The challenge for Association CEO’s is to understand how Private Equity Hires Associations, Private Equity Fires Associations. Simply put, the new Private Equity owners are not necessarily maintaining their Association memberships. Following the company purchase, new owners use concrete strategies that improve operations, products, revenues, and market position. Utilizing proactive and innovative strategies will determine whether or not Private Equity Hires Associations, Private Equity Fires Associations.
Private Equity Investment is Exploding
U.S. investment in Private Equity skyrocketed to $57 billion in the first quarter of 2018 alone. In 2017 there were 3,283 transactions in the United States, totaling $511.66 billion. These numbers reflect a post great recession high. Associations who haven’t yet experienced membership losses yet should expect to see these challenges land at their front door soon. Bobby Franklin, President & CEO, National Venture Capital Association (NVCA) in Washington, DC indicates that PE has the resources it needs to continue acquiring companies. According to PitchBook 2017 Annual PE and VC Fundraising report, Private Equity funds have almost $1 trillion in dry powder (investment capital) and that could foretell more company acquisitions.
Private Equity Background and Their Objectives
Understanding the threat is the critical first step for Associations, notes Steve Caldeira, President & CEO of the Washington, DC based Household & Commercial Products Association (HCPA). Earlier in his career, Caldeira worked firsthand with Private Equity while at Dunkin’ Brands (2007-2009). The company was purchased by three PE Funds; Bain Capital, The Carlyle Group, and Thomas H. Lee Partners. It has been reported that each of the firms profited approximately $600 million upon sale of the company. Caldeira notes that these firms have a clear vision once they purchase companies:
- Maximize return to its investors – Through due diligence and strategic rigor, they vastly improve the company’s operational performance and brand marketing to enable revenue growth and measurable profits to maximize its exit position.
- Exit – Selling the company to a different firm or company or even possibly cashing out through an Initial Public offering.
Having this background is the starting point for the understanding of how and why Private Equity Hires Associations, Private Equity Fires Associations.
Private Equity Hires Associations, Private Equity Fires Associations: PE Too Has a Value Imperative
Nowadays executives don’t join anything without a direct connection to helping them achieve business outcomes. Busy executives will find other ways including starting their own coalitions or launching their own Associations to create an environment more conducive to business success. Private Equity is in many ways similar. Keep in mind that the key differences that define the Private Equity approach are highly disciplined strategies combined with a well established success formula for their investors. Understanding these differences will help Associations why Private Equity Hires Associations, Private Equity Fires Associations.
Two Steps to Engage Private Equity Owners
Steve Caldeira faced the Private Equity challenges as an Association Executive at two leading Trade organizations: International Franchise Association and now at the Household & Commercial Products Association. Understanding the Private Equity mandate, Caldeira applied a two step process that bridged critical gaps through an understanding of differences to work toward common goals:
- Early Engagement – Meeting with the new Private Equity owners to understand the regulatory and tax impediments that keep them up at night. Then mapping these concerns to the Association’s federal and state advocacy teams.
- Volunteer Leadership – Inviting new owners to participate on the Board of Directors (with a potential pathway to the Officer level) or to participate in key Association committees. These opportunities help the new owners leverage the Association as an extension of their firm’s business strategy. They also create understanding (as well as business to business opportunities) for promoting dialogue between Private Equity owed companies and other members of the Association.
Organizations, in addition to the International Franchise and Household & Commercial Products Association, are utilizing the board leadership opportunity in similar ways, with many PE owned companies sitting on Association Boards. Associations with PE owned companies sitting on Boards include:
- American Hotel & Lodging Association (AHLA) (Caesars Entertainment, Hilton, La Quinta)
- National Retail Federation (NRF) (The Container Store, Macy’s)
- American Beverage Association (ABA) ( Pepper Snapple Group)
- American Frozen Food Institute (AFFI) (Pinnacle Foods)
These two approaches are effective strategies in so much as they are determining factors as to whether or not Private Equity Hires Associations, Private Equity Fires Associations.
Private Equity Owners Also Insist Upon Clarity and Deliverables
Corey Rosenbusch, President & CEO, Global Cold Chain Alliance, Arlington, Virginia remains focused on the potential loss of dues and non-dues revenue as Private Equity companies consolidate memberships. Thanks to pro active strategies the Association has not lost a single private equity firm from membership when they entered the space. Moreover, each of these companies have stayed engaged after they were purchased.
GCCA is delivering impressive results for Private Equity owned companies and overall membership through the mitigation of costs of regulatory compliance. For example, members achieved a decrease in the number of violations and OSHA fines per inspection.
The Association also identified two other high ROI opportunities to support the new Private Equity owners with:
- Technical resources – Helping reduce costs.
- Talent development initiatives – Assisting with workforce challenges.
Rosenbusch notes “GCCA continually identifies new and innovative opportunities to maximize the ROI for the organization and for our Private Equity owned members.”
Private Equity Hires Associations, Private Equity Fires Associations
Make no mistake about it, Private Equity is increasingly becoming a force to be reckoned with for all Associations. The high volume of available capital and Private Equity investors hungry for strong returns means Association CEO’s must create opportunities to engage their new Private Equity owners. Not doing so is risky and could result in considerable erosion of the membership base. Utilizing proactive and innovative strategies are the best tools that will determine whether Private Equity Hires Associations, Private Equity Fires Associations.