Consumer & Retail

Transformation and Growth Through Private Equity Ownership

6 min read

The private equity consumer sector is a dynamic environment that demands strong leadership and strategic foresight.

In the second of our new ‘Transforming Legacy Brands’ CEO series, hosted by Odgers Berndtson’s Global Consumer & Retail Practice, we welcomed Boris Kawohl, who recently concluded his tenure as the leader of the global consumer team at 3i Private Equity.

Boris has been instrumental in driving successful transformations and international growth strategies in the consumer and retail sectors, including at Action, Europe's leading non-food discount retailer which grew during 3i’s ownership from approximately $600m to over €13billion in revenue.

During the webinar, Boris shared his experience and insights through an interactive session led by Odgers Berndtson’s Pieter Ebeling who leads the Private Equity & Consumer Practice in the Netherlands.

The Crucial Role of Leadership in Private Equity

One of the key statistics in private equity is that 73% of successful exits are attributed to the team members, highlighting the critical importance of having a strong team in place, particularly the CFO and CEO. Starting with the CEO is essential, as they play a pivotal role in the investment journey. Ideally, a strong, well-established team that has been working together for some time is preferred. However, private equity often encounters situations where the perfect management set-up is not initially present.

In such cases, quickly assembling a strong team is crucial to avoid losing time and momentum. Clarity in leadership and communication is vital for effectively executing the value creation plan.

Strategies for Risk Mitigation and Team Building

Private equity firms are adept at identifying, accepting and mitigating risks. One effective strategy is to work with potential incoming CEOs during the due diligence phase. This approach helps to reduce risks and ensures the new leadership is well-prepared to take on their roles. Additionally, internal candidates, often overlooked, can be valuable assets due to their familiarity with the company and its operations. Their internal knowledge and relationships can be crucial for success.

Transforming Consumer Brands

Boris shared his experience with transformations of high-profile consumer brands throughout Europe. These include: nexeye, one of Europe’s leading optical retailers in the value for money segment; Konges Sløjd, a premium lifestyle brand from Copenhagen; BoConcept, a Scandinavian furniture brand; and Basic-Fit, Europe’s largest and fastest-growing fitness chain.

Boris stressed the importance of having a clear vision for the company, which serves as the foundation for the strategy towards future ambitions.

Ensuring alignment upfront among the management teams, the board and the shareholders is vital.

Constructing supervisory boards, alongside management teams, is crucial for achieving the company’s vision and strategy. Board members should have relevant experience, whether industry-specific, geographical, or otherwise, to help the company realise its agreed vision. Financial incentives, including upfront investments, help align everyone along the journey and demonstrate commitment to the value creation strategy.

Navigating Future Trends and Opportunities

During the webinar, Boris discussed the current trends and outlook for the consumer market and private equity investments. Navigating future trends and opportunities in the consumer markets requires a keen understanding of the sector's cyclical nature and the ability to identify stable, or otherwise attractive pockets within the market.

Despite, or because of, challenges in the operating performance of some businesses, there are areas that are attractive for investment. Particularly, due to the generally volatile consumer sector investment sentiment. Sector specialists who can navigate the market cautiously are well-positioned to capitalise on these opportunities.

Focusing on identifying winners within specific sub-sectors, rather than making broad sub-sector calls, can lead to more successful investments.

Additionally, the impact of AI in the consumer sector is beginning to grow, with the most technologically advanced companies benefiting from AI as an extension of their existing digital capabilities.

As AI technology advances, it is likely to play a more significant role in driving innovation and efficiency within the consumer market.

Key Takeaways for Aspiring Leaders

For those transitioning from senior roles in large, listed companies to private equity, understanding the unique dynamics of the private equity environment is crucial. Value creation goes beyond P&L management and talking to experienced individuals in the field is essential. A realistic perspective and caution against over-optimism are key.

The webinar provided valuable insights into private equity opportunities, due diligence, and the detailed orientation and sector knowledge required from both people and business perspectives. Practical strategies for rolling out businesses across Europe were also shared, emphasising the importance of risk awareness and strategic planning.

Odgers Berndtson's industry-specific expertise and global reach support businesses in identifying transformative talent to navigate change and market adversity. We extend our gratitude to all participants for their contributions to this insightful discussion.

__________________________________________________________

Get in touch. Follow the links below to discover more, or contact our dedicated leadership experts from your local Odgers Berndtson office here.