This could be our last gig as entrepreneurs,” says Mohit Thukral, founding partner of mint-fresh business process management (BPM) firm Vivtera, which managed to secure a fat ten-figure rollout capital commitment from global private equity house Warburg Pincus. “So we want to give it a good shot.” Friends advised them to tie up with Warburg — pioneer of the private equity cult in India — after they had shopped their idea to several blue-blooded funds.“We decided to work with them because their thinking matched ours. Our idea is to create a ‘disruptive’ services platform and tech solutions company. For Warburg, this is their big BPO play after WNS several years ago,” says Thukral. Warburg intends to create a top-of the-line platform to make a dent in the $100-billion BPM industry as Thukral — along with cofounders Gaurav Sethi and Harpeet Duggal — aims to acquire or partner companies with Vivtera’s $1-billion firepower in key geographies of North America, Europe, Japan and Australia. Once part of the core team that helped build Genpact into one of the largest global BPO companies, the trio plans to leverage its experience through this new startup that will have strong digital and analytics capabilities. It will also give them an opportunity to finally fulfill their long pending aspiration of becoming entrepreneurs.Platforms seem to be the winning PE formula, and everyone is busy creating one or many. So, if TPG is behind former Fortis chief executive Vishal Bali’s healthcare venture Asia Healthcare Holdings, then Everstone is rolling up a foods platform following its acquisitions Modern Foods, through which it snapped up Cookie Man recently.Goldman Sachs backed Sumant Sinha to grow ReNew to be among the top two renewable energy platforms, while Blackstone Group and Indiabulls Real Estate are planning a commercial properties platform with rent-yielding assets, just months after doing a deal. Even India’s every own sovereign fund, NIIF, has joined forces with DP World for a $3-billion infrastructure platform for ports, terminals and logistics. (See More the Merrier) The ‘barbarians’ of the takeover boom are no longer hostile asset strippers who buy businesses. Instead, they are creating assets through partnerships and scaling them ground up.It’s a symbiotic relationship. For a fund, it allows entry into cherry-picked sectors such as consumer, media and entertainment, financial services, IT, BPO, renewable energy and healthcare. It can ride the momentum by scaling up through bolt-on acquisitions, or ‘roll-ups’ in PE parlance. In highly fragmented sectors like business services, such platforms also end up as consolidators of smaller operations. “Funds drip feed capital into the platform as it grows,” explains Vivek Soni, partner and PE practice lead, EY India. It’s also a whole new opportunity for the expanding pool of senior professionals to turn entrepreneurs and ride piggyback on capital to build the next generation of highgrowth enterprises.“After working in a company at a senior level for over 25 years, you feel you’ve done almost everything… That’s when the entrepreneurship bug bites you,” says KV Srinivasan. He started Profectus Capital this year after his stint as chief executive of Reliance Commercial Finance with Actis PE, which has pumped in $200 million to capitalise the SME lender.A platform can be structured in two or three ways. One, where the PE fund identifies a sector, gathers an expert management team and infuses capital into a newly-established corporate entity. Here, the management, including the chief executive, are mere employees of the PE-owned company. At best, they get are fat salaries and some target-linked stock options. The second mode involves private equity funds tying up with high-flying executives who have quit their jobs to become entrepreneurs. PEs back these entrepreneurs with large pools of capital and help them grow their existing business. However, the catch here is that PEs will only back executives with exceptional skills and a proven track record of growing businesses.It’s opportunistic too. As MNCs or conglomerates take a long hard review of their disparate portfolios, often PEs take over non-core businesses as ‘carve-outs,’ either on their own or with a management team to scale it up as platforms. “PEs that create platforms have longer time horizons than classic PE funds. They’re willing to give you enough time to grow the business,” says Yogesh Mahansaria, who acquired Israeli tyre manufacturer ATG with the backing of Warburg Pincus in 2006 and grew the business before selling out twice over – first to KKR and then to a strategic Japanese tyre maker.Sometimes, it’s just pure economic logic . Often bankable companies in consumer, healthcare are flush with cash and simply don’t need PE money or are trading at rich valuations. “There is no point in buying expensive companies,” says Sanjay Nayar, chief executive, KKR India. “Instead, it would be a great idea to make a platform vehicle or back a quality entrepreneur to create something from scratch.” This trend of creating platforms started some five years ago when the M&A market turned prohibitively expensive, says A Mahendran, chairman and managing director, Global Consumer Products. The former head of Godrej Consumer Products started this FMCG platform with funding from Goldman Sachs.“Promoters were quoting 5-6x earnings multiples for their business then. When PEs could not find fair-priced deals in the existing space, they teamed up with professionals with proven track-record with the sole target was to grow the business – organically or through acquisitions,” says Mahendran.The success stories — Ajit Isaac (Quess Corp), V Vaidyanathan (Capital First) and Yogesh Mahansaria (Alliance Tire Group) helped the case of the ‘platform investment’ thesis. The term ‘platform’ had not come about when Warburg Pincus backed Mahansaria or Vaidyanathan, but with time and firmer proof of concept came sophistication.“Some of our most successful investments have started as platforms in India, led by very talented entrepreneurs and management teams,” says Vishal Mahadevia, managing director, Warburg Pincus. Warburg also backed Cairn India’s former chief executive, Rahul Dhir, to create a niche oil exploration company Dolonex Energy and Jitu Virwani for Embassy Industrial Parks. Their approach has been sector-agnostic, spanning both old and new economy and among the most successful.“Many of these investment opportunities were unique in themselves as they presented to us a chance to partner with very talented leaders and be a part of a journey at a platform stage — by acquiring or building assets to create a leading business in a particular market,” Mahadevia adds.But according to entrepreneurs, skillset and track record alone may not be enough. Self-deployed capital is critical as it gives the entrepreneur greater autonomy to run the business. Without your own capital, you end up becoming an ‘employee’ of the PE fund, they say.“You become an entrepreneur with a free hand only if you’re all in,” says Anshuman Singh, CMD, Stellar Value Chain Solutions, a supply chain and logistics platform. “That’s when PE investors take you seriously and support you.” The funds typically pump in a lion’s share of the capital so they control the purse strings and shareholding. Equity ownership of the entrepreneur is worked out in different ways — performance or target-driven, time-linked accruals or conditional to exit options (available for the PE). If the business grows at a fair pace and the primary PE investor gets a good exit, the entrepreneur may end up with 10-20%.“Shareholding of the entrepreneur may vary from case to case… If the business involves higher levels of management/operational skills (say a pharma business), the entrepreneur would hold significantly higher stake in the company,” believes Isaac, chairman, Quess Corp, BPO platform of billionaire Prem Watsa-managed Fairbridge Capital.Together, they have bulked up the business, acquiring staffing portal Monster. com and HCL’s care unit ‘Touch’ in 2018 and also allied businesses such as MFX, Aravon, Brainhunter, Magna, Coachieve, Randstad Lanka and Transfield Services Qatar. Quess Corp shares have doubled since its blockbuster IPO mid-2016. Reason enough for such hectic matchmaking to continue.