Data-driven procurement to help improve capital efficiency

Q&A with Michelle Keller-Hobson, Director, Private Equity Business Development, Vertice. Vertice is a London-based SaaS-and-cloud spend optimisation platform. Michelle will be speaking on the topic ‘How can portfolio companies optimise technology spend?’ during the Value Creation Summit at IPEM.

IPEM: What is the most misunderstood aspect of value creation in your area of expertise today?

MKH: Private equity-backed businesses often overspend on software, which is frequently one of their top three expenses. The most commonly overlooked opportunity in value creation, particularly during the initial 100 days after an acquisition, is procurement; especially software and cloud spend. Many private equity firms focus on other areas like revenue, leadership or integration, but early cost optimization can significantly improve a company's near-term performance.

IPEM: Where are you seeing the biggest gap between boardroom ambition and execution on the ground? 

MKH: The gap exists in the execution of procurement as a strategic lever for value creation. Execution on the ground can be improved by transforming reactive procurement into a proactive, tech-enabled discipline. Procurement teams are stretched thin and lack access to reliable benchmark data to help drive effective negotiations on the ground.

As a result, many SaaS contracts are left unmanaged or auto-renew. With better access to benchmarking data and renewal calendars, execution on the ground can be improved by transforming reactive procurement into a proactive, tech-enabled discipline. 

IPEM: What capability or mindset shift will define the next generation of value creation? 

MKH: A key mindset shift will be treating SaaS and cloud spend as a recurring opportunity rather than a one-time fix. The next generation of value creation will be defined by a focus on capital efficiency and spend intelligence, not just growth. This will involve a shift towards data-driven procurement becoming the norm. Firms that embrace this will achieve faster cost savings and better capital efficiency. 

IPEM: If you could embed one question into every due diligence process, what would it be? 

MKH: As companies' software stacks have become a major recurring expense that directly impacts profitability, the question we would embed would be: "What is the most inefficient recurring expense, and what has been done to address it?

The aim is to understand if the company has a clear, data-driven understanding of its software landscape or if it is a fragmented, unmanaged area of spend. The answer would reveal if there's a significant, often overlooked, opportunity for margin improvement.

IPEM: How do you think the operational value creation playbook might evolve in the coming years? 

MKH: Over the next few years, procurement will become a transformative force in private equity, with firms dedicating more resources to it, such as hiring Procurement Operating Partners.

Data-driven strategies will also become more important, such as using smart recommendations and advanced benchmarking to boost capital efficiency and spend intelligence, rather than focusing solely on top-line growth.

In our view, this evolution will help businesses build resilience and protect their financial performance in a volatile market.