One sector seemingly immune to the current global health crisis is private equity. As deal making rages on, leaders will be needed in droves. But a recent report by human capital advisory firm FMG Leading says that many PE firms are not always equipped to choose the right CEOs to run their portfolio companies, even in the best of times.
New York, NY – March, 2020 – Private equity firms conduct rigorous due diligence in assessing acquisition targets. Those with the best track records place high trust in their ability to size up a prospect’s financials, operations and market position. But many mid-sized PE firms are less successful in choosing the CEOs who run their portfolio companies.
One study of PE firms, in fact, found a little less than half had to change the CEOs who ran their portfolio companies. How does this happen? According to a revealing report by FMG Leading, a business and human capital advisory firm, “Investors can overlook three leadership skills that are crucial to rapid, profitable growth: thinking strategically and systemically; building alignment and commitment to the firm’s strategy; and developing essential team members.”
Private equity firms with solid track records of turning around or accelerating already-growing businesses in a short period of time have a well-developed knack for choosing businesses with great growth or turnaround potential. “In short, they buy right,” said the report, “The Missing Ingredients: Three Things PE Investors Should Look for in a CEO.”
