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  • Publish Date: Posted about 1 year ago
  • Author:by Simon Lythgoe

What it takes to be a successful PE portfolio company CEO

​Whilst there is not a one size fits all solution for what we see in successful PE portfolio company CEO’s we are able to see some clear trends when it comes this. Below we have attempted to answer some key questions, along with recommendations to best ensure success on appointment. When are successful CEOs appointed in the company life cycle?Whilst there is no single “best time” when appointing a CEO, underperforming investments were significantly more likely to change leadership midway through the hold period with few internal appointments.Even given the potential risks of changing leadership just prior to exit, there are examples of a CEO change within one year of exit, emphasizing the positive outcome of making active and bold choices at the right stage of the company’s life cycle. How do successful portfolio company CEOs lead?Successful portfolio CEOs tend to be “humbler”, approaching others in an even manner, empowering their peers, and successfully delegating. They excel in rapidly changing business situations, speeding up their work style as needed and juggling competing priorities. Given that portfolio company CEOs need to ensure that their direction aligns with the private equity sponsors’ strategic plan, any tendencies to self-govern may be quite detrimental to their success. What is the typical background of successful portfolio company CEOs? Despite the perceived risk of appointing a CEO without prior private equity experience, from our experience, this is not a limitation to success.Industry experience is key: Almost all top CEOs had longstanding industry experience, whilst this is supplemented by those who have had banking or consulting experience. Within their industry, almost all CEOs have demonstrable leadership experience. ​What are the keys to success upon appointment?Working successfully with the board. Learn as much as you can about the partners in the PE firm who are investing in the company. Get absolute clarity about their expectations and timelines for a successful exit.A CEO of a PE portfolio company needs to understand the P&L and balance sheet. Most CEOs know how to manage a P&L, but not a balance sheet because they have been able to use the corporation’s capital and the expertise of a CFO. In a PE setting, you must know both.Partner with Your CFO. The role of the CEO and the CFO are changing in portfolio companies. Compliance is a big issue. Your CFO will not only spend more time on regulations and tax matters as the complexity of the role increases, he or she will also have more direct conversations with firm partners. You have to count on your CFO to carry out those conversations in a way that makes everyone comfortable.It is All about Execution. A CEO must be both strategic and tactical since you will be running lean, and you must be willing to work in the trenches. Speed is Critical. You will be leading a lean, flat organization. The advantage is that you can communicate directly to key managers and execute a strategy in a matter of weeks rather than the months required in large organizations.Make Sure You Have the Right Talent. Larger PE firms may have formal human resources departments that work across portfolio companies. If not, recognize that your success is only as good as your team.Lead Your Team. Traditionally, PE firms have thrown equity at the senior team believing that the financial incentive was enough to motivate these leaders. That doesn’t necessarily work anymore. You must understand what motivates each team member to make them want to do whatever it takes to get the job done.

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​Whilst there is not a one size fits all solution for what we see in successful PE portfolio company CEO’s we are able to see some clear trends when it comes this.

Below we have attempted to answer some key questions, along with recommendations to best ensure success on appointment.

When are successful CEOs appointed in the company life cycle?
Whilst there is no single “best time” when appointing a CEO, underperforming investments were significantly more likely to change leadership midway through the hold period with few internal appointments.


Even given the potential risks of changing leadership just prior to exit, there are examples of a CEO change within one year of exit, emphasizing the positive outcome of making active and bold choices at the right stage of the company’s life cycle.

How do successful portfolio company CEOs lead?
Successful portfolio CEOs tend to be “humbler”, approaching others in an even manner, empowering their peers, and successfully delegating. They excel in rapidly changing business situations, speeding up their work style as needed and juggling competing priorities.


Given that portfolio company CEOs need to ensure that their direction aligns with the private equity sponsors’ strategic plan, any tendencies to self-govern may be quite detrimental to their success.

What is the typical background of successful portfolio company CEOs?
Despite the perceived risk of appointing a CEO without prior private equity experience, from our experience, this is not a limitation to success.


Industry experience is key: Almost all top CEOs had longstanding industry experience, whilst this is supplemented by those who have had banking or consulting experience. Within their industry, almost all CEOs have demonstrable leadership experience.

What are the keys to success upon appointment?

Working successfully with the board. Learn as much as you can about the partners in the PE firm who are investing in the company. Get absolute clarity about their expectations and timelines for a successful exit.


A CEO of a PE portfolio company needs to understand the P&L and balance sheet. Most CEOs know how to manage a P&L, but not a balance sheet because they have been able to use the corporation’s capital and the expertise of a CFO. In a PE setting, you must know both.


Partner with Your CFO. The role of the CEO and the CFO are changing in portfolio companies. Compliance is a big issue. Your CFO will not only spend more time on regulations and tax matters as the complexity of the role increases, he or she will also have more direct conversations with firm partners. You have to count on your CFO to carry out those conversations in a way that makes everyone comfortable.


It is All about Execution. A CEO must be both strategic and tactical since you will be running lean, and you must be willing to work in the trenches.
Speed is Critical. You will be leading a lean, flat organization. The advantage is that you can communicate directly to key managers and execute a strategy in a matter of weeks rather than the months required in large organizations.


Make Sure You Have the Right Talent. Larger PE firms may have formal human resources departments that work across portfolio companies. If not, recognize that your success is only as good as your team.


Lead Your Team. Traditionally, PE firms have thrown equity at the senior team believing that the financial incentive was enough to motivate these leaders. That doesn’t necessarily work anymore. You must understand what motivates each team member to make them want to do whatever it takes to get the job done.


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