What Buyers Ask About Leadership Transition Before Paying for Your EBITDA
When a buyer looks at a portfolio company’s performance, one of the biggest questions is whether those results will survive a leadership transition. A strong plant manager can deliver impressive numbers, but if the operation depends on one person to keep everything running, that’s key person risk, and buyers will price it in.
That’s why the people side of value creation matters just as much as the operational improvements. You can have a solid plan, but that doesn’t mean your team is ready to execute it. A Deloitte study released in October 2026 found that 68% of leaders encountered some form of resistance during their most recent major change initiative. And if your people aren’t ready to change, even the best value creation plan can stall before it gets started.
The question PE owners need to ask early is whether the team is capable of delivering the results and building the habits that will sustain them through the next leadership transition and beyond.
Start by understanding the culture
You can learn a lot about a company’s culture just by walking the plant floor. Who runs the daily meetings? When problems come up, does someone take ownership and follow through, or do the same issues keep showing up? Are frontline employees comfortable raising concerns, or is there an “us versus them” mentality between management and the workforce?
These are the things buyers pay attention to during diligence, and they’re the same things we look for when assessing a company early in the hold. You want to see leaders asking questions, employees offering ideas, and teams working together to solve problems.
If you’re a PE owner, you need to understand that culture in month one, not year five. Otherwise, you risk spending valuable time trying to implement improvements in an organization that isn’t ready to embrace them.
Building a management system the team owns
Once you understand where the team stands, the next step is helping them change how they run the business. With PE owners under increasing pressure to deliver EBITDA improvements earlier in the hold, there’s little time to lose getting people aligned.
We typically start by assessing the team’s readiness for change and bringing leaders together to understand why things need to be done differently. From there, we spend roughly 12 weeks coaching people on the plant floor, helping them establish a tiered daily management system that connects performance, problem solving, and accountability across the organization.
I’ve seen what happens when companies skip that leadership work. At a fast-growing food manufacturer, two plants had performance boards in place, but utilization was still hovering around 60% on lines capable of running at 80%. Managers spent their days putting out fires because nobody had helped them understand how to use the information to manage differently.
We worked with the leaders and their teams on how to run those meetings, identify what’s off standard, assign ownership, and follow through on what needed to be fixed. The boards didn’t change. What changed was how people used them.
That’s how you reduce key person risk: the system carries the knowledge, not one individual.
Building muscle memory that lasts
I like to think of a management system as a muscle, not a machine. You don’t build strength by going to the gym once, and you don’t build a sustainable management system by putting up boards and running a few meetings. People have to keep doing the reps until the new way of working becomes second nature.
You should start seeing that progression over time. After six months, leaders are running their meetings without outside help. By twelve months, problems are getting resolved faster and performance is more consistent. And by eighteen months, a new leader should be able to step in without the whole system falling apart.
That’s how culture changes. People start thinking differently, which changes how they act. When those actions are repeated, they become habits, and when enough people share those habits, they become part of how the company operates.
For a buyer, that’s far more convincing than a few good quarters. Ideally, you want at least twelve months of consistent performance before the sale process begins, with evidence that the management system is working without depending on any one individual.
The real test is the leadership transition
A leadership transition is inevitable during a longer PE hold, and it’s one of the biggest risks to sustaining operational improvements. I’ve seen management systems lose momentum because a new leader comes in with a different approach and doesn’t support the changes already underway.
That’s why you can’t take your foot off the gas when a key leader leaves. You need someone who believes in the management system and is willing to reinforce it. If the operation can’t afford to wait for the right permanent hire, an interim leader can keep things moving while the search continues.
More importantly, the system shouldn’t depend entirely on the person at the top. We coach plant managers, department leaders, and frontline supervisors because each level needs to understand its role in daily management and problem solving.
At one PE-owned consumer goods plant, we combined leadership coaching with improvements to recruiting and onboarding. Within three months, turnover dropped from 40% to 12%, open positions went from 19 to zero, and weekly output nearly doubled. We also brought a new plant manager into the management system so the improvements wouldn’t disappear with the leadership transition.
At a food packaging manufacturer, training supervisors in daily management helped increase productivity by approximately 30% without eliminating jobs.
These are the kinds of results a buyer wants to see, but just as important is knowing the organization can continue delivering them when people change.
Will the results survive a leadership change?
A strong leader can improve a plant’s performance, but a strong management system allows the entire team to sustain it. That’s what PE owners should be building during the hold: an operation where people understand the expectations, problems get addressed every day, and performance doesn’t depend on one person walking through the door.
If you’re preparing for an exit, the time to find out whether that system is working is before a buyer starts asking questions. Our Phase Zero Playbook explains how to assess the operational and leadership gaps that could put your value creation plan at risk.
Related reading: Year Six and Still Holding explores the other factors buyers evaluate when determining whether EBITDA improvements are sustainable.
Other content in this series:
Article: Year Six and Still Holding: What Buyers Test Before They Believe Your EBITDA Story
Blog: Sell Side Due Diligence: Is Your EBITDA Coming From Demand You Can Prove Before the Process Starts?
Blog: SKU Rationalization and Product Design: Is Your Margin Structural?
Blog: COMING SOON – Run to Demand: What Buyers Look for on the Plant Floor
