Last year, our private equity (PE) leadership survey—performed jointly with Vardis—dug deeper into a key aspect of the owner/CEO relationship: misalignment between the two sides on a wide range of critical matters. In this year’s survey (our fourth annual), we take a closer look at the ongoing disconnection between respondents’ beliefs and behaviors, and between their views on certain topics—most notably, the role of addressing talent needs to drive growth in portfolio companies (portcos). Respondents this year included portco CFOs, adding richness to the insights we gained from our survey findings.
Also new this year, we’ve organized our findings and analysis into two reports. The report you’re reading now is Part 2 of 2. In Part 1, we concentrated on three main themes:
- Proactive management of the triangular relationship among PE sponsors and portco CEOs and CFOs
- Early understanding of major misalignments related to the role of human capital in PE firms’ investment thesis
- Disconnections between beliefs and behaviors regarding pre-deal assessment of prospective portcos
In Part 2, we shift focus to:
- Keys to success in the first 100 days after a deal is inked
- Management of performance evaluation, turnover, and replacement of portco executives
SUCCEEDING IN THE FIRST 100 DAYS: IT’S REALLY ALL ABOUT PEOPLE
As early as possible after closing an investment deal, PE firms must use every tool available to determine who the A, B, and C players are in their new asset. And they must swiftly define expectations and priorities for key roles, ensuring that those roles indeed create value and have measurable KPIs.
Top priorities for CEOs in the first 100 days
When asked what they thought a portco CEO’s top two priorities should be in the first 100 days post-deal, 74% of our PE and 76% of our portco respondents alike listed “Establish/ensure seniorteam alignment” as the number-one priority (figure 1). As their number-two priority, 76% of portco respondents cited “Assess the management team,” while 72% of the PE respondents chose “Validation of the investment thesis and delivery of quick wins.”
For PEs, assessing the management team was far down on their list—number six—while validating the investment thesis and delivering quick wins came in fifth place among portco executives. Interestingly, both groups rated “Reporting interface with PE sponsor (such as cash flow, financial reports, and KPIs)" as their number-three priority.
These numbers illuminate a major disconnect between the two groups—and between their beliefs and behaviors—regarding what top priorities should be in that crucial time period after a deal closes. For instance, while PE responses to other questions in the survey indicate that they view human capital as key to investment success, the fact that assessing a portco’s management team came in sixth place in their list of priorities suggests that they may be devoting insufficient attention to human capital needs in their portcos.
And while “Analyze the company culture” was closer to the bottom of the list, 50% of the portco respondents prioritized it, versus only 19% of the PE firms. This 31% delta dovetails with comments in Part 1 of this report about misaligned views regarding the importance of organizational culture assessment.
