Private Equity: The Four Positions a Portfolio Company CEO Must Be Able to Play

The Four Positions a Portfolio Company CEO Must Be Able to Play

Last year saw nearly 3,000 mid-market PE deals, according to PitchBook, and many of the incumbent CEOs involved in those deals have already been shown the door. With shorter holding periods trending, companies must generate value in the first 12-18 months, or they put the deal thesis at risk. It’s difficult if not impossible to make up for any value you fail to generate in the critical first few months.

TBM Vice President, Leadership Solutions Practice, Shannon Gabriel, identified four hats every private equity-backed, portfolio company CEO must wear. To make changes at the top fast, PE firms need an effective means of sizing up the capabilities of an incumbent CEO during the pre-LOI phase of the deal. That starts with knowing exactly what to look for.

4 positions every portfolio company CEO must be able to play

MVP

Track record of past performance

Consistently delivers financial returns
Maintains or improves key operating metrics
Shows quantifiable progress against strategic goals

Quarterback

Knows the game plan and puts it into play

Fully aligned with the PE firm’s strategic direction
Capable of acting both strategically and tactically at the same time
Sense of urgency to put plans into action and generate value immediately

Coach

Develops and motivates the team

Can align teams with strategy and break down long-term objectives into short-term goals
Holds the respect of employees and is capable of creating momentum
Develops key members of the team

Referee

Straightforward communicator capable of making tough calls

The candour to articulate the facts – good and bad – in a clear and concise manner
Comfortable communicating daily with the PE operating partners and leadership team
Ability to quickly execute difficult decisions

If the CEO can’t play all the right parts, don’t wait to make a change. Spending some time during the due diligence phase to assess the CEO’s capabilities in four critical areas is one of the most important steps you can take to ensure the success of your deal thesis.

Meet the Expert

Shannon Gabriel

Vice President, Leadership Solutions PracticeEmail Shannon

Shannon Gabriel is Vice President of TBM’s Leadership Solutions practice where she leads the organization’s comprehensive approach to labor strategy, change management and leadership development that impact top-line growth and improve organizational culture.