The Untapped EBITDA Lever in Your Portfolio
Your portfolio companies are sitting on an EBITDA lever most deal models never price in: procurement. The funds that work it capture value the market has not paid for.
Contrarian take from 20+ years in procurement: most PE value-creation plans are over-indexed on growth and under-indexed on the cost line that moves fastest.
Walk through a typical mid-sized portco. There is a sales transformation underway. A pricing project. Maybe a bolt-on thesis. And procurement? Procurement still sits inside finance, run part-time, because at the company’s earlier scale that was the right design. The company outgrew that design quietly. Almost every portco at this size has, and that is precisely why the lever is still intact when you arrive.
Yet in my experience the gap between what these companies pay suppliers and what they should pay typically runs at 15–25% of addressable spend. Captured savings drop straight to EBITDA. At typical hold-period exit multiples, every dollar of procurement savings compounds into several dollars of enterprise value.
Compare the levers honestly
- Revenue growth needs market cooperation, sales cycles, and luck. Payback in years.
- Pricing is powerful but risks volume and customer relationships.
- Procurement needs no customer to say yes. The counterparties are suppliers, the data already sits in your AP system, and the first wins typically land within one or two quarters.
So why is the lever still intact?
Three structural reasons. First, ownership hasn’t caught up with scale yet. The buy side grew faster than the org chart, so no one’s mandate depends on it. Second, it is unglamorous. Nobody raised a fund on a supplier-consolidation thesis. Third, “procurement covered” usually means invoices get paid on time, and at a smaller scale that genuinely was enough. Paying invoices is not procurement, and recognising the difference is where the value starts.
The funds that get this right do something simple: they treat procurement like they treat finance. Day one of the hold period, they ask three questions. What do we spend? With whom? Against what market price? If the portco cannot answer in two weeks, that is the finding.
You do not need a 12-month transformation to start. You need a baseline, a ranked opportunity list, and someone senior who owns the number. That is achievable inside a 100-day plan, and it is usually the cheapest EBITDA in the entire value-creation agenda.