The New Reality of PE Ownership
The day a private equity firm acquires your company, everything changes. The pace increases. Scrutiny intensifies. Reporting requirements multiply. Questions get sharper and more frequent. And your ERP—which may have been adequate for running the business as a private company—is suddenly under a microscope.
PE sponsors have seen hundreds of portfolio companies. Their operating partners have spent careers optimizing businesses across every industry. They know what good looks like, and they can spot gaps in minutes. The systems and processes that served you well enough before the transaction become obvious deficiencies under professional ownership.
This isn't criticism for its own sake. PE firms exist to create value, and their playbook is well-established: operational improvements, strategic growth initiatives, and eventual exit at a higher valuation. Your ERP is foundational to executing that playbook. If it can't deliver reliable data, support rapid decision-making, and scale with growth plans, it becomes a constraint on value creation.
Understanding what sponsors actually want—and preparing for it before they ask—positions you as a partner in value creation rather than a problem to be managed.
Understanding the PE Perspective
To understand sponsor expectations, you need to understand their economic model and operating approach.
The Investment Thesis
PE firms acquire companies with a value creation thesis. Maybe they see opportunity to accelerate revenue growth. Maybe they plan to improve margins through operational efficiency. Maybe they'll execute a roll-up strategy with add-on acquisitions. Maybe the company will benefit from professionalization and scale.
Whatever the thesis, the ERP needs to support it. Growth plans require systems that scale. Margin improvement requires visibility into costs. Acquisitions require integration capability. Professionalization requires robust processes and controls.
Your first task as a portfolio company CFO is understanding the investment thesis and assessing whether your ERP can support its execution.
The Time Horizon
PE ownership is inherently temporary. The typical hold period is 3-5 years, sometimes shorter. This creates urgency: value creation that takes seven years doesn't fit the model. Improvements need to happen quickly.
This time pressure extends to ERP. You don't have years to gradually improve systems. If there are problems, they need to be addressed now. If capabilities need to be built, the clock is already running.
The Exit Focus
From day one, sponsors are thinking about exit—whether to a strategic buyer, another PE firm, or the public markets. Everything that happens during ownership is evaluated partly through the lens of how it affects exit.
Your ERP matters for exit. Buyers will scrutinize your systems during due diligence. Clean financials, mature processes, scalable systems—these support valuation. Messy data, manual processes, and technical debt—these create concerns that can affect price or deal certainty.
Think of every ERP investment as both an operational improvement and an exit preparation activity.
The Portfolio View
Your company is one of many in the sponsor's portfolio. Operating partners are managing multiple investments simultaneously. They don't have time to learn the idiosyncrasies of each portfolio company's systems.
Sponsors want portfolio companies to operate with common frameworks, standard metrics, and comparable reporting. If every company defines EBITDA differently or reports on different timelines, portfolio management becomes difficult. Standardization creates efficiency for both you and the sponsor.
What Sponsors Actually Want from Your ERP
With that context, here's what PE sponsors typically expect from portfolio company ERPs.
Fast, Reliable Monthly Close
Five business days or less. No excuses, no exceptions. This expectation is universal across PE firms. If your close takes 15 days, it's too slow. If it takes 10 days, it's probably still too slow.
Why so urgent? Several reasons:
Sponsors need current data to manage the portfolio. Waiting two weeks for financials means making decisions on stale information.
Fast closes indicate process maturity. If you can close quickly, you probably have good systems, good controls, and good people.
Board meetings happen on fixed schedules. If the board meets on the 15th and your close isn't done until the 18th, you have a problem.
Speed enables responsiveness. Issues identified quickly can be addressed quickly.
A five-day close isn't about heroic effort at month-end. It's about processes and systems designed for speed—automation, real-time data, clear procedures, and discipline. If your current close takes 15 days, getting to five days requires structural change, not just working harder.
Clean, Auditable Financials
Even if you're a private company, sponsors expect public-company rigor in financial reporting. Clean revenue recognition, proper accrual accounting, supportable estimates, documented judgments. The bar is higher than you might have set for yourself as a standalone private company.
Why public-company standards for a private company? Because:
Auditors will scrutinize everything. Even private company audits get more rigorous under PE ownership.
Exit due diligence will be exhaustive. Buyers' accountants will test every significant estimate and judgment.
Problems found later cost more. A revenue recognition issue discovered during exit negotiations can kill a deal or crater valuation.
Credibility matters. If sponsors can't trust your numbers, they can't trust your plans.
This means your ERP needs to support compliant accounting: proper ASC 606 revenue recognition, accurate accrual tracking, complete documentation, and clear audit trails.
Real-Time KPI Visibility
Monthly financials aren't enough. Sponsors want dashboards showing revenue, bookings, pipeline, churn, operational metrics—updated daily or weekly.
The specific KPIs depend on your business:
For SaaS: ARR, MRR, churn, expansion revenue, CAC, LTV, net dollar retention
For manufacturing: orders, backlog, throughput, inventory turns, scrap rates
For services: utilization, realization, backlog, pipeline, win rates
For distribution: orders, fill rates, inventory turns, margin by product
Whatever the metrics, sponsors want them accurate, current, and consistent with how they think about the business.
If your ERP can't produce these metrics—if they require manual spreadsheet work each time they're needed—you have a gap. Either build the reporting capability or spend countless hours manually producing what should be automatic.
Scalability for Growth
The whole point of PE ownership is growth—organic and through acquisition. Your ERP needs to handle 2x or 3x the current transaction volume without breaking.
Transaction Volume
Can your system handle double the orders, invoices, and payments? What about triple? Some systems that work fine at current scale hit performance walls at higher volumes. Know your limits before they become constraints.
User Capacity
Growth means more employees. More employees mean more system users. Can your licensing and architecture support that growth? What's the cost curve?
Organizational Complexity
Growth often means new subsidiaries, new geographies, new business lines. Can your ERP structure accommodate that complexity? Multi-entity? Multi-currency? Flexible chart of accounts?
Acquisition Absorption
If the investment thesis includes acquisitions, your ERP is the integration platform. Can you absorb an acquisition's data cleanly? Can you bring their transactions onto your system quickly? The ability to integrate acquisitions efficiently affects how aggressively the roll-up strategy can be executed.
Process Documentation
Sponsors want to understand how the business operates, and documentation is how they learn. Documented processes indicate maturity, enable knowledge transfer, and support due diligence.
For your ERP specifically, sponsors expect documentation of:
How transactions flow through the system
What controls exist and how they work
What reports are produced and how to interpret them
What customizations exist and why
What integrations connect to other systems
If documentation doesn't exist, you'll be asked to create it. If it exists but is outdated, you'll be asked to update it. Documentation is not optional.
The Gaps That Get Exposed Under PE Ownership
Certain problems that fly under the radar in private companies become immediately apparent under PE ownership.
Manual Processes Everywhere
What worked at $20M breaks at $50M. Manual invoice review, spreadsheet-based forecasting, email-driven approvals—these don't scale.
Sponsors have no patience for "we've always done it this way" when the way has obvious limitations. If a process requires manual effort that could be automated, expect questions about why it hasn't been.
Common manual processes that draw sponsor attention:
Month-end close steps that require manual intervention
Report creation that involves exporting and manipulating data
Approval workflows that happen outside the system
Reconciliations performed in spreadsheets
Data entry that duplicates information across systems
Tribal Knowledge
If closing the books depends on what one person knows, that's a risk sponsors will flag immediately. Key-person dependency is operational vulnerability.
Signs of tribal knowledge problems:
Only one person knows how to run certain reports
Close procedures aren't written down
Month-end requires "adjustments" that only the Controller understands
System configurations are undocumented
Workarounds that "just work" with no explanation of why
The fix is documentation and cross-training, but these take time. Starting before sponsors ask puts you ahead.
Inconsistent Data Definitions
When Sales and Finance have different definitions of revenue, sponsors lose confidence in all your numbers. If Marketing's lead counts don't reconcile to Sales' pipeline, which number is right?
Data definition issues often trace to disconnected systems, manual consolidation, or lack of governance. They're symptomatic of broader process immaturity.
Sponsors want a single source of truth. If your ERP is that source—and everyone uses it consistently—you're in good shape. If you have competing versions of reality in different spreadsheets, expect scrutiny.
Poor Customization (Not Customization Itself)
Sponsors aren't opposed to customization—they're opposed to poorly done customization. Over-customized, undocumented systems are a liability. But well-designed custom solutions that accelerate operations are assets that sponsors appreciate.
The questions sponsors ask about customization:
Is it documented? Can someone new understand what it does?
Is it maintainable? Who supports it?
Does it create upgrade risk?
Does it deliver business value that justifies the complexity?
Good customization passes these tests. Bad customization fails them. The distinction matters.
Control Weaknesses
Sponsors expect robust controls, even in private companies. Segregation of duties, approval workflows, access controls, audit trails—these aren't optional.
Common control gaps that sponsors flag:
Users with too much access ("everyone is an admin")
Lack of segregation between transaction entry and approval
No systematic access reviews
Missing audit trails for sensitive transactions
Manual controls that depend on individual diligence
Getting Ahead of Sponsor Expectations
The best time to address these issues is before the sponsor asks. Companies that proactively demonstrate operational maturity get more trust, more resources, and more runway.
Accelerate Your Close
Get to five days before they tell you to. Analyze where time goes, identify bottlenecks, automate what can be automated, and build processes designed for speed.
The path to a fast close:
Automate recurring entries and calculations
Move reconciliations into NetSuite
Create hard deadlines with automated reminders for other departments
Build a close checklist with sign-offs
Fix upstream issues instead of adjusting at close
Start now. A 15-day close won't become a 5-day close overnight.
Document Everything
Processes, policies, system configurations—if it's not written down, it doesn't exist. Documentation is insurance against key-person risk and essential for due diligence.
Priority documentation:
Close procedures with step-by-step instructions
Key accounting policies with supporting rationale
System configuration documentation
Customization inventory with purpose and ownership
Integration maps showing data flows
Documentation doesn't have to be elaborate. A clear, current wiki is better than a beautiful manual that's three years out of date.
Build Self-Service Reporting
The less you have to create manually, the more credible your numbers. Custom dashboards that update automatically are worth the investment.
Reporting priorities:
Real-time revenue and pipeline metrics
Operational KPIs for your specific business
Automated financial statement packages
Board-ready materials generated from system data
Every report that requires manual creation is an opportunity for error and a drain on time. Invest in automation.
Clean Up Technical Debt
Replace poorly-built customizations with well-architected solutions. Remove unused scripts and workflows. Document what remains. Fix problems that everyone has worked around for years.
Technical debt cleanup priorities:
Scripts that nobody understands
Workarounds that create data quality issues
Performance problems that slow users down
Custom fields and records that are no longer used
Integrations that require manual intervention
Strengthen Controls
Build controls before auditors or sponsors tell you to. Segregation of duties, approval workflows, access reviews—implement them proactively.
Control improvement priorities:
Review and rationalize user roles and permissions
Implement approval workflows for sensitive transactions
Establish periodic access review processes
Ensure audit trails capture necessary information
Document control procedures
Plan for Scale
Evaluate whether your current systems can handle 2-3x growth. Identify constraints before they become emergencies.
Scale planning considerations:
Performance under higher transaction volumes
Licensing costs at larger scale
Multi-entity capabilities if expansion is planned
Integration capacity for acquisition targets
Reporting performance with larger data sets
Working with Your Sponsor
Once you're under PE ownership, the relationship with your sponsor determines how much support you get and how much autonomy you retain.
Be Proactive About Issues
Sponsors appreciate finance leaders who surface problems before they become crises. If you know your close is too slow, say so and present a plan to fix it. Surprises erode trust; proactive problem-solving builds it.
Speak Their Language
PE sponsors think in terms of value creation, EBITDA, and returns. Frame ERP investments in those terms. "This automation will save $100K annually and enable us to close in five days" resonates more than "this will improve our processes."
Align on Metrics
Early in the relationship, align with your sponsor on how key metrics are defined and calculated. If they're comparing you to other portfolio companies, use consistent definitions. Misalignment creates confusion and undermines confidence.
Ask for Help
Good sponsors have operating resources that can help with ERP and finance improvements. They've seen the problems you're facing at other portfolio companies. They may have preferred vendors, playbooks, or templates. Leverage their experience.
Manage Expectations
Be realistic about timelines and costs. If fixing your ERP will take nine months and $200K, say so. Sponsors can handle reality; they can't handle surprises. Underpromise and overdeliver.
The ROI of Getting Ahead
Investing in ERP maturity before sponsors demand it pays off in multiple ways.
Trust and Autonomy
Sponsors give more latitude to management teams they trust. Demonstrating operational maturity earns that trust. Companies with clean systems and reliable numbers get less day-to-day oversight than companies that seem like they might have problems hiding somewhere.
Resource Allocation
Portfolio companies compete for sponsor attention and resources. Companies with their house in order are positioned to ask for growth investments. Companies still struggling with basic operations get help with basics instead of strategic initiatives.
Valuation Impact
At exit, buyers pay premiums for clean operations. Mature ERP, documented processes, and reliable financials reduce buyer concerns and support valuation. The investments you make in ERP maturity contribute directly to exit value.
Your Career
CFOs who can operate effectively under PE ownership are valuable. Building these capabilities—fast close, clean financials, robust controls, scalable systems—makes you more effective in this role and more attractive for future opportunities.
Bottom Line
PE ownership is an accelerant. It amplifies whatever is already there—good processes become great, and bad processes become crises. Your ERP is the foundation of your operational capability. It determines how fast you can move, how clearly you can see, and how confidently you can act.
Sponsors will evaluate your ERP whether you invite them to or not. The question is whether that evaluation reveals capability or concern. Proactive investment in ERP maturity positions you as a partner in value creation. Reactive scrambling positions you as a problem to be managed.
The clock is already running. What you build now determines what you're working with for the next three to five years. Make it count.
