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Event Recap

Insights from the Operating Partners (Virtual) Forum - May 2020 Part I

Top Takeaways from the Accordion (Virtual) Forum

Accordion hosted its fourth virtual Operating Partners gathering on May 7th, providing an open forum for operating sponsors to collaborate and share developments – across firms and industries – on key issues related to COVID-19. Here are the top takeaways:


Now that we are two months into the pandemic response period, have initial strategies held up? Or have Operating Partners (OPs) had to pivot their approach? Most reported having to pivot.

One OP changed the conversation with portfolio company executives by asking them to identify what the trigger points are – because their company is only going in one of two directions: up or down. The OP stated that, “this unlocked the thought process.”

Two other OPs indicated that they overestimated the initial liquidity needs in March and that capital needs have reduced. Now, they’re pivoting to long-term profitability. Another OP took it one step further to challenge portfolio companies’ C-suites by asking them to create a pro-forma P&L where EBITDA is comparable to pre-pandemic but at 75-80% of the top-line.

Another OP asked, “How can portfolio companies be commercially empathetic?” Utilizing this question, the OP’s portfolio companies have introduced new products into their portfolios.


One OP stated that a few of the portfolio companies that are distributors have been able to shift product lines to personal protective equipment (PPE) because the supply chain was already established. Given this move, the portfolio companies have gone from amber to a “mild green.”  It was mentioned how the status of the portfolio company is affected by geography because certain states forced businesses to close (e.g., MI) while others have remained open (e.g., AZ).


One concern raised was that a portfolio company had seen a material boost in demand because it sells COVID testing equipment and it can’t keep up. The OP posed the idea that at some point, demand will swing the other way and it’s important to think about what that will mean down the road. Another OP mentioned that consumers in China are buying again, but that retailers are depleting inventories to levels lower than they have historically. This means that purchasing by the retailers hasn’t caught up to consumer demand. Concerns were raised about whether there would be a snap-back in purchasing so that consumer demand and purchasing remain somewhat similar.

Cash planning has put increased scrutiny on inventory purchases, especially with summer approaching and the anticipation of increased consumer demand. One OP mentioned that to mitigate this, portfolio companies are allowing a decrease in purchasing on less critical SKUs and new product launches while continuing to maintain stock on primary products – so that if there is a shortfall, it’s to those products that won’t cause a detriment to the brand.


One OP discussed how they recently closed a deal with a company located in Israel, but the integration has been surprisingly smooth given that they cannot hold face-to-face meetings; they stressed the importance of building relationships utilizing web conferencing. Another OP, whose fund focuses primarily on family-owned business, cautioned not to execute carve-outs. He noted that his fund recently closed on an add-on, and that this was far easier to accomplish in the current environment (than a carve-out) because he believes carve-outs would require face-to-face communication. One OP commented how amazing it’s been regarding the amount of work getting done while working remotely.

As a quick aside, the question was posed as to whether anyone will be traveling to portfolio companies – let alone visit face-to-face with leadership – for a potential acquisition.  Most replied that they will not be traveling for the remainder of this year.

The conversation gravitated back to deals and even fundraising in a post-COVID environment. One OP mentioned that since travel will be less, creating and maintaining relationships is going to be critical. Another OP discussed that when raising a fund pre-COVID, they would have a diligence day where every deal and operating MD would attend – but now they’ve transitioned to a digital version. This worked out extremely well because pre-COVID attendees would only be able to converse with 1-2 people in the firm, but with the new digital forum, they’re able to speak to many more crucial deal and operating team members.


An OP that sits on the Board of a Georgia-based company reported feeling pressure to reopen. He had been trying to guide them to understand the downsides vs. gains of rushing back to the office, and the company’s leadership had done everything except ask the employees. After (finally) surveying the employees, the common theme in the responses was that more information was needed on vaccines – and other elements like testing – and that they shouldn’t hurry back to the office. Another OP stated that his fund classified employees based on risk of exposure and recommended that participants refer to a great resource such as the OSHA guidelines. They then took it a step further and classified businesses based on whether they were deemed essential.


The common theme seemed to be that landlords are not doing much in terms of abatements or rent reductions because they are paranoid about making long-term decisions that could come back to haunt them. One OP mentioned that some of his restaurants have received one month of abatement at best, and that though some landlords will forgive three months of rent, they will tack it back on pro-rata at the end of next year. Another mentioned how a landlord was drawing down on the deposit, but that wasn’t overly helpful nor impactful to the P&L. One OP mentioned that the only landlords that he has seen try to work out a deal were those of companies entering bankruptcy or whose financial condition was gloomy pre-COVID,  “landlords are stymied on what to do.”