Third Annual Private Equity (PE) Leadership Survey | 2018

Misalignment between PE investors, portfolio company (portco) CEOs triggering costly turnover

Last year, our Private Equity and CEO survey performed jointly with Vardis, focused on the relationships between PE owners and the CEOs running their portcos, and generated insights into how those relationships might be strengthened. In this year’s survey—our third annual—we delve more deeply into an especially significant aspect of owner/CEO relationships: misalignment between the two sides on a surprisingly wide range of critical matters.

For too many PE owners, misalignment is triggering unplanned turnover among their portfolio company CEOs. Indeed, for this year’s survey respondents, CEO turnover was unplanned for 34% of investments. And everyone’s paying the price. Such turnover can disrupt entire companies, causing confusion and sparking fear among managers and employees about what the change in leadership will mean for them.

What this report reveals:

CEO turnover is unplanned for 34% of investments, leading to significantly worse returns and longer hold times for private equity firms.
The first 100 days are ripe for misalignment, with varying expectations of support, assessments of the management team, performance metrics, and frequency of contact.
Private equity investors tend to replace CEOs at the most disruptive times.