December 29, 2014
Interviewed by: David Snow
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Arsenal’s 90-day Plan for Chromaflo

Exploring the relationship between private equity group Arsenal Capital Partners and its portfolio company, Chromaflo. Arsenal’s Tim Zappala, Chromaflo’s Scott Becker and RSM‘s Mauro Bonugli discuss the 90-day plan for Chromaflo, how Arsenal guided the process, and what the firm helped the portfolio company achieve.

Exploring the relationship between private equity group Arsenal Capital Partners and its portfolio company, Chromaflo. Arsenal’s Tim Zappala, Chromaflo’s Scott Becker and RSM‘s Mauro Bonugli discuss the 90-day plan for Chromaflo, how Arsenal guided the process, and what the firm helped the portfolio company achieve.

Arsenal’s 90-day Plan for Chromaflo
Anatomy of a PE Deal

David Snow, Privcap: Today, we’re joined by Scott Becker of Chromaflo Technologies, Tim Zappala of Arsenal Capital Partners and Mauro Bonugli of RSM. Gentlemen, welcome to Privcap. Thanks for being here.

Unison: Thank you. Pleasure.

Snow: We’re telling the story of Chromaflo and Arsenal. You’re the GP and you’re the head of the portfolio company. We’re learning about how you’re partnering to create value and make a more successful business. And, of course, Mauro is here to give the 1,000-foot view of best practices across the industry and different models for accomplishing value creation. There is a term used quite a bit in private equity: the “100-day plan.” There are variations on this term, but it’s basically the plan to create value at the portfolio level, typically done in conjunction between the private equity firm and the portfolio company. How does the plan for value creation work at Arsenal? Give us a bit of a background.

Tim Zappala, Arsenal Capital Partners: Yeah. We use a very similar process. Prior to closing, once we have a fix on exactly what our overall strategy’s going to be and we’ve dialoged enough with the portfolio company so we know where we want to get the alignment. We normally put together a 90-day plan, which has all the commercial aspects and technical aspects that the company will be focusing on from an imitative standpoint as well as a variety of integration-related activities. And those vary. Then, once the close occurs, the company moves forward with the execution with our support. Then, roughly six months after the company is up and going, they’ve got their feet on the ground. We get to know everybody better. We normally go back and we refresh the strategy to make sure we’ve got the right alignment for the next couple of years.

Snow: Scott, from your perspective, what was that process like? How intense was it?

Scott Becker, Chromaflo Technologies: Our 90-day or 100-day plan, as you described it, was developed well in advance of the close. We were probably done with our 90-day plan three months before the close occurred.

Zappala: That’s right.

Becker: The first week after we became Chromaflo, we exhibited at a trade show as Chromaflo with complete literature and signage—the whole show was around our new name. Our goal was established well in advance as well. We intended to double our earnings over a five-year period. I’m happy to say we’ve actually done that twice now. We’re not only double, but we’re four times our original earnings and we’ve done that in less than three years. So, it’s been a good run. We had to initiate a pretty extensive 90-day plan. It covered every single discipline—everything from finance to operations to sales and marketing to communications—and it was heavily provided by the Arsenal group, the template on how to implement it.

Snow: I’d love to hear more about specifics of what worked in the plan, but Mauro, can you give us a bit of a background on whether all private equity firms use these plans? Do some of them say they do, but not really? What’s the range of approaches?

Mauro Bonugli, RSM: Yeah. It’s very interesting. They all have their 100-day plan. But I’ve seen both spectrums. I’ve seen firms that have 100-day plans that are somewhat generic, right? Mostly put together based on the investment thesis, so it could be we’re going to double earnings in five years so what we have to do in the first 100 days to prepare to get there. And I’ve seen the opposite, too. I’ve seen plans, like Scott mentioned, where when the investment is closed you have very specific lists of strategic initiatives you want to accomplish. Another component that I haven’t seen this tremendous as often as part of the 100-day plan—but I’ve seen it getting more and more common these days—is setting up their company dashboard or company operating metrics. A lot of private equity funds try to look at what we call “forward-looking metrics” and more operational metrics and figure it out, [asking] “What are the four or five metrics that really matter in this business, and can we figure out in the first 100 days how we can actually extract them on a more recurring basis so we can manage this successfully?”

Snow: Scott, without getting too much into the weeds on chemicals for those of us who are not experts, what were the most important facets you identified in constructing this plan that you knew would really drive growth at your company?

Becker: I would say number one was transferring the technology we had in the U.S. onto the global platform that we developed through the acquisitions. Maybe the second thing was to make sure we had alignment, because we actually put together quite a diverse set of cultures through these various acquisitions and we needed to make sure we were all aligned and focused on the most important things, which in our case happened to be customers or potential customers.

Snow: Then, was there a tool kit or a set of resources you were able to reach into within Arsenal to accomplish some of these things?

Becker: I often reached out to Arsenal. I continue to reach out to Arsenal to this very day, heavily with Tim because he has extensive experience. There isn’t a template that exists, but more or less experience and advice that’s critical to making things happen.

Bonugli: I’ve seen private equity funds being very specific in some templates. For example, I worked with an operating partner who had more like an HR background and he had what he called the “one-page plan,” [in] which every company would come in and he would work with the HRO to actually roll out this one-page plan to make sure everybody was online.

Zappala: Right. So we tend to be a bit more specific in the functional areas. Okay. In the growth and strategy and technology areas, it tends to vary by company. As Scott has indicated, if you went through and looked at his plan, there were key initiatives that were team-oriented because we find we need to get the team in place first and make sure the organization has the right skills in order to move forward—technology-oriented and commercially-oriented. Then, it gets a bit more functional. What are you going to do on IT? What are you going to do on accounting? There are a handful of activities that you have to make sure you’re covering both in a typical integration and, in this case, in a carveout situation.

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