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The Canada Pension Plan Investment Board is taking a page from private equity giants by creating an internal team that can work with companies it invests in to improve their returns.
Launched a year ago, the small team is part of CPPIB's private investment operation and has a mandate to parachute in to companies – particularly firms recently acquired by CPPIB in private equity deals – when needed to help develop a growth plan.
CPPIB chief executive officer Mark Wiseman said the fund wanted to have some "operational expertise" in its midst, which will also be handy to help assess potential new deals when the fund is considering investments.
"We're not turnaround experts, [and] we're not going in and managing the companies that we invest in," Mr. Wiseman said in an interview.
"But having some degree of expertise around operational excellence we think helps us on the due diligence side – it helps us to actually have a better understanding of the companies we're looking at before we buy them. And then once we own them, in specific circumstances it is something we can do to help enhance the value-add of the investments that we've made."
He said the team may work with a company CPPIB has just invested in to help the management team develop a "100-day" strategic plan, or it could work with a company CPPIB has owned for a while on a specific critical project, such as implementing a new computer system.
Mr. Wiseman says the model comes from private equity giants like Onex Corp., KKR & Co. LLP and TPG Capital LP, who are often partners with CPPIB in major private-equity deals and have large teams of operations experts who work with companies.
"They've all built much more substantial teams to do this type of thing, and we're partnering with those firms and we leverage off what our partners bring to the table," Mr. Wiseman said. "But this give us some in-house expertise in this area."
Skilled operating teams are a key selling point for major private equity firms. U.S.-based TPG, for example, says on its web site that it devotes "significant resources" to attracting experienced operating professionals and a network of world-class executives and advisers who will work with acquired companies to improve their operations and returns.
(Janet McFarland is a Globe and Mail Business Reporter.)
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Janet McFarland