Author: Gerald O'Dwyer

Written By Gerald O’Dwyer The PE Guru 

For an executive keen on leading a private equity-owned company, particularly in the lower middle market, it’s important to immerse themselves within the private equity industry. This means establishing connections with numerous PE firms, understanding how they value an executive’s credentials, and recognizing how the individual executive fits into the broader PE landscape. 

An executive should aim to meet with at least 100 PE firms operating in the lower middle market. Each PE firm has its unique way of assessing and valuing an executive’s capabilities, experiences, and potential contributions. By meeting with multiple firms, the executive gains insights into what different firms value and how they approach investing in the lower middle market. This broad exposure is crucial for gaining a comprehensive view of the PE landscape and understanding how to position oneself in it. 

PE conferences are an ideal platform for meeting a large number of PE firms efficiently. These gatherings provide a wealth of opportunities to interact with key players, learn about emerging trends, and understand the current investment climate. Executives can engage in constructive dialogues with representatives from different firms, gain firsthand insights into the inner workings of these companies, and form meaningful connections that could potentially lead to fruitful partnerships. 

To stand out to PE firms, an executive need to bring more to the table than just their credentials and industry experience. A well-thought-out deal thesis is one of the most effective ways to show differentiation. The deal thesis should articulate the executive’s strategic vision for growth in their industry or market. It demonstrates their deep industry knowledge, strategic thinking capabilities, and proactive approach towards value creation, making them more attractive to PE firms. 

Building an owner target funnel is another key strategy for an executive seeking to differentiate themselves. An owner target funnel is a structured approach to identifying and engaging with potential portfolio companies that might be ripe for a private equity acquisition. By actively building an owner target funnel, an executive show that they are not only strategically thinking about potential opportunities but also taking concrete steps to create value. This proactive approach can be a significant differentiator for PE firms, demonstrating the executive’s initiative, resourcefulness, and ability to drive growth. 

Conclusion 

To lead in the lower middle market, a CEO must demonstrate strong leadership skills, operational expertise, strategic thinking, financial acumen, and adaptability. They must also understand the workings of private equity, build strong relationships within the industry, have a solid deal thesis, and actively build an owner target funnel. By doing so, they set themselves up for success in navigating the exciting and challenging landscape of private equity-owned companies.