Consultancy or Software for Private Equity EBITDA Enhancement? 

When private equity firms implement private equity procurement, they often outsource the entire process to private equity procurement consultants. However, this is not the only option available.  

Spend analytics and intelligence software can also drive major EBITDA enhancement opportunities. To help you decide which option is right for your cross-portfolio margin enhancement efforts, let’s go over the core benefits of each approach. 

TLDR: Jump to the bottom of the article to find out how a consultant engagement and a Spend Intelligence solution can work together to bring even more EBIDTA enhancement value.  

Consultancy engagement benefits

Private equity procurement consultants are typically skilled at analyzing data from both a boots-on-the-ground and a 10,000-foot view perspective, which provides several benefits. 

Outsourcing the work to the experts 

Letting a specialized expert diagnose and fix your problems is often the most efficient way to achieve your desired result. Like hiring a contractor for a remodel, you can come home to great results without having to learn a new skill or add to your daily responsibilities. Consultants are highly trained at: 

• Identifying less obvious opportunities for EBITDA enhancement 

• Prioritizing projects and initiatives 

• Finding programs, relationships, and approaches you didn’t know existed 

• Highlighting concern areas your portfolio needs to address 

In other words, a private equity procurement consultancy will bring a fine-tuned sourcing eye that you may not have in-house. Instead of fumbling around with data or stumbling into unexpected sourcing pitfalls, you can let a veteran handle the process for you.  

Focus on what you do best 

Another benefit of working with private equity consultants is that you can enjoy the margin improvements that come from cost savings while focusing on other priority tasks. Private equity procurement projects can be time-consuming because they involve mobilizing various business units, reaching agreements with suppliers, managing savings leakages, and more. 

Consultants typically have templates, existing relationships, and deep category expertise that adds efficiency to the project.  

Experts, a whole lot of them 

Working with a consulting firm gives you access to a full team of seasoned sourcing professionals. Depending on the firm you work with, you could hire decades of cumulative experience from thousands of private equity and portfolio company engagements.  

The benefits of a SAAS solution 

Consultancy engagements provide clear value for several reasons, but spend analytics solutions offer their own curb appeal. In fact, they have become the way for individual procurement teams to increase their bottom-line impact. 

Spend analytics can provide massive value across your entire portfolio. Here are a few reasons why it can be a better investment than a consultancy engagement.  

Time is money, and SAAS is fast 

While consultants are skilled at analyzing data, identifying spend reduction opportunities and delivering on them is not always fast. Spend analytics solutions, on the other hand, provide comprehensive spend visibility as quickly as possible because it’s how we’ve designed our platform from the start. 

Like an experienced consultant, we have worked with 500+ companies and 20+ GPs to collect, normalize, categorize, and refresh $8 trillion of spend data. As a result, we have built a platform that uses advanced machine learning algorithms that can provide full portfolio visibility in two months or less. 

Our data model’s time to value isn’t an exaggeration. Learn more about how we deliver usable data so quickly. 

Progress can be continual 

One key differentiator between Spend Intelligence and a procurement consultancy engagement is the scope and level of visibility it provides. Consultancy assessments are typically snapshots in time that focus on specific areas of the portfolio.  

Spend Intelligence, on the other hand, provides full visibility that can be refreshed monthly. Not only does it allow you to see the current state of your spend, but you can also watch trends develop over time and use it for more informed decision-making long term. 

This visibility is great for perpetual enhancement programs since it allows you to easily find projects, evaluate their impact, and prioritize accordingly. It also gives you the option to equip each portfolio company’s procurement team for category management and EBITDA enhancement initiatives at the company level. In short, Spend Intelligence often proves to be a skeleton key for firms looking to optimize EBITDA on an ongoing basis instead of simply improving it with short-term cost cut-outs. 

Stay in control of your data and execution 

Unlike a consultancy engagement, working with Spend Intelligence keeps you and your partners in the driver’s seat. This provides benefits you cannot find outside of a software solution: 

• You stay involved in and aware of all projects. 

• You have on-demand access to spend data, reports, and advanced analytics. 

• You can lead sourcing initiatives with context that can only come from a portfolio-level perspective. 

Of course, a consultancy engagement will not take away your control and access to data completely. However, it will look different than it does when using tech. To decide whether a hands-on or off approach is ideal for you, consider the following:  

• Your goals – Is the firm seeking short-term gains or perpetual, continuous improvement? 

• Your resources – Do your portfolio companies have procurement teams that could execute opportunities independently? 

• Portfolio complexity – Consultants are experts, but some issues take the touch of an operating executive.  

• Your budget – How much does the ROI percentage matter? Consultancy engagements can quickly become expensive. 

As you can probably tell, using a consultant and implementing a Spend Intelligence solution both provide a wide array of benefits, which brings us to our final point.  

Why not both?

The best part of this comparison is that you don’t have to choose one or the other. Spend Intelligence and consultants both offer unique benefits that often work well together. 

Most importantly, starting with a Spend Intelligence platform will give you a holistic spend data foundation in just a few weeks, which you can then use to:   

• Eliminate lengthy, costly assessments 

• Bring in consultants whenever you want 

• Speed up consultants’ delivery timelines 

• Handle one-off projects internally 

• Identify and direct the execution of opportunities at individual portfolio companies 

• Take a mature, best-in-class approach to portfolio procurement 

Ready to learn more about how you can jumpstart your margin enhancement efforts with Spend Intelligence? We would love to quantify the impact that taking control of your portfolio’s spend could have on your bottom line. Get in touch to schedule a meeting with Matt Angier, our Director of Private Equity Accounts.