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Operating Partner

Definition - What does Operating Partner mean?

Operating partners are independent advisors to private equity groups who actively contribute to the strategic and operational development of portfolio companies.

Operating partners are typically former CEOs or COOs with a proven track record of business leadership. They will provide their expertise for portfolio companies with regards to operational knowledge, as well as access to a deep network of of industry contacts.

Divestopedia explains Operating Partner

The use of operating partners has become more prevalent by private equity firms as they employ an industrial investment approach that is based on operating improvement, rather than financial engineering through multiple expansion or use of excessive leverage.

Operating partners can be involved in a multitude of different business activities, from day-to-day operations, bolt-on acquisitions, or post-sale liquidity analysis. Their overall purpose is to increase the portfolio firm's entreprise value through operational improvement and exploiting industry opportunities.

Mid-market business owners considering taking on a private equity partner should inquire if the PE employs an operating partner. If so, be sure to build a relationship with this individual as it is likely that the management team will spend a significant amount of time with them.

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