Inflexion’s inherent value creation philosophy spans multiple levers

As a private equity house that has operated in the mid-market space for more than 20 years, Inflexion has developed a trusted value creation methodology it adapts for each and every one of its portfolio companies, Tim Smallbone, Partner at Inflexion and responsible for its Portfolio and Value Acceleration teams, told Actum.

 

“Value creation has been part of Inflexion’s DNA throughout its lifetime. As the years have passed, we have become more formalised in our approach, building on tried and tested experiences of managing more than a hundred deals,” Smallbone said. 

 

“Before we invest in a company, we draw up a structured value creation plan. These will have common themes running throughout them across our portfolio companies, such as M&A plans or how to best increase margins or boost revenue, but are each bespoke to that particular company,” he added.

 

 

As is typical, Inflexion’s value creation strategy surrounding a new investment begins with its 100-day plan. Within this hundred days, Inflexion’s investment team map out how its value creation strategy will be applied over the lifetime of its investment. These are reviewed quarterly and annually, and two Inflexion partners are placed on the board to work closely with the chair and whose responsibility it is to drive through that value creation plan.

 

During the initial 100-day plan, significant consideration is taken over the required talent changes, Smallbone said. Discussions surrounding people are one of the most common and recurring themes Inflexion experiences throughout its investments, he added, acknowledging that changes are often made in this department for the good of the company to progress in the direction it wants. “Having the right people in the right place at the right time of a company’s development is crucial,” he said. “Businesses can quickly outgrow its management’s skillset.”

 

 

Inflexion’s inhouse Talent team, which makes up part of its Value Acceleration team, has a network of direct contacts that are used to help fill positions around the top table. This is often used alongside the use of external search parties.

 

Inflexion’s Value Acceleration team conducts and drives the growth strategy across its investments. Portfolio companies turn to them for support across a spectrum of value creation levers. These levers are made up of digital, commercial, internationalisation, ESG, talent and M&A fields. The private equity house also has its own dedicated portfolio management team that sits across each of its three funds. These not only monitor the company and fund performance, but also oversee whether value creation plans are being successfully implemented.

 

Its Value Acceleration teams have external associates it interacts with that may be parachuted into certain situations for additional support if and when necessary, and Inflexion is itself investing in expanding this team.

 

The growing importance of drawing up and successfully implementing an achievable and meaningful value creation plan in today’s investment environment is something that is not lost on Inflexion.

 

“Private equity houses cannot survive these days by simply buying and selling well. The hard graft is spent and the rewards are achieved through the work put in during the holding period where value is proactively added,” Smallbone said.

 

Smallbone was also quick to emphasise that the purpose of implementing a strong growth strategy and value creation plan stretches beyond that of yielding immediate reward. 

 

“Creating value is not just about increasing profits for the here and now, but also making sure the business is in good shape to further progress under new owners once we exit. We ask ourselves ‘What are we creating that somebody will want to buy off us in five or so years’ time?” he said. 

 

 

It also takes place through various means throughout the lifetime of Inflexion’s investment period and is not simply a set of projects needed to be executed over a set period of time. Not only is there a lot of interaction with portfolio companies through its dedicated Partners and teams assigned to them, but Inflexion also runs numerous exchanges and events where presentations are made surrounding sector developments or wider discussion points such as ESG or digital developments.

 

While there is a focus on the levers Inflexion identifies at the beginning of a process, it is essential that an investor stays nimble and reactive throughout its ownership of a business, Smallbone said. 

 

 

“The rapidly developing world of technology is another element that needs to be kept on top of. It is imperative to continually invest in technology to stay abreast. The demands of technology continue to roll on,” he added.