Six Lessons For Succeeding As A Private Equity CEO
Jeffrey Warren, JP Flaum
The Chief Executive article, “Six Lessons For Succeeding As A Private Equity CEO," co-written by Russell Reynolds Associates Consultant Jeffrey Warren, debunks six common myths about PE firm CEOs. The article is excerpted below.
Many executives think they’ve made it once they become CEO for a private equity portfolio company. About half are wrong: A Bain & Company analysis found PE firms ultimately replace nearly 50 percent of them.
What does it take to succeed? We asked 25 leaders at premier PE firms, including Bain Capital, The Carlyle Group and KKR, as well as 15 successful portfolio company CEOs. Their responses revealed six common myths that often plague new portfolio company CEOs — and how to overcome them.
Myth #1: Once you’ve seen one PE firm, you’ve seen them all
PE firms vary significantly in their operations and expectations, but many new CEOs mistakenly assume they all conform to a stereotypical profile. From communications cadence to the primacy of the playbook, it’s essential to proactively clarify your sponsor’s protocols.
Even more important: discerning the variance within firms stemming from the personal styles and motivations of deal team members. For example, an investor aiming for a promotion – or a comfortable retirement – may want to sell your company more quickly than their colleagues. As one CEO said, success involves not just maximizing enterprise value, but deftly juggling the agendas of the people in the room with a “massive amount of money” at stake.
To avoid crossed purposes, a CEO’s first job is gleaning key team data, including: Who has decision-making authority? Who handles the day-to-day? How many deals and exits has each person had? How are they compensated? What’s the pecking order?
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