5 Attributes Private Equity Firms Look for in Business CEOs
As presented in Harvard Business Review, the executive search firm DHR International and the consulting firm Green Peak Partners recently surveyed 32 top PE firms regarding their decision making process for selecting CEOs for their portfolio companies.
The survey identified five common attributes PE firms look for in CEO candidates.
1. Team-building. PE firms most desire CEO candidates who are able to assemble and motivate a high-performing management team. PE firms are particularly attracted to CEO candidates who have a track record of recruiting and retaining other c-level executives.
2. Urgency Trumps Empathy. Given the demanding economics and timetables of portfolio company investments, PE firms seek CEO candidates who they believe will be able to cut costs and grow revenue quickly. This typically means identifying candidates who can act decisively when faced with difficult decisions regarding personnel and resources.
3. Candor. PE firms are attracted to CEO candidates who they believe will communicate bad news to their PE sponsors openly and timely. Unlike public companies where finessing the presentation of negative information is at times a virtue, PE firms demand quick and direct feedback from the CEOs of their portfolio companies.
4. Pedigree Isn’t Everything. Although blue-chip diplomas and industry experience remain relevant factors in identifying qualified CEO candidates, PE firms are open to non-traditional candidates who demonstrate an ability to identify and adapt to the fundamentals of the PE investment cycle.
5. Resiliency. CEO candidates with spotless resumes can be less attractive to PE firms than candidates that have demonstrated resiliency in the face of adversity. Particularly in turnaround situations, PE firms value CEO candidates who have faced negative results and “lived to fight another day.”
Click here for a related article in the Wall Street Journal.
Michael Fitzpatrick is a corporate associate based in Nixon Peabody’s Boston office and works in the Private Equity and Investment Funds group. Read more Nixon Peabody blogs here.