What an operating partner actually does after the close

LIMESTONE Strategic Partners, from Carmel, Indiana, offers buyers an operating partner seat after the close, on its own or following the quality of earnings on the same deal.

After the close, some things change whether you decide them or not, because they belonged to the seller and the seller has gone. Sort the forced changes from the chosen ones first, instrument the business before you change it, and make the people decisions on purpose, because they are being made either way. That is the first hundred days in the operating partner seat.

You do not get to change nothing. Some things change on the day you close whether you decide them or not, because they belonged to the seller and the seller has gone. Sort those from the changes you are choosing, and the two pieces of advice everyone gives you stop contradicting each other.

A buyer taking over a lower-middle-market business gets handed two pieces of advice, and they do not agree.

The institutional one says move. About 90% of private equity firms build a 100-day plan, and McKinsey’s line to new portfolio-company chief executives is that if a problem is confirmed after 90 days, it is already too late. The operator one says the opposite: do no harm, change nothing, spend the first six months as a student of the business.

Both camps are right, and they are talking about different changes.

Sort the changes before you make any

Put every change in front of you into one of two columns.

Forced. It changes because the transaction happened. You did not choose it, you cannot defer it, and if you ignore it something breaks on a date you do not control.

Chosen. It changes because you think the business will be better for it. It can wait a quarter without harm. It costs you credibility if you get it wrong and earns you some if you get it right.

The institutional advice is right about the forced column and wrong about the chosen one. The operator advice is right about the chosen column and dangerous applied to the forced one, because a change-of-control clause does not care that you are being patient.

Where you see the forced column most clearly

I have not run a business through its first 100 days after buying it, and I would rather say that before I draw any lessons from what I have done.

At Postlane Partners, I worked on acquisitions and initiatives within operating businesses. At Gladieux Energy, I supported the deal team on the company’s approximately $190 million sale to Sunoco and led its first ERP implementation and a fleet-dispatch initiative.

At Crossbridge Energy Partners, I worked on FP&A for a refinery business acquired from Shell in 2021 and supported financial analysis of additional acquisition opportunities. These were financial and implementation responsibilities; I did not personally lead a newly acquired business through its first hundred days.

The refinery work is still the clearest view of forced change I have had, and there is a reason the finance seat is where you see it. When a business comes out of a parent, somebody has to rebuild the reporting, the treasury, the payroll interface and the month-end close from nothing, because all of it belonged to the parent and none of it comes across. That person finds out, in order and with dates attached, exactly which things were never theirs to keep.

Nobody chose those changes. They arrived with the transaction.

Every owner-led business is a carve-out

When you buy a business from the person who built it, you are also buying a carve-out. The systems were never written down, because they lived in one person’s head, and that person now takes your calls as a courtesy.

The list of forced changes is longer than most buyers expect and almost none of it is strategic.

What usually turns out to be forcedWhy it has a date attachedContracts with change-of-control clausesConsent is often required before the assignment is valid, and the counterparty knows it before you do.Bank and lender facilitiesOften personally guaranteed by the seller, and a personal guarantee does not transfer.InsurancePolicies written in the seller’s name need rewriting at completion or they lapse.Software and subscriptionsFrequently licensed to the owner personally, on their card, in their email.Supplier terms agreed on a handshakeThe terms were extended to a person.Key employees deciding whether to stayThat decision is being made in the first few weeks whether you manage it or not.Customer notificationSomebody will tell them. It is better that it is you.

Work that list first. It is unglamorous, it is invisible when it goes well, and it is most of the job in month one.

The people decision is being made whether you manage it or not

Restraint matters in the chosen column because the expensive failure in these deals is people, and the window is shorter than buyers think.

Where integration is handled badly, key employees leave early, and most of them decide whether they are staying well before the integration plan expects them to. The percentages that circulate on this mostly trace to vendor and startup blogs, so I am not quoting them. The direction is consistent enough to plan around.

In a business with concentrated customers, losing a handful of the people who carry those relationships can take a large share of revenue with them. That can outweigh most of the operational improvements a new owner arrives wanting to make, and it moves first.

So handle the forced list quietly and early, and spend what credibility is left on one chosen change that pays inside the first year. Say out loud that everything else is on hold until you have earned the right. People can work with that. What they cannot work with is a new owner who rewrites the commission plan in week three because it was on a slide.

There is a useful test for the odd process you are itching to fix. It is usually one of three things: something that made sense once and no longer does, something that still quietly makes sense in a way you cannot yet see, or the previous owner’s preference. You often cannot tell which until you change it and watch what breaks.

Instrument before you change

You cannot tell whether a change worked if you never had a baseline, and most businesses at this size measure almost nothing a new owner needs.

What to instrument in week oneWhat it tells youCash in and cash out, weeklyWhether the business behaves the way diligence said it would.Revenue by customer, monthlyConcentration, and whether anybody is quietly leaving.The order or job pipelineThe only forward-looking number most businesses this size have.Gross margin by job or productWhere the money is made, which is often not where the owner said it was.Days sales outstandingWhether collections were being carried by the owner’s relationships.Headcount and open rolesThe cost line that moves fastest and is hardest to reverse.One weekly leadership meeting, 30 minutesWhether decisions are being made without you, or not at all.

All of it fits in a spreadsheet and a standing half hour, and it can be running inside two weeks.

What we install, and in what order

When we take an operating seat the sequence is the same every time. What we build depends on the business, and the way we work stays the same.

By day 30 there is a scored read of the business with the binding constraint named in one sentence, a weekly leadership meeting running to a fixed agenda, and the monthly close underway. By day 60 there is a KPI dashboard somebody internal owns, a 13-week rolling cash forecast, and a decision authority matrix that says who decides what, so decisions stop routing through one person out of habit. By day 90 the weekly meeting has been handed to somebody inside the business and we sit in it as participants.

The handoff is the point. We facilitate early only to model the standard, and when a recurring task keeps landing on us it belongs on the org chart instead.

It is also most of what separates this seat from the three it gets confused with.

The limits, including one that applies to us

An operating partner helps turn the transition plan into defined priorities, each with an owner, a measure and a follow-up, and which of them we execute directly depends on the agreed scope. Our own rule is that we will not become the unpaid full management team, and every recurring task gets a named owner inside the business. If what you need is a general manager, hire a general manager.

And where this install comes from. We run it today with owners who are scaling or preparing to sell, and it is the same install in a post-close chair.

Your first two weeks

Pull every contract and find the change-of-control clauses. That is the highest-return afternoon available to you, and most of it was discoverable in diligence.

Write the forced list before you write the strategy. If a change has a date on it that you did not choose, it goes at the top.

Ask the seller the questions only they can answer, and write the answers down while they are still taking your calls. If you financed with an SBA loan, the seller transition period doubled from 12 months to 24 under SOP 50 10 8.1, which is far more runway than buyers had a year ago, and most of them will spend it being polite.

Then pick a single chosen change, make it work, tell everyone it worked, and buy the credibility for the next one.

If you are under LOI or recently closed, we will go through your forced list with you on a call, the contracts and the transition points, and tell you what we would work first. If you are earlier than that, the two worth reading are what a quality of earnings report will not tell you and same profit, very different price.

Questions we hear

How is this different from a fractional CFO?

A fractional CFO owns the finance function, and owns it properly. An operating partner owns whatever is in the way, which in the first 100 days is usually not finance. It is a supplier relationship, a key employee deciding whether to stay, or a system that quietly belonged to the seller.

When should I bring someone in?

Before close, if you can. The difference between finding a change-of-control clause in week two of diligence and week two of ownership is the difference between a negotiation and a problem.

What does it cost?

The role is priced monthly by level, from Advisory to Embedded, as set out on the CFO and operating partner page, with the level and the terms set in the engagement letter before we start. The first months run heavier than the steady state, and we say which is which up front.

Jared Luegers, CFA, is the Founder and Managing Partner of LIMESTONE Strategic Partners. His background includes nearly six years in public-equity research, acquisition and operating-company initiatives through Postlane Partners, and executive strategic finance at Valeo Financial Advisors. He leads LIMESTONE’s operating work and contributes the operating perspective to transaction diligence.

Sources: Grant Thornton and PitchBook on private equity 100-day planning; McKinsey on new portfolio-company chief executives; SBA SOP 50 10 8.1, Appendix 15, on the seller transition period; LIMESTONE delivery method.