Portfolio Company Performance Analysis and Reporting Automation

Portfolio Company Performance Analysis and Reporting Automation

Providing transparent and accurate performance data to investors, partners and auditors is becoming increasingly important, if not critical for those engaged in private equity and venture capital investing. The nature of the private equity investing environment, however, makes this seemingly simple task problematic and fraught with inefficiencies. Many obstacles inherent in this investment vertical exist that prevent the systematic flow of information from operating company through the Fund Manager to Limited Partners and other related stakeholders. This presentation will attempt to isolate existing challenges and identify opportunities for value creation within the IT community.

Discussion Agenda 1. Portfolio Company performance analysis and reporting WHY is it important and HOW can it be improved? 2. Industry trends and the associated opportunities for adding value. 3. Examine the TOP 10 challenges inherent in automation. 4. Common pitfalls to homegrown solutions. 5. Industry software solutions 6. Brief product demonstration 7. Customer remarks TA Associates 8. Conclusion and Q/A.

Typical flow of information each month / quarter from portfolio company management team to the fund manager. Data collected from EACH ENTITY includes: Financial Statements Capitalization Details Operating Metrics Company II Distributor PPT Reports Company III Financial Svcs. PDF Reports Company I Software Co Excel Based Company IV Retail Native System Reports Company V Medical Device MFG. Word Template FUND MANAGER

Typical distribution of information monthly / quarterly / annually upon receipt of data by the fund manager. Ad hoc / one off analysis Internal Partners' Review Annual FAS 157 Audit FUND MANAGER Portfolio Analysis Fund Raising LP Reporting

Does the existing process ADD or CONSUME value? Company II Distributor PPT Reports Company III Financial Svcs. PDF Reports Company I Software Co Excel Based Company IV Retail Native System Reports Company V Medical Device MFG. Word Template FUND MANAGER Ad hoc / one off analysis Portfolio Analysis Internal Partners' Review Fund Raising Annual FAS 157 Audit LP Reporting

In order to solve this problem and turn it into a value added process, it is important to understand that a negative correlation between efficiency and insight is inherent in the process as it often exists today. Efficiency Insight Insight Efficiency

Drivers leading to the need for technology include: 1. Inefficiencies (and cost!) of current process today the data collection and analysis process typically conforms to the 80/20 rule of analysis. 80% of time spent expediting collection and preparing data for review and 20% of time spent analyzing - effectively forcing the fund manager to choose EFFICIENCY over INSIGHT. 2. Current economic conditions greater visibility into portfolio company performance is necessary in order to expose warning signs for diminishing performance and help illuminate opportunities for organic value creation. 3. Growing regulatory environment FAS 157 and other statutory requirements create an essential need for instant access to critical investment and financial information. 4. Increasing demands of the LP community What may appear to a valued investor as a simple request for information may drive hours of data aggregation from within the fund.

Leveraging Technology A systematic approach can be used to eliminate non-value added activities, automate the flow of information, and facilitate a rich reporting and analysis environment that will effectively flip the 80/20 rule of analysis and establish a POSITIVE CORRELATION between EFFICIENTY and INSIGHT. Efficiency Insight

TEN OBSTACLES TO AUTOMATION 1. Diverse portfolio of companies. 2. Disparate financial and operational platforms. 3. Vastly differing chart of accounts (general ledger) 4. Inconsistent data formats. 5. Unique Key Performance Indicators KPI s 6. Ensuring timely collection of information. 7. Concerns regarding additional reporting burden. 8. Constant changes to budget and plan data. 9. Ever changing external reporting requirements. 10. Need for access to basic information from a variety of stakeholders

Homegrown solutions often fall short as a result of a failure to address the needs of four distinct and often competing agendas. 1. Portfolio Company Management Teams often over burdened with reporting obligations and push back on process that requires additional effort with no tangible benefits. Timeliness of reporting will suffer. 2. Internal Finance Teams Tasked with external communication (reports) and conforming to an ever growing list of regulatory requirements. 3. Deal Teams Require access to more granular, operating level details in a user friendly environment that facilitates a robust ad hoc analytic environment. 4. Managing Partners and Directors Seek a high level, actionable Just the Facts reporting environment from which to glean a sense of the state of a body of investments.

DRIVER OPPORTUNITY Inefficient Data Management Leverage Technology and related tools to economize the process of portfolio company performance data management, lower operating costs and improve overall returns. Current economic conditions and a maturing PE and VC investing industry. Embrace technology that improves the timely delivery of information enables the fund manager to make better, more informed decisions faster. Expanding regulatory environment. Implement a strategy that facilitates consistent and reliable access to historic performance information. Increasing demands for financial transparency. Turn the growing need for financial transparency into a valued asset that builds confidence among investors and other stakeholders. Leverage technology as a key point of differentiation in an increasingly competitive fund raising environment.

Technology Solutions providers on the market today include:

ClearFinancials Brief product demonstration

TA Associates Comments

Conclusion / Q&A Thank You!