The PortCo IT Team You Build During the Carveout Shapes the Hold Period

Summary

During a carveout, the decision about which IT capabilities to keep internal can shape a PortCo’s capacity for the rest of the hold period. Nathan Ulery explains why business-specific IT expertise belongs inside the company, while an MSP can take on repeatable operational work, and why PE firms should make that split before staffing decisions become difficult to unwind.

[Estimated read time: 4 minutes]

Decide what IT the PortCo should own

Over numerous carveout engagements, I’ve seen that the decision about which IT capabilities remain internal to the new PortCo and which become outsourced determines everything downstream: how fast the company integrates the next acquisition, how much internal capacity is left for the initiatives the investment thesis depends on, and whether IT is still playing catch-up two years into the hold period.

My take: Split PortCo IT work into what requires deep knowledge of the business and what doesn’t, then staff internal IT for the first kind only. Hand the second kind to a managed services provider (MSP).

The PortCos I’ve seen make this model work establish it before close, while they’re still building the internal team. Waiting until six months into the hold period means operational demands and staffing decisions have already started defining what that team does.

Keep business knowledge inside

A PortCo coming out of a carveout may have a small IT team, or none at all. IT was centralized at the parent, and the people who knew the environment may have stayed behind or never been dedicated to the carved-out business. That creates an opportunity to be deliberate about the team NewCo builds.

Prioritize internal IT hiring for roles that require deep knowledge of the business. Business analysts, product owners, and other people who understand both the business and its technology know order-to-cash. They understand how manufacturing processes map to the systems supporting them and can take an acquisition, expansion, or other growth initiative and determine what has to change across the technology environment.

That business context is difficult to outsource. Keeping those roles inside the PortCo is where internal IT investment can create competitive advantage.

Outsource maintenance, security, and troubleshooting

I sometimes describe a good MSP to clients as an easy button.

You know you need services like around-the-clock support, security tooling, endpoint management, and someone who can dispatch to any location in the country when something breaks. But building all of that internally requires hiring, tooling, training, and enough staff to provide the coverage the business needs. That takes about two years to establish on your own from scratch. An established provider brings those capabilities with it and can have you set up in several weeks.

Instead of spending the first years of the hold period building the operational IT capabilities internally, the PortCo can put its internal technology talent to work on value-creation priorities.

Build for the next acquisition

The value of this structure becomes especially clear when a PortCo starts acquiring.

I worked with one company that acquired a new business every month. Its internal IT team spent its time integrating pricing structures, product SKUs, and point-of-sale workflows into the core platform. Those decisions required knowledge of the business and its systems.

While the internal team handled those business-specific decisions, the MSP executed infrastructure integration through a repeatable model in parallel. Neither team stepped on the other, and each acquisition was fully converted in under 30 days.

That speed is the return on getting the IT responsibility split right early. An internal team stretched across both business decisions and network troubleshooting can’t hit a 30-day conversion, no matter how good the people are. Split it wrong, and every acquisition becomes a scramble to free up internal capacity that’s already spoken for.

Make the staffing decision during the carveout

A carveout gives PE firms and PortCo leadership a rare opportunity to define the IT operating model before habits and staffing decisions become difficult to change. To capitalize on that, the decision needs to be made as the company determines its structure, staffing, and infrastructure, before close or in the first weeks after.

I’ve seen companies take the other approach, hiring an internal team around immediate operational needs with the expectation that those people will take on more strategic work later. That transition rarely happens.

Operational demands keep coming, and the people hired to manage them don’t have capacity for anything beyond that. The PortCo ends up with an internal IT organization built around work an MSP could deliver more efficiently at scale, while the strategic initiatives behind the investment thesis stay understaffed.

The staffing decisions you make during the carveout determine what internal IT spends the hold period doing. Reserve that team for work requiring deep knowledge of the business, hand the rest to a partner built to run it, and IT stops being something the next acquisition has to work around.

If you’re setting up IT for a portfolio company coming out of a carveout, I’m glad to talk through how the split should work for your situation.