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UK private equity houses have severe skills gap

15 Jul 2015

Latest research by ThoughtSpark amongst UK private equity houses with assets under management of over £2bn, has revealed that there is a severe IT and marketing skills gap.

Image: www.freedigitalphotos.net

UK private equity houses were asked to rate a range of skills in companies they acquire or fund. On a scale of 1-100%, where 100% is the optimal skill level, IT management was rated at just 48%, while professional, accountable and measurable marketing was judged at 44% overall. This compares with much stronger skills such as new product development (71%) and sales (69%).

The increasing role of private equity in developing British business is not simply a matter of contributing development capital. PE and VC firms help acquired firms develop the key skills needed to drive rapid growth in the funded venture. This ThoughtSpark study therefore provides an important barometer of where skills enhancement is most needed amongst newly acquired firms.

Funds are misapplied

Lack of IT management skills is a particularly worrying gap, with businesses critically reliant on their systems for operational efficiency, effective customer management and intelligent sales activity. Poor marketing skills mean that business development funds are misapplied so that an effective pipeline of sales leads is not generated, and market awareness fails to be built.

In short, sub-par IT and marketing skills can significantly reduce a businesses' ability to go to market, target the right audience with the most effective messages and generate effective sales growth.

Key findings from the research include:

The skills private equity houses rated most highly in newly acquired firms were: new product development (71%), sales (69%) and overall financial and business management (57%).

Unsatisfactory skill levels were reported for IT management (45%) and professional, accountable and measurable marketing (44%).

"Understanding the skills gaps in acquired companies is a key factor to ensure rapid sustainable growth," Paul Lindsell, MD and founder of ThoughtSpark, comments. "It is not surprising that start-ups focus on financial management and product development since incompetence in these areas would stop them from even getting off the ground in the first place.

Lack of capability

"However, there is evidently a startling lack of capability in marketing and IT as firms move to second stage growth. Leaving these skills undeveloped is likely to be disastrous for business managers and investors alike. In fact, there is little point in making a private equity investment in the first place if these key skill areas are left unattended," Lindsell says.

"IT capabilities are increasingly important to business development in a world where sales automation and online interaction are becoming more and more the norm. Equally, misdirecting marketing effort and spend is tantamount to flushing money down the toilet. Addressing these two clear gaps in their skillset of newly acquired firms is key to transforming start-ups into market leaders."