Decades of short-term focus opened the door for much-needed PE vision and structure.
The PE sponsor had a sizeable investment with a meaty thesis: expand beyond generics and into specialty pharma, commercialize an already-existing global pipeline, streamline the business, and rebuild culture after a uniquely tumultuous string of events. Our role was to assess alignment with (and appetite for) the investment thesis, current state of culture, and how to sequence leadership changes without putting business stability at risk. Most importantly, the PE sponsor needed to know whether the incumbent CEO was the right partner to restructure and rebuild with, or whether a more experienced leader was needed.
CONFRONTING THE CHALLENGE: WHAT WE KNEW
The aggressive value creation plan, based on both organic and acquisitive growth, raised a wide array of questions for Ampersand to answer. Chief among them were: would this formerly family-owned business truly have the flexibility to reposition and expand? What organizational, leadership, and structural changes were most critical to deliver? How could private equity ownership best help the business (and individual leaders) navigate significant cultural baggage? How cohesive is this team, and what are the risks associated with embedding stronger, more strategic leadership?
With $443M EBITDA at diligence and a target exit of $1B EBITDA on the horizon, the PE sponsor needed to support the team to both execute on a near-term pipeline, maintain the existing portfolio, and launch specialty products. A successful transition beyond generics would require significant improvements across strategy creation, operational execution, cost management, manufacturing, R&D efficiency, and communication – all while turning a keen eye toward a clear and present need to overhaul leadership strength from the top down.
AMPERSAND’S APPROACH
Creating an Organizational Scorecard translated the strategy into specific accountabilities and benchmarks to track; outlined what the management team needs to accomplish to realize the investment thesis; enabled alignment, and created momentum around key strategic priorities.
Against the backdrop of the Organizational Scorecard, Ampersand integrated elements of assessment and development that inspired candor and surfaced meaningful perspectives on the current state of the business, as well as appetite for the transformation ahead. Our Organizational Diligence process integrated 1:1 interviews and light-touch 360-degree feedback to identify the organization’s strengths and risks, the functional gaps to fill, while generating recommendations and action items to immediately address opportunity areas.
Building on Ampersand’s initial recommendations, we performed Executive Diligence to assess CEO candidates and assist the sponsor in selecting a best-in-class leader once the deal was closed.
DISCOVERY: WHAT WE FOUND
Ampersand found a nimble, committed leadership team which prided themselves on responsiveness, agility, and resiliency in enduring a tumultuous past – both in terms of leadership and in business growth. Eagerness for a true partner was clear, as each team member earnestly looked forward to the next phase of growth. And efforts to rebuild relationships and trust with regulators following recent turmoil had been paying off, laying the foundation for continued global expansion.
But operating with discipline and adequate change management – rather than defaulting to agile firefighting – posed a significant risk. Having embraced execution and reactivity as points of pride, learning how to proactively plan; support more rigorous R&D; invest in talent; nurture culture, or develop strategic acumen had been left to the wayside. The lift ahead to adapt from high-volume generics to a broader healthcare focus was not to be underestimated.
And while the warm, open, and easy-going incumbent CEO brought much-needed transparency and stability to a struggling culture, his conflict aversion, under-developed judgement, and lack of strategic ability misaligned with the needs of the future organization. To fully commit to the charter ahead, an organization of this size and remit needed a true strategic, visionary leader to right the ship and steer it forward through uncharted waters.
OUTCOMES: WHAT WE CONTRIBUTED
- Creation of an Organizational Scorecard illustrated core growth targets, clarified needed capabilities in key enabling functions, and identified specific opportunity areas to address in order to achieve the investment thesis.
- Ampersand-led feedback provided insights on organizational strengths, opportunity areas, and team dynamics – as well as clear and strategic recommendations to lay the groundwork for collective success.
- As the legacy CEO was moved to the BOD, a follow-on Executive Diligence assessment put a strategic, goal-focused, and results-oriented CEO at the helm to lead the business throughout the next phase of growth.
- In year one, continued partnership with the new CEO and BOD resulted in thoughtful Executive Diligence and a complete upgrade of the management team.
- In year two (and with a newly energized organization and significant momentum), we were engaged for another Organizational Diligence. During the company’s first acquisition, Ampersand assessed the incoming business and talent during the diligence phase and illuminated areas of competence and risk to inform future diligence, organizational design, and talent decisions.
- The sponsor anticipates a best-in-class exit following a continued focus on diligence and leadership development throughout the hold period.
Our commitment to confidentiality prevents us from disclosing the identity of our clients and other confidential information. The information contained in this case study is not intended to serve as advice.
