Private equity has built its reputation on discipline, speed, and the ability to unlock value that others overlook. Yet one of the most under-discussed and underestimated sources of value sits deep within the operational fabric of portfolio companies: procurement. While PE firms invest heavily in sales acceleration, pricing strategy, and financial governance, procurement often remains an afterthought or a secondary lever in the value creation plan.
This gap persists not because procurement lacks value, but because private equity firms face a unique set of structural challenges that complicate procurement transformation. Many of these challenges are rarely acknowledged openly. They live in the operational shadows, influencing costs, working capital, compliance, supplier relationships, and governance. They slow down integration, weaken negotiations, and reduce the leverage PE firms could otherwise command.
These challenges are not obvious at first glance. They stem from fragmented systems, varying levels of procurement maturity, and the inherent complexity of operating multiple businesses with different procurement cultures and histories. Although these issues are well known to CFOs and operating partners, they are not always discussed at the level of strategic importance they deserve.
The firms that recognize and address these challenges are outperforming. They are using modern procurement intelligence, governance frameworks, and consolidation strategies to eliminate friction and unlock measurable EBITDA impact. Solutions conceptually aligned with the capabilities of Mulberri’s eGPO PRO illustrate how these challenges can be addressed at scale, without heavy transformation programs.
This article explores the procurement challenges PE firms rarely talk about publicly, and how leading operators are overcoming them through visibility, compliance, governance, and structured sourcing.
The Challenges Behind the Scenes: Why Procurement Is Harder in PE Than Most Admit
Procurement transformation inside a single company is difficult. Across a multi-entity private equity portfolio, the complexity increases exponentially. Several systemic challenges make procurement in PE uniquely demanding.
1. The Visibility Gap That Slows Every Decision
Most PE firms begin ownership without a clear view of how portfolio companies spend money. This is not because portfolio companies lack discipline, but because:
- Each company operates its own ERP
- Categories are defined inconsistently
- Supplier data is messy or unstandardized
- Manual reporting creates lag and inaccuracies
- Invoices lack structured descriptions
This results in a visibility gap that affects the entire value creation plan. Without unified visibility, operating teams cannot prioritize categories, assess supplier concentration, identify pricing variance, or design sourcing waves.
Visibility is the prerequisite for every procurement action. Without it, procurement becomes reactive and tactical rather than strategic and systematic.
2. Compliance is Often Assumed, Not Measured
Many PE firms assume portfolio companies follow procurement rules simply because policies exist. In reality, inconsistent compliance is one of the biggest contributors to margin leakage.
Common issues include:
- Maverick spend bypassing sourcing
- Off-contract pricing
- Unapproved vendors
- Inconsistent approval flows
- Lack of audit trails for large purchases
These issues do not arise from bad behavior. They arise from a lack of structure. If processes are manual or opaque, compliance becomes optional.
Compliance is the connective tissue between strategy and execution. It determines whether negotiated value is captured or lost.
3. Governance Breaks Down in Multi-Entity Environments
Governance is one of the most overlooked procurement challenges in private equity. It becomes especially difficult when portfolio companies:
- Operate across geographies
- Have different leadership styles
- Run on different internal processes
- Maintain their own procurement cultures
The absence of procurement governance manifests in subtle ways:
- No consistent approval thresholds
- No standard vendor onboarding process
- No discipline around contract renewals
- No tracking of supplier performance
- No portfolio-level oversight
Governance is not about centralizing control. It is about creating clarity. Without governance, procurement becomes an uncontrolled expense rather than a strategic lever.
4. Supplier Consolidation Sounds Simple — Until You Try to Do It
Every PE firm knows supplier consolidation saves money. Yet consolidation across multiple companies is more complex than identifying overlapping suppliers.
Challenges include:
- Misaligned contract cycles
- Different pricing tiers and legacy agreements
- Supplier resistance to portfolio-wide renegotiation
- Unique requirements or service models
- Cultural resistance to change
Supplier consolidation can create significant value, but success requires structured sourcing pipelines, consistent data, strong governance, and clear incentives.
5. Fragmented Procurement Maturity Across the Portfolio
In most PE portfolios:
- Some companies have sophisticated procurement teams
- Others have a single individual managing purchasing
- Some have digital workflows
- Others rely on email, spreadsheets, and phone calls
This variance makes portfolio-wide procurement strategies difficult to implement. The lack of a baseline creates uneven execution, inconsistent savings realization, and gaps in supplier relationship management.
Procurement maturity must be uplifted, but without adding headcount or requiring large system deployments.
How Leading PE Firms Overcome These Challenges
Private equity firms that excel in procurement transformation share one trait: they start by fixing what cannot be seen. They address the structural challenges before jumping into category strategies or supplier negotiations.
The firms that consistently outperform focus on four pillars.
Pillar 1: Visibility — The Foundation for All Procurement Value
Visibility transforms procurement from a tactical cost-control function into a strategic discipline.
Leading PE firms achieve visibility by:
- Aggregating spend across the portfolio
- Using real-time classification for accuracy
- Normalizing supplier names and categories
- Building dashboards that reveal patterns
- Creating a single source of truth for procurement
Platforms aligned conceptually with Mulberri’s eGPO PRO make unified visibility possible without costly integrations.
The result is clarity. And clarity is the gateway to leverage.
Pillar 2: Compliance — Ensuring Value is Realized, Not Lost
Procurement strategies fail when compliance is weak. To prevent leakage, leading PE firms build lightweight compliance structures that do not slow down operations.
This includes:
- Standardizing approval flows
- Defining spending thresholds
- Requiring digital purchase orders
- Using preferred supplier catalogs
- Monitoring spend behavior through dashboards
Compliance must be embedded in daily workflows, not enforced manually.
Pillar 3: Governance — The Missing Link in Procurement Transformation
Governance creates order. It ensures procurement decisions do not rely on individual judgment or local preferences alone.
Strong governance includes:
- A clear procurement policy
- Defined category ownership
- A contract review and renewal system
- Supplier performance scorecards
- Regular portfolio-wide procurement reviews
Governance is the operating system of procurement. Without it, consistency and discipline fall apart.
Pillar 4: Consolidation and Sourcing — Where Hard-Dollar Value Emerges
Once visibility, compliance, and governance are in place, sourcing can deliver significant EBITDA improvement.
Leading firms:
- Identify category and supplier commonality
- Build structured sourcing pipelines
- Prioritize high-impact categories
- Run competitive events
- Negotiate aligned contract terms
- Consolidate suppliers to strengthen leverage
Sourcing must be organized, measurable, and portfolio-aware. It is the final step, not the first.
The Path Forward: Turning Procurement Into a Strategic Advantage
Procurement excellence in private equity is not achieved through individual sourcing events or isolated cost savings. It is achieved through structural clarity, disciplined governance, and consistent execution across portfolio companies.
The firms that master these practices are building an operating superpower:
- They see spend patterns with precision
- They capture negotiated value consistently
- They reduce risk through visibility and governance
- They strengthen EBITDA without relying on external growth
- They improve exit narratives through operational maturity
Solutions similar in philosophy to Mulberri’s eGPO PRO allow PE firms to solve procurement challenges without heavy systems or organizational disruption. But the strategic principle stands independently: procurement transformation succeeds only when visibility, compliance, governance, and consolidation operate as a unified system.
The procurement challenges in private equity may be rarely discussed, but they are widely felt. Addressing them is the difference between occasional savings and sustainable, compounding value creation.
To explore how procurement visibility, governance, and consolidation can elevate value creation across your portfolio, request a guided procurement transformation session today.
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