Private Equity Leadership Services
Whilst financial analysis will always be a core component of PE practice, many firms recognise that ‘number crunching’ alone is not enough.
With our support, PE firms gain an extra edge by building a wider repertoire of practice - looking beyond the numbers to understand their investments in greater depth. This enables them to build greater foresight, manage risk more effectively and make wiser decisions.
Leadership in Private Equity
Long-term success and value creation in PE often depend significantly on the effective leadership of portfolio businesses. This means that PE investors confront a number of inherent challenges:
Failure to engage effectively with these challenges...
can destroy value and drain the energy and attention of all concerned.
Drawing on 25 years’ of practical PE experience, combined with in-depth research, our suite of services focuses on the leadership aspects of PE over the investment cycle.
Our expertise in leadership is complemented by insights from other areas.
This means that we can engage more effectively with the complexity of our clients’ businesses, to provide clear insights into the links between leadership and value creation and destruction.
This ensures that we make recommendations which are focused and pragmatic. With our support, GPs and their investee leadership teams are able to maximise the chances of success and so maximise returns.
Areas of Support
Our suite of service offerings is tailored to provide support at each stage of the PE investment cycle:
Wiser, risk-adjusted decisions
Improved resilience and agility
Greater alignment, transparency and trust
Smoother implementation of the plan
Efficient use of resources - Time, energy and attention as well as capital
Successfully negotiating and executing deals in PE brings a number of leadership-related challenges:
How to assess the leadership potential of the management team when time and access are limited
How to predict the tensions, complexities and leadership risks behind the business plan
How to systematically track and manage ‘gut-feel’ as a basis for the investment decision
How to build trust and lay the foundations for a transparent, collaborative post-deal relationship
Failure to engage effectively with these challenges can impair investment decisions and jeopardise deal execution.
Areas of Support
Leadership Risk Analysis
We use our proprietary leadership risk framework to analyse the high-level investment hypothesis. Because we draw on the information memorandum and other deal documentation, as well as briefings from the deal team, our review can happen in parallel to other deal activities. It does not usually require direct access to the management team. Our analysis highlights the key leadership milestones, enablers and inhibitors which are likely to arise on the critical path to exit. The scope can be adjusted based on what time and data are available.
Drivers of Leadership Success
Our leadership risk framework also highlights the key factors which will enable or potentially inhibit effective leadership in the context of the specific investment under consideration. This enables the deal team to establish a high level ‘menu’ of leadership characteristics against which members of the senior leadership team can be assessed and monitored, both during due diligence and over the course of the investment. This high-level list of leadership qualities will be a combination of factors generally relevant in the context of all PE investments and factors relating to the specific deal and the path to exit.
‘Gut-feel’ tracking for the deal team
Seasoned PE investors see ‘gut-feel’ as an important barometer when reaching an overall conclusion about a prospective leadership team. Our online tool enables members of the deal team to curate their instincts and impressions over the course of their interactions with the prospective leadership team allowing them to track and address emerging questions and concerns. This simple systematic approach helps the deal team to create an ‘audit-trail’ to support their instinctive impressions of management over the course of different meetings, discussions and presentations, providing a more robust basis for ‘gut-feel’.
More finely calibrated, risk-adjusted investment decisions
Improve insight and understanding of leaders, despite time and access constraints
More robust evaluation of leadership team, whilst avoiding disruption
Deeper understanding of the leadership implications of the strategic plan and how to address these
A firm foundation for an effective post deal relationship
First 100 Days
Challenges which arise when bringing new investments into the portfolio include:
Sustaining business performance in the face of ‘post-deal fatigue’
Defining a high impact value creation plan as a basis for setting priorities and taking action
Moving out of ‘sales mode’ to recalibrate and reset the relationship
Clarifying expectations and agreeing on relevant measures of leadership effectiveness
Failure to engage effectively with these challenges can undermine the relationship between the GP and the investee business and delay implementation.
Areas of Support
Developmental Assessment of leadership Team
Once the deal has been finalised, the portfolio leadership team come under pressure to deliver on the plan. PE investment adds to the inherent complexity of leadership, often bringing with it expectations of significant growth and change, delivered at pace and with constrained resources. Conducting a developmental leadership assessment is a way for the GP to show support to the investee management in clarifying and meeting the leadership challenges which lie ahead. It also facilitates a timely and candid discussion of leadership strengths and development needs, framed within the specific context of the business.
Portfolio Transition Support
The transition of a business from pre-deal negotiation to portfolio membership is a significant milestone, both for the business and the GP. The dynamics of the relationship are fundamentally different and all parties move from ‘sales mode’ into ‘execution mode’. We work with clients to decide how best to mark this important transition and surface relevant expectations and concerns. Here, a small investment of attention shortly after the deal reduces the risk of misunderstanding and potential conflict at a later
stage, when things can be much harder to resolve.
Creating a Tailored ‘Foresight Dashboard’
PE practitioners generally recognise that the future is inherently unpredictable and investments rarely play out exactly as expected. Business plans, which were prepared in order to build the necessary conviction to make an investment, convey an unrealistic sense of certainty and are insufficient to reflect the inevitable complexities and trade-offs of a ‘live’ business agenda. Our proprietary framework enables GPs to analyse their high-level strategy in terms of the inherent tensions and sources of resistance which may impede implementation. We can create a high-level dashboard which highlights early indicators of resistance and non-financial measures of success. This boosts foresight and reduces the risk of surprises.
Rapid engagement with the value creation plan
Accelerated relationship building between the GP and the investee management team
Identification of non-financial indicators of success and warning signs, highlighting the need for correction
Agreement on the high level leadership agenda and associated challenges and milestones
Candid and supportive discussion about portfolio leaders’ development agenda
Investments rarely play out as initially expected and the ongoing management of portfolio businesses presents GPs with a range of challenges:
How to enable rapid identification of, and engagement with, emerging threats and opportunities
How to ensure that any bad news is shared promptly and transparently
How to accurately understand the links between leadership effectiveness and business performance
How to make informed, objective judgements around senior appointments
Failure to engage with these challenges can mean that energy and attention are wasted on blame and defensiveness, whilst underlying business issues continue to incubate.
Areas of Support
Diagnostic Leadership Review
There may be businesses in the portfolio whose performance has not met expectations or where there is a perception that there is further, as yet untapped, potential. If there is a suspicion that the underlying issue relates to the leadership of the business then this can be an ideal time to conduct a developmental assessment of the leadership team. As long as the process is carefully positioned as being constructive and supportive, such an assessment can significantly improve business results and also serve to ‘reset’ what may have become a strained relationship with the GP.
Recruitment and Integration of new leaders
Over the course of an investment, it may become necessary to make changes to the senior portfolio leadership team. Whilst new leaders can bring fresh skills and insights and positively impact business results, changes at senior level can also cause significant disruption and may set the business back. Using our leadership risk methodology we can help to create a precise role specification and provide independent support in the assessment and selection of a suitable candidate. We can also facilitate the process of brining new leaders on board and minimise the chances of ‘tissue rejection’.
Where GPs recognise that there is scope to improve the way they look at portfolio leadership, we can conduct a diagnostic review of their existing practices. This enables GPs to identify high impact opportunities to expand and develop their approach, enabling them to create more value by more systematically understanding and engaging with the leadership dimension of their investments.
Opportunity to course-correct and reinvigorate portfolio businesses
Better understanding of root-causes of performance issues, and avoidance of blame and defensiveness
Clearer perspective for the GP across the portfolio as a basis for directing attention to best effect
Identification of untapped latent leadership talent
Rapid induction of newly recruited senior portfolio leaders
Preparing for Exit
The success or failure of an investment hinges on the exit so a great deal of energy, attention and emotion is focused on this stage of the investment cycle. Central challenges include:
How to create a clear, credible narrative around the future success of the business so that potential acquirers can create a strong investment rationale
How to build full awareness of the key opportunities and risks inherent in the business and prevent unexpected issues or unresolved problems clouding negotiations
How to present a rich, accessible picture of the business which provides sufficient reassurance around leadership capacity and succession
How to evaluate exit options with sufficient balance and detachment and build conviction around the best timing and exit strategy
Failure to engage with these challenges can fuel impetuous decisions, undermine bargaining power and ultimately impair returns.
Areas of Support
Leadership Case Creation
There will usually be no shortage of financial analysis to highlight future growth and value creation prospects. However, it often falls to potential acquirers to discern the associated leadership risks. Without clarity around the future leadership agenda, acquirers may be tempted to discount too heavily for this. We provide support in thinking through the future leadership agenda in a way which helps acquirers to ‘join the dots’ and so reduce uncertainty. This enables the GP to include a compelling leadership narrative in the sales documentation and so present a richer and more coherent picture of the business.
A common area of uncertainty relates to leadership succession and it is important that doubts here do not compromise value. Conducting a timely succession planning review, in advance of exit provides clarity around the succession pipeline for key leadership roles. It also facilitates an open, candid discussion about future plans and motivations of key leaders, further reducing the risk of unwanted surprise departures late in the day.
Pre-emptive Management Due Diligence
If the incumbent leadership team are expected to play a significant role in driving future value creation, it is likely that will come under considerable scrutiny from prospective acquirers and they may undergo formal management due diligence. Conducting a pre-emptive review of the leadership will help to highlight any material risks or issues so that these can be addressed in advance of exit. This will help incumbent leaders to present themselves with a balanced self-awareness, and boost their credibility in the eyes of prospective acquirers.
A convincing and compelling investment hypothesis for prospective acquirers
Optimised balance between GP value harvest and future value legacy
A credible narrative around leadership capacity and succession, clearly linked to the paths of value creation
Minimalised risk of unexpected disruption from ‘surprises’ arising from acquirer due diligence
Smooth and efficient execution of exit transaction
GP Leadership Support
PE tends to attract professionals who bring high levels of intelligence, pace and ambition. When channelled appropriately, these qualities can produce exceptional results, but, on their own, they do not guarantee success. To succeed, PE professionals must also engage with more subtle interpersonal and behavioural challenges:
Because the interpersonal dimension plays a more significant role in PE than probably any other branch of finance. PE professionals need to maintain a high level of self-awareness and self-management
With a fast-moving, complex agenda, PE professionals need to manage pace and find sufficient space for reflection to ensure that they apply proper discretion when deciding where and how to channel their energy and attention
Partners also need to consider how best to lead their firms to ensure sustained growth and success over time and differentiate the firm in what is an increasingly crowded PE marketplace.
Failure to consider these areas compromises effectiveness and, ultimately, returns. It can also impair the resilience and longevity of the firm.
Areas of Support
Next Level Leadership Development
We work with principals and partners, both individually and in teams to provide focused, high impact leadership development. Our approach is rooted in the specific leadership challenges which arise in PE firms, providing clear, actionable, high impact developmental insights which will benefit both the individual and their firm. Our developmental assessments help PE leaders to build a rich understanding of themselves as leaders, which integrates an awareness of their preferences and habits, and the impact of these.
PE is a young industry, and it is only recently that LPs founders and partners have begun to engage with the challenge of succession planning. Our succession planning methodology takes careful account of future vision and strategy to create clear, equitable channels of succession. This identifies and engages talented individuals with untapped potential and maximises firm resilience and longevity.
Firm Culture and Practice Review
In an increasingly crowded PE market, firm culture represents an important point of differentiation in the eyes of key stakeholders. A clear, well-aligned culture can also boost performance and improve effectiveness. We work with firms to raise awareness of the culture they have and advise on how best to shape culture to enhance success. We also advise GPs on how to embed an understanding of leadership risk into their existing toolkit in order to build a wider repertoire of practice.
Deftly managed firms which stand out from the competition and thrive over time
Well-rounded professionals with a balance of financial expertise and interpersonal awareness
A clear succession pipeline which ensures firm longevity
Smooth choreography of role transition when changes occur in the firm leadership team
A broader repertoire of practice bringing depth of insight and understanding
What Sets Us Apart
Our approach is built on a combination of practical experience, which we have gained from working with a broad spectrum of PE firms, as well as ongoing research. The things which our clients value most include our:
Our dealings with portfolio leaders are respectful and supportive and we conduct our work in a way which reflects positively on our clients. We maintain absolute discretion and confidentiality at every stage.
Like our clients we are interested in business implications. We do not see leadership as an end in itself, we focus on what will create or destroy value
Our maturity, confidence and empathy enable us to engage and quickly gain the trust and respect of senior leaders
We bring a rare span of understanding and experience, which integrates a deep understanding of finance, accounting and risk management, combined with expert knowledge from the fields of leadership, complexity and organisational behaviour
We recognise that every firm and every deal is different so we tailor our approach and reports to match the specific context and the client’s requirements. We present clear ‘takeaways’ and clearly set out what needs to be done in light of our findings
The above qualities, combined with over 20 years’ experience specialising in PE and corporate finance help to make us one of the preeminent providers of leadership advisory services to the PE industry.
To explore the benefits which
we could bring to your business please get in touch