Private equity firms conduct rigorous due diligence in assessing acquisition targets. Those with the best track records place high trust in their ability to size up a prospect’s financials, operations and market position. But in our experience, many mid-sized PE firms are less successful in choosing the CEOs who run their portfolio companies. Does the founding CEO have what it takes to turbo-charge the type of growth that a PE firm requires? Not always. Does their replacement work out? Often not. In fact, one recent study of PE firms found a little less than half had to change the CEOs who ran their portfolio companies.
In this paper, we first explore why it can be difficult for companies to consistently choose the right CEO, and why CEO assessments often go astray. We then dive deep into the three leadership qualities of the most successful CEOs we’ve seen at PE-backed companies, and provide examples including the CEOs at Health Integrated Inc., Surgical Care Affiliates (which became a public company in 2013) and other highly successful firms. Finally, we explain how to begin to assess whether a CEO or CEO candidate has these three requisite skills - along with the key questions that reveal if a CEO has what it takes to be successful.
What You'll Learn:
- The most common ways that CEO assessments go astray.
- The 3 must-have skills for CEOs in PE-backed companies.
- The questions that reveal whether or not a CEO has what it takes.
- What's possible when companies get it right.