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Report / Whitepaper  |  04/15/2020  |  Nick Leopard, Atul Aggarwal & Anthony Horvat

COVID-19: The Accordion Framework for PE Sponsors (Part II)

COVID-19: A Practical Framework for Private Equity (Part II)

By Nick Leopard, CEO & Founder, Atul Aggarwal, President, and Anthony Horvat, Managing Director

March was the beginning. It was the beginning wave of a novel pandemic’s crash to shore. For sponsors and their portfolio-backed CFOs, it was the beginning of intense, acute value stabilization efforts.

To support those client efforts, Accordion began applying our COVID-19 Framework (Part I) – a tool to help sponsors categorize their portfolio according to the traffic light matrix of green (healthy) companies, yellow (at-risk) investments, and those restructuring situations that are blinking red.

And now we’ve turned the page. If month-one was all about portfolio planning, assessing and diagnosing (with some necessary decision-making thrown in for good measure), month-two is all about doing.


So now the question begs: Do what, exactly? Here, sponsors may find our answer surprising: you need to live in the yellow.

Yes, you will, rightly, spend a substantial amount of time growing your greens and restructuring your reds. But, it is your yellows to which you must yield unprecedented time and focus. They have become the critical swing companies in your portfolio, playing an outsized role in overall fund performance (returns, carry, and fundraising).

This framework extension (Part II) focuses on the yellow: defining it, discussing its importance to the carry, and outlining the practical steps that sponsors and CFOs must each take to address it.

And, because this is not the last of it; because of the possibility of pandemic resurgence in the fall, or continued novel outbreaks, it’s important to memorialize the insights and plays to-date. This extension, therefore, also includes critical month-one learnings to inform future planning.


  • Page 3: The Fight for Fund Performance: Focusing on The Yellow
  • Page 5: CFOs: Managing The Yellow
  • Page 8: Sponsors: Enabling Yellow Management
  • Page 11: A 12-18 Month Yellow Company Program
  • Page 13: (Addendum) Black Swan on Repeat: Memorializing Month-One

The Fight for Fund Performance: Focusing on The Yellow

The COVID recession is the black swan event of all black swan events. Coming on the heels of the longest bull market in history, it is also an event that will be navigated by many GPs with little experience managing through disruption, much less recession.

The PE industry has had the luxury of a largely green aggregate portfolio, thanks to a thriving macro economy. The return from the bulk of that portfolio has overshadowed the few underperformers such that PE has largely ignored those mistakes.

With a portfolio of uncertain performers, sponsors no longer have that luxury – they must now spend their time (money and resources) squarely in the yellow.

COVID-19: A Focus on The Yellow = A Strong Impact on Returns

Figure 1: For a closer look, and additional content, please click on the ‘Continue Reading’ button below.

The What: The yellow are those at-risk portfolio companies that may be saved, but only with immediate and effective action. If the green is all about growth, and the red is all about financials, the yellow is all about operations.

The Why: While the market disruption has made select companies greener (telemedicine, at-home fitness, etc.), it has created a sharply depressed performance outlook for many more organizations. As a result, the yellows have an outsized impact on fund performance, such that when a couple of yellows go dark, or fall to red, they diminish fund returns and associated carry (which also impacts future fundraising efforts).

Figure 1: This graphic depicts a snapshot of a sample portfolio pre-COVID disruption. It is followed by projections of what happens to that portfolio when sponsors don’t lean in to their yellow, and the impact when they do. As illustrated, active sponsor engagement on yellow portfolio companies improves fund performance and GP carry.


About the Authors

Nick Leopard
Nick Leopard
CEO & Founder

Nick Leopard is the CEO & Founder of Accordion, the go-to partner to the private equity community. Founded in 2009, Accordion has grown to serve nearly 200 of the world's premier private equity firms and their portfolio companies – driving value creation through financial consulting services and portfolio operations technology. Before launching Accordion, Nick was part of the investment team of a $200M mezzanine debt fund, BHC Interim Funding, L.P., which focuses on short-term investments in companies with $50-$500M of revenue. Prior to BHC, he was a member of the FIG Investment Banking Department of Bear, Stearns & Co. LLC.   Read more

Atul Aggarwal
Atul Aggarwal

Atul became the President of Accordion in 2019. He joined Accordion from Bain & Company, where he was a Partner in the New York office. During his 20-year career at Bain, Atul worked for both corporate and Private Equity clients. He spent his early years working across a variety of assignment types, including: M&A and carve-outs, strategy, cost, customer experience, and organizational work. More recently, Atul was focused exclusively on major transformations for some of Bain’s largest clients – leveraging a blend of traditional value creation levers with the more “human” aspects of successful transformations, such as leadership and executive coaching, behavior change, and change management techniques.  Read more

Anthony Horvat
Anthony Horvat
Managing Director, Performance Improvement & Restructuring Solutions

Anthony Horvat is a Managing Director with over two decades of experience leading business improvement initiatives across numerous industries and situations. He brings a deep and extensive skill set to all aspects of business improvement, including acquisition integration to generate value on behalf of all stakeholders. Anthony was an early member of the highly successful Turnaround & Restructuring Service practice at AlixPartners where he focused on increasing value for under-performing and distressed companies globally. His extensive client work included leadership positions at RCN, Acterna, WorldCom and Dura Automotive. His experience in turnarounds and performance improvement cross a wide range of client companies located in the US and overseas with revenues ranging from $100 MM to $40 billion.  Read more

COVID-19 Response

COVID-19 Response

COVID-19 is having immediate and far-reaching implications on the private equity community. If you’re a sponsor, you’re seeing your healthy investments become at-risk companies. If you’re a CFO, you’re faced with tremendous uncertainty and the need to make critical decisions (and fast). Regardless of your role, you need help – with liquidity management, 13-week cash flow forecasting, SG&A rationalization, contingency planning, lender management, and, potentially, substantive restructuring support. At Accordion, our team is here to help with all of these areas (and more).

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