An orphaned business is carved out, transforming underneath PE ownership.
A three-pronged business with more than 70 years of experience in the food processing industry was readying a significant, but non-core business unit for a carveout under new PE ownership. While each of the parent’s three divisions offered a variety of natural foods, one had been the cash cow for the larger entity; yet, it lacked relevance in light of a newly charted strategic direction.
The new sponsors saw promise for this division as a once again growing, standalone company. Ampersand was brought in to help our client answer crucial questions about leadership and culture, with a specific focus on understanding the capabilities to be built in this soon-to-be hived-off business.
Confronting the Challenge: What We Knew
The new PE sponsor was determined to provide a fresh start for an organization that had historically felt unsupported. Previous ownership had siphoned off a significant amount of the profits from the primary brand, creating an environment where one under-invested business funded two smaller, disparate divisions.
But there were significant questions about morale, leadership capabilities, and high R&D spend without clear ROI. They knew that assessing capabilities and adding and upgrading talent in the C-suite were must-do’s, but needed additional data to do so strategically and thoughtfully.
Additionally, the newly formed entity would need to pivot from slow, steady, and dependent upon corporate resources to an independent, growth-oriented organization. Success meant learning how to operate agilely, establishing decision-making protocols, and recreating what they had to come to depend upon from a shared services organization for critical enabling functions like HR, R&D, Finance, and Technical Research.
Ampersand’s Approach
Ampersand integrated elements of assessment and development that inspired candor and drove action from both sides of the table. Our Organizational Survey process utilized targeted individual interviews, 360 feedback, and action planning to align all stakeholders on the path forward. Building on Ampersand’s initial recommendations, project scope grew to include Executive Diligence, where we played an active role assessing candidates to assist the sponsor in selecting a best-in-class CEO and CFO once the deal was closed.
Discovery: What We Found
The experienced and collaborative team had accomplished much, despite inattention from the previous corporate parent. But standing up the organization while driving for growth exposed gaps in most functional areas, posing significant risk that the organization would be overwhelmed while navigating its move to independence. R&D was a particular challenge; “led” by a technologist who was better equipped to be an individual contributor, a significant redirection was required. And a new organizational structure to address both market-facing and internal needs was crucial to facilitate a successful carveout: in the absence of a compelling CEO to drive strategy, efforts to date had been unfocused, inefficient, and lacking discipline.
On the bright side, however, Ampersand uncovered hidden strengths to tap in Finance, Manufacturing, and HR. While Finance was previously recognized as a reasonably capable department, it was clear that they could handle much heavier lifting than expected. Manufacturing had been seen during diligence as potentially stale and stagnant, but it became apparent that the department was actually a huge generator of talent through mentoring, coaching, and thought partnership. Finally, the HR leader brought previous PE experience, thoughtful professional development initiatives, and was seen as the “glue of the organization.”
Three months post-close, Ampersand’s Executive Diligence galvanized decision making around a C-suite leader that the organization sorely needed: a CEO who brought a diverse understanding of operations, sales, and supply chain. Leadership strength was energized further by the hiring of a CFO who was a fully confident, credible, and commercially focused finance leader. The result was a team with both the drive and the experience at this scale to support the business.
Outcomes: What We Contributed
- Set the stage for a successful carveout of an $800M revenue division of a large corporate parent.
- Provided recommendations for an agile, lean organization structure, effectively setting the pace for expansion and growth while nurturing a newly formed infrastructure.
- Uncovered mismatched roles in R&D, shining a light on discrepancies and opportunities that previous leadership had missed.
- Facilitated discussion and a team-oriented approach to align all stakeholders on next steps and crucial benchmarks.
- PE sponsors continued to use Ampersand as trusted advisors throughout the hiring life cycle, enabling the placement of a successful CFO as well as a CEO who is a true force of nature. Both are currently driving thoughtful and meaningful change.
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