This is a press release from KKR about Dean B Nelson and unlocking top-line growth in private equity and business.

1. Unlocking top-line growth
The key to improving a portfolio company’s operations is via top-
line growth, says KKR Capstone’s Dean Nelson

2. According to Dean B Nelson, “It‟s pretty straightforward to work with a company
and get its costs down in the first six months. But if we want this investment that
we‟re going to hold four, five, six, seven years, to really create a lot of value for
our investors, we need to drive top-line growth.”
It seems as though every private equity firm is operationally focused these days.
But separating true operational improvement from window dressing can be
difficult, particularly as a growing number of fund managers continue to hype
their ability to cut costs and transform portfolio companies. KKR holds a distinct
advantage in this regard, as it can point to more than a decade-long operations
track record with KKR Capstone, its 60-strong in-house global operations team.
“Our goal is to build the right strategy and work side by side with the team to
implement it so that the new processes or tools work long after we‟re gone. We
succeed when the strategy works and we are able to walk away from it, having
created value for our investors,” says Dean Nelson, founder and head of KKR
Capstone. “Alignment of interest is not a small point. People at the company
know that we have the same interests at hand.”
He continues: “Frankly our model‟s a little different. We don‟t write slide decks,
we don‟t try to prove to the „nth‟ degree how big an opportunity it is – our goal is
to work with the management team to get the opportunity up and running.”

3. The key to defining operational improvement, and overall value for the business,
is top-line growth, Nelson says. Operational strategies geared toward the
development of stronger revenue streams leave portfolio companies better
situated in the long-term.
Most firms focus their operational improvement strategies on cutting costs, a
strategy that – though important – usually only provides a one-time bump on the
balance sheets. Eliminating costs alone does not position a portfolio company
for long- term growth, he says.
“It‟s pretty straightforward to work with a company and get its costs down in the
first six months. But if we want this investment that we‟re going to hold four, five,
six, seven years, to really create a lot of value for our investors, we need to drive
top-line growth to get the multiple up and keep a good steep improvement in
EBITDA,” Nelson says. “And I think that‟s unusual for the industry, certainly how
people view the industry.”
KKR‟s approach to top-line growth begins during the due diligence process,
when KKR Capstone executives join the deal and management teams to
analyze and determine where a potential portfolio company stands to benefit
from the firm‟s operational expertise.

4. Those areas – or “levers” as Nelson likes to call them – generally include a
combination of five or six cost-cutting and top-line strategies, he says (the bulk of
the firm‟s efforts are spent on the top-line strategies). Those levers can include
helping a portfolio company negotiate better terms with its supply vendors,
improving its pricing functions, creating a new framework for sales staff or
targeting areas in which it could expand, but KKR Capstone‟s initial involvement
generally centres around helping company management find where it has “left
money on the table”. “A lot of these private companies, they‟re very profitable,
and they don‟t worry about the cash coming out of the business,” Nelson says.
“We never try to put our vendors in a place that‟s beyond their comfort zone or
beyond what‟s appropriate, but we do see a lot of companies that probably
aren‟t pushing working capital as well as a lot of the best practices companies
out there would.”
Another area where private companies stand to benefit is improving their pricing
strategies on specific goods or services. KKR Capstone has found that many
companies don‟t have a pricing function that takes into account their
competitors, which can lead to situations in which they lose customers to lower
price competitors. It‟s also found some companies leave „money on the table‟
by undercharging.

5. Freeing up that working capital, and taking into account new sources of
revenue, can open the door to expansion, including to emerging markets where
macroeconomic growth patterns continue to be more optimistic than those in
the US and Europe. Projecting those visions of growth to existing management
teams can assuage the anxieties of family owned businesses that may be
skeptical of partnering with a private equity firm.
“When working with a family-run business, a founder, or an entrepreneur, it‟s like
sell- ing a child, it‟s something you‟ve built,” says Nelson, recalling a recent
example where the company was excited by “our vision for growth, and in
particular the growth in the number of stores. They wanted to know how we
would do that, how we would make sure they had additional resources,” he
says.
Crucial was acknowledging that expansion and growth couldn‟t come through
cost cutting alone, he says. Identifying and executing strategies that a company
can use to lower its costs while growing revenues benefit both the company and
the private equity firm‟s returns in the long run. That‟s not window dressing.
Original press release from KKR.