Before the burst of the current economic crisis acquisition activity by private equity (PE) firms broke one record after another with the top firms competing for the largest deal. Recent business headlines imply that there is a new wave coming following the first signs that the crisis is over especially in the USA.
PE professionals agree that the return on their investments relies heavily on the people whom they assign with running their portfolio companies. A great percentage of executives who have a thriving career in public companies ultimately fail in a PE portfolio leadership role due to a cultural misfit or limited experience in change management and problem solving within a new environment.
Which are the key competencies which PE firms seek in order to employ the management of one of their portfolio companies? Some of them are:
- Proven track record in leading change and transformation.
- Entrepreneurship and risk orientation.
- Generic managerial excellence rather than industry specialization, as well as exposure to a variety of functional disciplines.
- Self-reliance and decisiveness.
- Hands-on and multitasking ability.
- Strong financial expertise, including P&L, cash flow management, debt repayment experience and headcount optimization.
- Ownership mentality rather than corporate mentality as they are often required to invest personally in the deal.
- Focus on longer-term results (a typical exit strategy is after 3-5 years) with a view to a variety of potential exit strategies (an IPO, recapitalization, a merger, or a sale of the company).
- The ideal age group is mid 40s to mid 50s. This target group with the right mentality is in such great demand that some PE firms hire candidates without a specific role in mind, and then look for a suitable portfolio company for them to manage.
As demand for such executives will grow again, it will become very challenging to recruit the most appropriate leaders for these positions. To attract this type of talent PE firms offer:
- Aggressive profit-sharing bonus plans, the cost of which would be far from affordable for a publicly traded firm since it would damage short-term quarterly results.
- Clear-cut objectives and short communication paths to the board without bureaucracy.
- High-level consulting from industry veterans who act as advisors to the private equity boards.
- Freedom from strict regulation requirements (like SOX Act) and pressures regarding quarterly earnings expectations and daily stock price fluctuations.
- A business environment focused on results rather than waste too much time on “massaging” shareholders, analysts, the media and corporate politics.
- High-level networking through the PE director’s access to markets, decision makers, Executive Search firms, lawyers and the like.
Before the burst of the current economic crisis acquisition activity by private equity (PE) firms broke one record after another with the top firms competing for the largest deal. Recent business headlines imply that there is a new wave coming following the first signs that the crisis is over especially in the USA.
PE professionals agree that the return on their investments relies heavily on the people whom they assign with running their portfolio companies. A great percentage of executives who have a thriving career in public companies ultimately fail in a PE portfolio leadership role due to a cultural misfit or limited experience in change management and problem solving within a new environment.
Which are the key competencies which PE firms seek in order to employ the management of one of their portfolio companies? Some of them are:
- Proven track record in leading change and transformation.
- Entrepreneurship and risk orientation.
- Generic managerial excellence rather than industry specialization, as well as exposure to a variety of functional disciplines.
- Self-reliance and decisiveness.
- Hands-on and multitasking ability.
- Strong financial expertise, including P&L, cash flow management, debt repayment experience and headcount optimization.
- Ownership mentality rather than corporate mentality as they are often required to invest personally in the deal.
- Focus on longer-term results (a typical exit strategy is after 3-5 years) with a view to a variety of potential exit strategies (an IPO, recapitalization, a merger, or a sale of the company).
- The ideal age group is mid 40s to mid 50s. This target group with the right mentality is in such great demand that some PE firms hire candidates without a specific role in mind, and then look for a suitable portfolio company for them to manage.
As demand for such executives will grow again, it will become very challenging to recruit the most appropriate leaders for these positions. To attract this type of talent PE firms offer:
- Aggressive profit-sharing bonus plans, the cost of which would be far from affordable for a publicly traded firm since it would damage short-term quarterly results.
- Clear-cut objectives and short communication paths to the board without bureaucracy.
- High-level consulting from industry veterans who act as advisors to the private equity boards.
- Freedom from strict regulation requirements (like SOX Act) and pressures regarding quarterly earnings expectations and daily stock price fluctuations.
- A business environment focused on results rather than waste too much time on “massaging” shareholders, analysts, the media and corporate politics.
- High-level networking through the PE director’s access to markets, decision makers, Executive Search firms, lawyers and the like.
