Q&A: Riverside’s Jason Murphy’s goals for 2020

The chief financial officer, speaks with Private Funds CFO about his automation goals for 2020, high multiples and what he’s most worried about in the new year.

Jason MurphyRiverside Company operates from 16 offices and its private equity and structured capital portfolios include more than 100 companies. Jason Murphy, its chief financial officer, speaks with Private Funds CFO about his automation goals for 2020, high multiples and what he’s most worried about in the new year.

What have you set your sights on for 2020?

Apart from the normal Q1 hustle and bustle, we’re laying the groundwork for bigger projects in 2020. As a broader firm, it’s bigger picture systems, rationalizations and integration. My team, specifically, is looking at continuing to accelerate our close in 2020 and continuing to improve our reporting. We are currently implementing a software tool that can help us accelerate our close, and also potentially become our budgeting and forecasting tool. We particularly like this program in that it exists in Excel, but allows us to easily link into other systems and data sets while maintaining data integrity.

The big underlying push is, of course, automation. Riverside is growing at a faster pace, and as a firm we have expanded outside of traditional private equity deals. All of this growth has definitely stressed our systems – and highlighted gaps in our systems which are typically plugged with manual processes built around Excel. We’ve always had the desire to make these more efficient. We’re slowly chipping away at automating and moving to more established tools, but the recent growth has certainly forced us to focus more on this and accelerate that process.

What parts of your back-office function are automated?

When you look across our back-office functions you will see good use of systems and automation. Our IT department and PMO function have been instrumental in implanting a variety of solutions that help to make our everyday takes easier.

“We’re willing to pay for the right deals, but unfortunately, all deals are expensive right now”

That said given the age of our firm we have also been focused on rationalizing our existing systems to make sure we are using solutions that not only meet our functional needs, but also works well in our overall ecosystem. We recently migrated our deal origination software, we have upgraded our management company ERP system and we have also taken the opportunity to leverage new systems and tools being developed by our third-party administrator. We have also focused on smaller opportunities, such as implementing an electronic signature application for our GP close process.

We recognized the need for systems early. We have an internally developed database tool that is coming up on 15 years that maintains all of our portfolio company data. This tool is integrated with our deal origination software and our ERP system, among others.

How do you hope to push forward with automation in 2020?

In 2020, we are taking a big picture look at our technology ecosystem: looking at all of the systems that we have and all of the processes that we have and saying, “OK, where do we lack the linkages? Which systems need to be talking to each other? Which systems are potentially redundant? Is there an opportunity to consolidate? While we may be using multiple systems for different processes, are there opportunities for a single solution to handle multiple processes?”

Some of our processes are automated in isolation – they exist in pockets or islands where something is automated from point A to point B, but not from start to finish, from a holistic perspective. Now it’s about identifying those breaks in the automation process and seeing if there’s an opportunity to fix it.

Obviously, the goal is end-to-end. We’re constantly asking ourselves, “Where are the quick wins that we can fix now and where are the longer wins that we need to focus on chipping away at?”

How are you grappling with the record levels of dry powder at the beginning of this year?

We’ve had a fair amount of consistency in capital deployment. At the smaller end of the mid-market, we’re still seeing plenty of deals. The bigger issue for us is around pricing. Values are high, so the big focus for us isn’t so much on being able to deploy the money, but rather on making sure that we’re smart about deploying it. We’re willing to pay for the right deals, but unfortunately, all deals are expensive right now. So, you need to be sure that if you’re going to pay up for a deal, it’s the right deal.

An advantage for us is that we’re not overtly sector or industry-focused. We’ve seven industry specializations where we focus a lot of our origination efforts, but we are not limiting ourselves to only finding great opportunities in those industries.

It’s not about being able to deploy dry powder, for us. It’s the wider impact on multiples that the combination of dry powder and low interest rates has created that requires us to work a little harder to find the best opportunities.

What are you most worried about in 2020?

There are always things you can control and things you can’t. You can’t control regulation or the timing of the next downturn. Our focus is really to be prepared for uncontrollable phenomenon, and part of that for us is diversifying our offerings.