter.

Recommended: 8 Treasury KPIs to Demonstrate More Value to Leadership

3 Ways Treasurers Can Ensure Their Company is a Successful Portfolio Company 

Now that we’ve covered some of the general impacts of a private equity takeover, let’s get into some more detail on how corporate treasury teams can make the most of the process. 

1. Ensure Complete Visibility of Cash Position

Knowing your cash position and cash burn rate is at the top of the priority list for corporate treasury teams. Obviously you already understand that you need to have a handle on the company’s current and projected cash position, but with a PE takeover there’s even less room for error. 

As we’ve already covered, PE firms are very data-driven and make decisions quickly. In order to be able to make quick decisions, they need accurate and current data. Figures that contain errors, or out-of-date and incomplete reports are likely to invite pressure from the new leadership. 

Here’s how you can avoid bad data:

Minimize Manual Inputs

Manual consolidation of cash is an accident waiting to happen. Data shows that up to 88% of spreadsheets contain errors. Some of these might seem minor, but there are major problems that can happen as a result. 

Take Canopy Growth, where a formula error in their spreadsheet led to reported quarterly earnings of -$69 million when they were actually -$155 million.

You don’t want to be responsible for that. 

That’s why API-powered bank data feeds and real time reporting are so important. By connecting directly to your data, you reduce the possibility for human error, thereby eliminating one of the biggest factors of incorrect data. 

Establish a Single Source of Truth

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With Trovata, you can see all of your multi-bank data in one secure platform.

With a single source of truth, you can eliminate manual errors and also manage your multibank data with ease. Most companies have a large number of cash accounts across many different financial institutions. That’s especially the case for companies who operate across borders and in multiple currencies.

And, what we’ve seen since the SVB meltdown is PEs requesting their portfolio companies to hold their liquidity across multiple financial institutions to minimize risk. 

While having a multibank cash management approach prevents you from losing access to the bulk of your liquidity overnight, it also means juggling several banking logins, making it difficult to gather and sort your financial data. 

Software like Trovata allows you to amalgamate all of your holdings into a single dashboard, using the power of bank APIs and ERP integrations to allow for consolidating reporting and a single source of truth for your cash. 

Previously, this kind of reporting and visibility was only available in a legacy Treasury Management System (TMS), but thanks to next-gen technology, you can get started with Trovata for free and connect your first bank in minutes. 

2. Use AI to Quickly Generate Forecasts and Run Scenario Planning 

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Trovata collects and normalizes data, then generates a forecast to show your PE firm, all in one platform.

Knowing how things have been in the past is useful, but offering insights into how things will look in the future is a massive value add. That’s particularly true for PE, whose entire business model relies heavily on a specific roadmap.

Not to mention, with a PE takeover comes debt, so being able to forecast and use excess cash to pay down the debt becomes a huge priority.

Software like Trovata utilizes technology like APIs and machine learning to predict future cash flows and conduct sophisticated scenario planning

Curious to see it in action? Check out this overview of cash flow forecasting in Trovata:


Accurate cash forecast data is invaluable to any business leader and makes the treasury team an invaluable resource in the business planning process.

3. Use API Payment Processing to Reduce Fees

Reporting is obviously incredibly important, but treasury teams can leverage this same technology to improve operational efficiency as well. API payment processing is the most clear example here. 

If you’ve managed to establish a single dashboard to manage cash, you can also use it to control transactions across all of these accounts in a single location. This cuts down time, but it can also lead to real cost savings as well.

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Trovata Payments empowers you to orchestrate money movement efficiently, initiating Real-time Payments (RTP), ACH, and wire transfers all in one platform.

For example, using Trovata, treasurers can make direct bulk payments rather than batch payments, dramatically cutting down on transaction fees and reducing errors in the transaction process. 

All of this adds up to significant increases in efficiency and reductions in costs, both major wins in a PE firm’s eyes.

The Bottom Line

Like anything in business, there are pros and cons to being taken over by a private equity firm. Despite the somewhat intimidating reputation, a takeover can be an opportunity for a company to grow and develop into something bigger and better, offering greater opportunities to everyone.

Treasury teams in particular have the potential to become a crucial part of the process, providing the insights and data analytics to help business leaders make accurate decisions.

But to do this effectively, they can’t rely on old-school methods of analysis and cash flow operations. Spreadsheets are too error-prone. The leading TMS costs an arm and a leg and takes up to 12 months to implement.

By leveraging next-gen treasury technology like Trovata, you can work more efficiently, gain greater projection capabilities, and reduce cash management and payment costs simultaneously. 

Now that is how you can quickly win over your new PE firm!

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