Private Equity Turnarounds: 3 Proven Operational Moves That Built a $300M Fund
Private equity turnarounds at the lower middle market require a documented value creation system, not deal instinct, and Eric Wiklendt’s $300M oversubscribed fund proves exactly why process beats intuition every time.
Key Takeaways
- Understand how private equity turnarounds depend on three operational levers — management alignment, revenue portfolio rationalization, and operational footprint optimization — rather than financial engineering alone.
- Learn how the Fix and Build framework used in private equity turnarounds gives fund managers a repeatable system to consistently improve EBITDA across manufacturing and value-added distribution portfolio companies.
- Discover why the bimodal distribution in private equity fundraising rewards hyper-focused fund strategies, and how a documented value creation playbook strengthens LP confidence during capital raises.
- Consider how pre-defined thresholds for capacity utilization and profitability allow fund managers to make plant closure and asset rationalization decisions before emotional or operational inertia sets in.
- Explore how equity incentive structures — specifically profits interest units with 83(b) elections — can align management team behavior with the long-term value creation goals central to successful private equity turnarounds.
The Fix and Build Framework Driving Private Equity Turnarounds at Scale
First 90 days of operational execution
Only after operational foundations are secure
Framework: Eric Wiklendt, Speyside Equity
Private equity turnarounds in the lower middle market are not won in the deal room — they are won in the first 90 days of operational execution. Eric Wiklendt, managing partner at Speyside Equity, closed a $300 million hard cap on his second fund while building a repeatable system he calls the PortCo Value Creation System, a structured approach to transforming underperforming manufacturers into high-EBITDA exits.
According to Wiklendt, the system divides into two phases: Fix and Build, with phase one focused on stabilization before any growth initiative begins. Private equity turnarounds that respect this sequencing consistently outperform those that rush toward growth before operational foundations are secure.
In this episode, Wiklendt explains that private equity turnarounds in manufacturing consistently generate 80% of early value creation through three operational levers. The first is incentivizing and aligning the management team. The second is rationalizing the revenue portfolio. The third is optimizing the operational footprint, including manufacturing and supply chain infrastructure.
Wiklendt notes that the businesses Speyside targets — companies generating $50 million to $500 million in revenue in manufacturing and value-added distribution — tend to be underloved and undermanaged due to misaligned ownership structures. According to the SEC’s alternative asset regulatory framework, fund managers operating in this space face heightened scrutiny around portfolio company governance, making documented value creation processes even more critical from a compliance and LP reporting standpoint.
Private equity turnarounds that skip the Fix phase and move directly to the Build phase — which includes bolt-on acquisitions, new market entries, new geographic entries, and new channel strategies — risk layering growth onto a structurally unstable operating base. Wiklendt is explicit that the system is designed to be scalable, repeatable, and consistently executable across every portfolio company, regardless of specific sector dynamics within manufacturing.
Pre-LOI Signals That Determine Whether Private Equity Turnarounds Are Viable
Private equity turnarounds begin with honest diligence on whether a business is even fixable before a letter of intent is signed. Wiklendt identifies two primary signals that indicate a deal should be walked away from immediately. The first is a management team so misaligned that a complete leadership replacement would be required. The second is a go-to-market strategy with no defensible reason for the business to exist in the market long term.
According to Wiklendt, customers must genuinely want the business to exist in the industry — if that fundamental commercial logic is absent, private equity turnarounds cannot manufacture it through operational improvement alone. This framing shifts the pre-LOI evaluation from a financial statement review to a strategic viability assessment that combines human capital analysis with competitive positioning. The Harvard Business Review’s research on operational execution supports this view, noting that leadership alignment is consistently the most underweighted factor in acquisition outcomes.
Wiklendt also introduces the concept of engineering the process stack as a decision logic tool applicable across any private equity turnarounds scenario. He distinguishes between value creation processes — the things customers actually pay for, such as designing, manufacturing, and selling products — and key support processes that enable those value creation activities. Understanding this distinction before an LOI is submitted helps emerging managers identify whether the operational foundation is capable of supporting transformation or whether the complexity is fundamentally too deep to justify the investment.
Assessing CEO Capability in Private Equity Turnarounds Before the Deal Closes
Private equity turnarounds rise or fall on the quality of leadership executing the value creation plan, and Wiklendt uses a deceptively simple diagnostic to evaluate CEOs during management presentations. Drawn from advice his father — a university mathematics and physics professor — gave him decades ago, the test is straightforward: when asked a difficult question about their business, how quickly can a CEO explain the concept in plain language that a fifth-grader could understand?
According to Wiklendt, the ability to simplify complex operational or strategic concepts is a direct signal of how deeply someone understands what they are trying to execute. In private equity turnarounds, where CEOs must communicate strategy across organizations of hundreds or thousands of people, the capacity to translate complexity into clarity determines whether execution cascades effectively through the organization. Wiklendt notes that complication during management presentations is typically a red flag, either the CEO does not fully understand the business, or the complexity is being used to obscure something.
Wiklendt explicitly connects this CEO assessment framework to the strategy deployment process used post-close. He explains that if a CEO cannot communicate the value creation plan simply and consistently, the five-step PortCo strategy deployment system will fail regardless of how well-constructed the plan is on paper. The Forbes leadership communication research aligns with this view, identifying clear communication as one of the top differentiators between high-performing and underperforming executive teams in operational turnaround environments.
The Five-Step Strategy Deployment Process Behind Successful Private Equity Turnarounds
3–5 year vision: target doubling EBITDA within 3 years through margin improvement
One-year plan with monthly milestones and balanced scorecard
3–7 targeted projects; specific processes for continuous improvement
Goals with defined deadlines; balanced scorecard tracking
Named individuals; specific tasks; defined timelines
Framework: Eric Wiklendt, Speyside Equity
Private equity turnarounds at Speyside are structured around a five-step strategy deployment process that Wiklendt describes as the organizational spine of the PortCo Value Creation System. The process begins with defining what success looks like over a three-to-five year hold period. For Speyside, that typically means doubling EBITDA within the first three years, primarily through significant margin improvement before any revenue growth phase is initiated.
Step two involves developing a one-year profit plan with monthly milestones and a balanced scorecard to measure progress against the long-term vision. Step three identifies the key projects and initiatives — typically three to seven — that will drive the annual improvement plan, along with the specific processes targeted for continuous improvement. Private equity turnarounds that fail at this stage typically do so because initiative lists are too long or too vague to be executed with accountability.
Steps four and five address measurement and human capital accountability respectively. Wiklendt emphasizes that goals without deadlines are not goals, they are aspirations, and that the most critical element of the entire system is assigning named individuals to specific tasks with defined timelines. The balanced scorecard methodology, widely recognized in corporate strategy literature, provides the structural foundation for this kind of cascading goal alignment across portfolio companies undergoing private equity turnarounds.
Wiklendt notes that this entire five-step system collapses without a CEO who can communicate it clearly at every level of the organization, reinforcing the direct connection between leadership assessment during diligence and operational execution post-close. Private equity turnarounds that align people, process, and communication across this framework produce consistent results with low variance, a characteristic that LP allocators increasingly prioritize when evaluating fund managers for re-up commitments.
Capacity Utilization and Profitability Thresholds in Private Equity Turnarounds
Private equity turnarounds in manufacturing require fund managers to make plant closure and asset rationalization decisions with pre-defined thresholds rather than gut feel. Wiklendt, who co-authored what was called The Standard Transition Process during his tenure at Eaton, a company operating approximately 200 plants globally, identifies two primary metrics that govern these decisions: capacity utilization and profitability per unit of deployed capital.
On the utilization side, Wiklendt uses time-based capacity analysis as a starting point. A plant running one shift, five days a week, eight hours per day operates at approximately 24% of the 168 hours available in a week. According to Wiklendt, that level of utilization creates a structural challenge for return on capital employed, given the fixed capital intensity characteristic of most manufacturing businesses targeted in private equity turnarounds.
The return on capital employed framework at Investopedia details why fixed asset intensity amplifies the financial impact of underutilization in capital-heavy industrial businesses. Profitability provides a secondary filter that can modify the utilization signal in either direction. Private equity turnarounds that apply both filters simultaneously, rather than treating utilization and profitability as independent variables, produce better portfolio construction decisions and reduce the risk of premature asset disposal or excessive capital retention in underperforming facilities.
Wiklendt explains that a plant with low capacity utilization but high profitability per square foot may actually represent a growth opportunity rather than a closure candidate. The correct response in that case is to fill the plant with additional volume rather than rationalize it. This nuanced application of dual-threshold analysis is one of the distinguishing features of the PortCo Value Creation System as applied to private equity turnarounds in capital-intensive manufacturing environments.
Three Critical Negotiation Points in Carve-Out Private Equity Turnarounds
Private equity turnarounds involving asset carve-outs introduce a distinct set of structural and financial complexities that require focused negotiation discipline. Wiklendt identifies three items that demand the hardest negotiation in any carve-out letter of intent. The first is the Transition Services Agreement, which defines the terms under which the acquiring entity continues to use the seller’s systems and services, typically spanning six to twenty-four months, until a standalone operational infrastructure is established.
The second critical negotiation point in carve-out private equity turnarounds is standalone adjusted EBITDA. Wiklendt explains that carve-out businesses carry both one-time and ongoing cost adjustments that must be accurately reflected in any valuation multiple. One-time costs include legal, tax, insurance, and management consulting fees associated with the separation. Ongoing standalone costs include annual audits, ERP systems, insurance for a smaller independent entity, and supply chain cost increases resulting from reduced purchasing power.
Private equity turnarounds that fail to accurately model these adjustments risk overpaying on entry and compressing returns before any operational improvement initiative begins. The third negotiation focus is the representation, warranty, and indemnification structure in the deal documents, particularly as it relates to human capital, working capital, and fixed capital that may have been strategically loaded into the carved-out entity prior to sale.
Wiklendt warns that sellers occasionally use carve-out structures to offload liability, what he describes as a scapegoat asset, and that thorough due diligence on assumed liabilities is essential protection against this risk. The SEC’s guidance on material agreement disclosures underscores why the reps and warranties framework in carve-out transactions carries outsized regulatory and financial significance for fund managers executing private equity turnarounds through this transaction structure.
Equity Incentive Structures That Drive Private Equity Turnarounds From Within
| Instrument | Tax Treatment | Speyside Use |
|---|---|---|
| Profits Interest Units (PIUs) + 83(b) | Long-term capital gains at exit | Preferred |
| Stock Options | Ordinary income on exercise | Used selectively |
| Restricted Share Units | Ordinary income on vest | Used selectively |
| Phantom Equity | Ordinary income on payout | Used selectively |
Framework: Eric Wiklendt, Speyside Equity — 7–10% diluted equity reserved per platform company
Private equity turnarounds require more than a competent management team — they require a management team that thinks and acts like owners. Wiklendt frames this around a phrase attributed to his partner Kevin: “We want partners, not employees.” The practical mechanism for achieving that alignment is a structured equity incentive program that creates meaningful upside for the leadership teams executing value creation plans across portfolio companies.
According to Wiklendt, Speyside typically reserves seven to ten percent of diluted equity in each platform company for long-term incentive plans. The preferred instrument is profits interest units, or PIUs, combined with an 83(b) election under the U.S. Internal Revenue Code. This structure allows recipients to receive long-term capital gains treatment on payouts at the time of a liquidity event, typically the three-to-seven year hold exit, rather than ordinary income treatment.
Private equity turnarounds structured with PIU-based incentives tend to produce stronger operational engagement from management teams because the financial upside is both material and tax-efficient. Wiklendt notes that the goal of this incentive architecture is to align limited partners, the general partner, operating partners, and portfolio company management teams around a single shared objective: increasing equity value through disciplined execution of the value creation plan.
Other instruments used in private equity turnarounds include stock options, restricted share units, and phantom equity, but Wiklendt describes profits interest units as the current preferred structure given the favorable tax treatment available to qualifying recipients. The Investopedia overview of profits interest units provides additional context on how this instrument functions within partnership structures commonly used in private equity fund portfolio companies.
Why Size Matters in Private Equity Turnarounds and Fund Portfolio Construction
Private equity turnarounds in microcap businesses carry structural risks that Wiklendt learned through direct experience in Fund One. Speyside attempted to roll up four sub-$50 million revenue stamping and fabrication businesses in the Chicago area into a $100 million revenue platform. The combination of customer concentration challenges, operational improvement delays, and the external shock of COVID-19 produced a deal outcome that did not meet expectations, generating one of the most significant lessons Wiklendt has applied to Fund Two’s construction criteria.
The lesson, stated plainly by Wiklendt in this episode, is that size matters in private equity turnarounds. Businesses below $50 million in revenue typically lack the systems, processes, and human capital depth required to absorb the shocks that inevitably accompany transformation. According to Wiklendt, small companies are disproportionately exposed to operational and financial risk because they lack the organizational infrastructure needed to implement corrective actions quickly when conditions deteriorate.
Private equity turnarounds at this scale can move from underperformance to insolvency risk faster than the fund management team can respond. Fund Two now operates with a hard minimum of $50 million in revenue for platform acquisitions, with bolt-on acquisitions below that threshold still considered on a case-by-case basis. According to Wiklendt, this portfolio construction discipline is one of the most controllable risk management decisions available to a fund manager.
The Wall Street Journal’s coverage of middle market private equity strategy has noted the growing importance of minimum size thresholds as institutional LPs increase scrutiny of fund construction discipline during due diligence for re-ups and new fund commitments. Private equity turnarounds that respect this size discipline produce more consistent risk-weighted returns, a narrower standard deviation on outcomes, which is precisely what institutional limited partners are evaluating when they assess a fund manager’s track record and process rigor.
The bimodal distribution Wiklendt describes in the current fundraise environment, where capital flows to mega-funds above $10 billion AUM and highly specialized funds below $1 billion AUM, rewards fund managers who can demonstrate deep sector expertise and repeatable operational methodology in private equity turnarounds within a clearly defined target market.
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About the Guest
Eric Wiklendt is the managing partner at Speyside Equity, a private equity fund focused on acquiring and transforming manufacturing and value-added distribution businesses generating $50 million to $500 million in revenue. He has closed over 38 deals across metals, specialty chemicals, and industrial manufacturing, and led Speyside’s second fund to a $300 million hard cap with an oversubscribed close. His operational background includes experience as a plant manager supervising over 300 union workers in Mexico and as a shift supervisor managing 70 UAW employees in Waterloo, Iowa, as well as roles in corporate mergers and acquisitions where he transitioned from operator to institutional investor.
Wiklendt holds a graduate degree and has applied his operational experience — spanning supply chain management, sales force leadership, and plant operations — to build the PortCo Value Creation System that anchors Speyside’s investment thesis in private equity turnarounds. He can be reached through the Speyside Equity website or via his LinkedIn profile for conversations about potential business acquisitions, operating partner opportunities, or fund collaboration.
Questions Answered in This Article
What are the first three operational levers pulled in private equity?
The first three operational levers pulled in private equity center on people, systems, and cash flow discipline. Elite operators begin by assessing whether the right leadership is in place, then move to standardizing core processes, and finally tighten working capital management to stabilize the business. These foundational moves create the conditions necessary for any further value creation to take hold.
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How does a PortCo Value Creation System generate operational alpha?
A PortCo Value Creation System generates operational alpha by installing repeatable improvement frameworks across portfolio companies rather than relying on one-off fixes. The system creates consistency in how problems are diagnosed, prioritized, and resolved, which compounds value over the holding period. This structured approach is what separates disciplined PE operators from those who simply buy and hope for market tailwinds.
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What operational moves scale a private equity fund to $300M?
Scaling a private equity fund to $300M required executing three core operational moves consistently across portfolio companies: leadership alignment, process simplification, and rigorous financial controls. Each move was applied systematically to drive measurable improvements in EBITDA, which in turn supported larger fund raises and stronger LP relationships. The discipline of repeating these moves across multiple holdings built the track record that made the $300M milestone achievable.
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How do elite operators simplify systems to scale portfolio companies fast?
Elite operators simplify systems by removing complexity that does not directly contribute to revenue, margin, or customer retention. They audit existing workflows, eliminate redundant processes, and install lean operating cadences that allow teams to move faster with fewer resources. Simplification is treated as a strategic discipline, not a cost-cutting exercise, and it consistently accelerates the timeline to meaningful value creation.
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What should fund managers prioritize when fixing underperforming portfolio companies?
Fund managers should prioritize stabilizing cash flow and assessing leadership quality before addressing any other operational issue in an underperforming portfolio company. Without adequate liquidity and the right people in key roles, no downstream improvements will hold. Once those two areas are addressed, managers can turn attention to process gaps and market positioning with a much higher probability of success.
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How do PE firms execute business carve-outs to maximize returns?
PE firms execute business carve-outs by isolating the highest-value business unit, establishing its own operational infrastructure, and removing the drag of the parent organization as quickly as possible. The carve-out process requires careful separation of shared services, customer contracts, and financial reporting to create a clean, standalone entity that can be valued and operated independently. When executed with precision, carve-outs allow firms to surface value that was previously obscured inside a larger, less focused organization.
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Which people-focused strategies turn around broken businesses in private equity?
Turning around broken businesses in private equity begins with an honest assessment of whether incumbent leadership has the capability and willingness to execute the required changes. Operators who succeed at turnarounds typically install or promote leaders who have direct accountability for measurable outcomes, and they build incentive structures that align management compensation with value creation milestones. Creating cultural clarity around performance expectations is as important as any financial or operational fix in a true business turnaround.
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How do operational improvements directly drive fund growth past $300M?
Operational improvements drive fund growth past $300M by producing verified performance data that LPs and institutional allocators can evaluate with confidence. Each portfolio company improvement strengthens the fund’s auditable track record, which is the primary currency in conversations with larger capital allocators. Consistent operational execution across holdings signals to the market that the fund’s results are repeatable and process-driven, not dependent on favorable macro conditions.
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Topics Covered in This Article
- Private equity turnarounds: the Fix and Build operational framework
- The three 90-day levers used in private equity turnarounds at the lower middle market
- Pre-LOI signals that indicate a private equity turnaround is not viable
- CEO assessment methodology for evaluating leadership capability before deal close
- Five-step strategy deployment process used across portfolio companies in private equity turnarounds
- Capacity utilization and profitability thresholds for plant closure decisions
- Carve-out transaction negotiation: transition services agreements and standalone adjusted EBITDA
- Profits interest units and equity incentive structures in private equity turnarounds
- Portfolio construction discipline and minimum revenue thresholds for platform acquisitions
- Bimodal distribution of fund capital and what it means for emerging managers executing private equity turnarounds
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