November 20, 2023

Industry pulse check: As an Operating Partner, is your firm billing back your time to Portfolio Companies?

As an Operating Partner, is your firm billing back your time to Portfolio Companies?

One reason that I enjoy doing work across Private Equity portfolio operations is that the mandates are rarely ever carbon copies of one another. The beauty of an Operating Partner is that every firm, and dare I say every deal team inside every firm, can define an Operating Partner in their own novel way.  It always keeps things interesting and allows me some white space within which to engineer solutions.  (Maybe it’s my insulation from being replaced by artificial intelligence….. famous last words.)

In some ways this condition simply reinforces that there is no one universal way of doing things in this space. Over time I have watched the structures of portfolio operations teams morph and evolve. One might think that at some point things would settle into one agreed upon form. If that were the case, it would be easy to counsel a prospective client on the “right” way to set up their team. But, I guess, because we’re ultimately dealing with people, there will always be room for ambiguity and bespoke design.

If there was one issue on which I’d expect PE firms to have some genuine agreement it would be around how they pay for the Portfolio Operations folks inside the shop.  Unfortunately, my assumption on that issue would be wrong too.  

Last month I put this question out to the community via my LinkedIn page and received a large number of responses.  We framed the question as follows:

“Does your PE firm directly bill back your time to the portfolio companies?”

I never expected to see the results as they came in.  A totally even split.

  • 51% responded “Yes”
  • 49% responded “No”

I know there are good reasons on both sides of this argument but didn’t anticipate such a balanced response from the community.  I’d love to pound the table for one direction versus another, but the data just doesn’t support it. Net-net, if you’re happy with your current dynamic, there isn’t any overwhelming market evidence to cause you to reevaluate it.  Happy LP’s, happy CEO’s and happy employees remain the one goal we can all agree upon.

And on that note, Happy Thanksgiving!  I’m grateful for all of you, and for the opportunity that this tremendous country affords to each of us.  Stay well.



Leave a Reply

Your email address will not be published. Required fields are marked *