Closing the IT Talent Gap in PE-Backed Carve-Outs A Q&A with Thrive’s Kevin Ellis
T echnology is an important consideration during a carve-out transaction, as a business entity separates from its original parent. Equally important are the IT and cybersecurity professionals who operate the businesses’ technology systems. Having an effective IT talent strategy can help a buyer jumpstart value creation after a carve-out, while a lack of strategy or improper planning can cost hard dollars and jeopardize the new parent/owning entity’s reputation. Kevin Ellis, executive vice president of private equity and financial services at Thrive, has supported hundreds of PE-backed portfolio companies during carve-outs, add-ons, and platform builds. He reflected on that experience in a conversation with ACG Magazine, sharing actionable insights about how PE sponsors can build an effective IT talent bench during a carve-out, accelerate their value creation roadmap, and avoid costly mistakes.
ACG MAGAZINE: How should buyers think about IT talent as they assess a carve-out’s readiness to operate independently? Kevin Ellis: You’re not just separat- ing the technology during a carve-out; you’re separating the operating capabil- ity. The systems don’t run themselves, so we need people to operate, secure, and govern them on a go-forward basis when the parent is gone. Critical expertise often sits with the par- ent and does not transfer with the deal, and that needs to be known up front. If there are talent gaps discovered after close that require extensions on a tran- sition services agreement (TSA), that can jeopardize the Day 1 stand-up and delay value creation initiatives.
ACG: What are the key talent areas to assess to avoid gaps post-close? KE: You want to evaluate IT talent for Day 1 capability, not necessarily head- count. Check for ownership around things like IT governance, cybersecurity, infrastructure, cloud, identity, network, and ERP, and make sure you have own- ers for those areas, either internally or through an outside technology partner. I would worry less about whether every IT position is filled and more about whether every critical capability has a clear and accountable owner. As you address core capability needs, it’s important to consider whether they merit a full-time staff member in the new company. If the heavy lifting hap- pens primarily during the separation, or if the new company doesn’t require
the same scope of services long-term, enlisting a third-party vendor might be more cost-effective than trying to build the capability internally. For example, take an enterprise company with a full in-house security operations center that divests a smaller business unit. The new company will need security capabilities, but there could be alternatives to build- ing their own permanent in-house func- tion. It might be more cost-efficient— and still meet the company’s needs—to outsource their security services. As a smaller platform looking to grow, those are things to look at. Buyers should also carefully consider services shared with the parent com- pany, to ensure that any core capabilities that sit with the parent are addressed when the new company separates.
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