As an executive search firm with a specialization in digital marketing, we obtain 20%+ of our assignments through introductions by private equity firms to their portfolio companies needing a CEO, CMO, CRO, CFO or other C-level positions. We are always looking for candidates who meet the needs of our clients and in particular, PE firms.
What personal characteristics do we look for when hiring for Private Equity?
How can you assess if you have the “chops” to work for private equity? Is your personal brand a match for private equity? What can you expect and what is expected once you are hired, in terms of the operational differences, compared to working for a large, publicly owned company?
If you are considering a career opportunity in a private equity financed business, then check out the top 5 qualities and characteristics to better understand if you really are ready, willing and able.
1. PE firms want to work with entrepreneurs.
Private equity firms have been started by investment bankers, successful corporate executives and entrepreneurs with a proven track record of building wealth by risking capital and building businesses entrepreneurially. In selecting a CEO, COO, or other C-level executive, private equity firms want to see proven entrepreneurship in the executive’s prior career steps. Has the candidate successfully started and built a business from scratch? Has he or she turned around a troubled business? Does the candidate have the proven track record and hands-on leadership profile to build confidence among others in the organization (including strategic alliance partners)? You need not apply if you do not have “entrepreneurial DNA" and passion, plus prior success implementing a business plan involving significant change (i.e., not managing a “steady state" business).
2. PE investors want “hunters" not “farmers."
While they tend not to manage from quarter to quarter, like so many public companies, private equity investors are looking for—and expecting—mega-growth of a business over a five- to seven-year window. The expectation is that the returns on capital are multiples of the original investment once the business is sold (usually to a strategic buyer) at the end of the investment period. Hunters have the fearlessness to compete in the marketplace on a daily basis, and their hunting skills are usually directly tied to an ability to increase the top-line revenues. In addition to growth via acquisition, most private equity investors evaluate revenue increases in the base line (“same store") business. This almost always leads them to hire a new Head of New Business—and it always needs to be a “hunter." We recently completed four executive search assignments nationwide for this type of position, most within the first year after a private equity firm has made an investment.
3. PE firms hire "doers" with a strong bias for action.
In LBOs and buyouts of privately held businesses, there are typically major issues that need to be addressed immediately: the prior owner/parent company/CEO may have failed; growth in the business may be stagnant; and investments or changes in the business were deferred because it was deemed a “non-core" asset. This is one reason that private equity investors like to hire “doers" with a bias for action – because typically so much needs to be done – and very quickly. Consider the GM turnaround and the three months the Board gave the initial CEO before making a change. As Jack Welch has said numerous times, a non-decision is sometimes the worst decision a CEO can make. If you are a procrastinator, stay away from private equity.
4. PE investors are reasonable until they become unreasonable.
Private equity investors typically resist hands-on involvement in the day-to-day operations of a business. They will typically put two to three of their own people on the Board of Directors and will remain minimally involved as long as the business moves forward according to (and in alignment with) the corporate business plan. They may come to Board meetings to listen to the CEO (and others in senior management), and they’ll work on complementary activities related to expanding and growing the business, such as additional acquisitions, or capital investment to increase manufacturing capacity. However, when/if the CEO and senior leadership begin missing the milestones, and the business turns south (even slightly), they are back with a vengeance ready to make changes in the senior leadership team (i.e., trade out the CEO, hire a strong COO with a sales/business development background, etc.) Working with a private equity-backed firm is potentially good for executives who (1) under-promise and over-deliver, and (2) are good at developing and implementing realistic business plans—and keeping the company on track and ahead of the key milestones outlined in these plans.
5. PE firms want an accelerated pace of change; be prepared to “ride the rapids."
While many C-level executives express frustrations at the slow pace of change in large corporations, many are unprepared emotionally to work in the rapid waters of private equity. You can expect almost 180 degrees the opposite environment once you switch over to a private equity-owned business. When you meet with the partners of these firms, invariably the first question they will ask you is, “If given this job, what would you do first?" and “What would be your plan for growing/fixing this business?"
Know what works best for your personal brand before jumping in!
It is extremely important to be prepared, and to do your homework, especially if you are considering one of these types of opportunities. For some true entrepreneurs, those unafraid of operating without a safety net, it can be exhilarating and highly rewarding (equity stakes and payouts are usually much higher than stock options earned inside a public company). However, for those executives lacking the necessary risk-profile and DNA, this is a career step to be avoided altogether.
If you have worked for a private equity firm, or have considered pursuing one of these opportunities, please write to us and share your experiences and perspectives.