Wickland Westcott

Private Equity - Have You Got What it Takes?

Heading-up a Private Equity backed business is not everyone’s cup of tea. Corporate animals in particular can struggle to adapt to the demands of such an environment. Here, Head of our Private Equity Practice Keith Miller details the 10 factors that demonstrate suitability.

1. It is different: roughly 1 in 10 Executives in a corporate organisation can successfully make the move into a PE-backed business. Has he/she genuinely thought about the differences, and tried to anticipate what the transition will feel like?
2. How to scale: always, the challenge is how to scale the business over a finite time-period. The candidate must be able to articulate the necessary building blocks to enable this to happen.
3. Entrepreneurialism: a key motivator will be to create capital for themselves. This ensures they have skin in the game, and implies a similar mindset to their backers.
4. Growth appetite: high levels of ambition, and the readiness to pursue challenging sales and profit targets are important hallmarks.
5. Paddles own canoe: whilst there will be a team to support them, there is rarely the infrastructure they might have enjoyed in a corporate role. Keith comments: "When they talk about bringing their PA with them, it’s a red flag".
6. Pace: Typically a PE deal is 3 to 5 years. Timelines are condensed and the ability to work at pace is fundamental.
7. Strategic insight: the incoming CEO must develop his/her own strategy, rather than inheriting someone else’s. They need to analyse the data, formulate a plan, and get buy in from the team.
8. Stakeholder management: in most situations there is a matrix of interested parties who need to be informed, influenced, challenged and engaged. The ability to manage both internal and external stakeholders is essential.
9. Versatility: if the situation demands it, the CEO needs to roll-up their sleeves and pack the product in order to get it out of the door. If someone instinctively feels ‘that is not my role’, then they won’t be successful in this environment.
10. Cultural fit: This is critical and often over-looked. If there is a disconnect, the business and the deal will suffer.

In summary, we look for credibility, dynamism, low status-needs and a willingness to back themselves. PE-backed businesses are neither better nor worse than corporate entities, but they are different. Of the 10 dimensions above, which is most important? "Cultural fit – don’t set sail without this" concludes Keith.

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