Case Study: Preparing for the Future Private Equity CEO Role

Written by: Gerald O’Dwyer the PE Guru  

Introduction   

The role of a CEO in a private equity (PE)-backed company is unique, posing challenges different from those in public or traditionally private companies. As deal costs surge due to high-interest rates and inflation, executives are faced with the necessity to prepare ahead of time. BlackmoreConnects emerges as a platform catering to these needs, ensuring CEOs and potential CEOs are armed with the required knowledge. 

Objective   

This case study aims to highlight the importance of early preparation for executives aspiring to helm PE-backed firms, focusing on building vast networks, understanding the intricacies of the PE world, and ensuring a smoother transition into the role. 

The BlackmoreConnects Initiative 

Born from a collaboration between Blackmore Partners, Inc., and five PE firms, BlackmoreConnects seeks to bridge the knowledge gap for executives new to PE. With the unique demands of PE-backed CEO roles rarely documented, BlackmoreConnects provides a platform for these leaders to build their knowledge base, engage with the PE community, and stay updated with the constantly evolving PE landscape. 

Importance of Building PE Relationships   

For future PE CEOs, building a robust network of over 200 PE relationships is paramount. By establishing a substantial PE funnel and consistently interacting with the PE community, executives not only ensure their long-term role but also set themselves up for financial success. 

The Current Landscape   

The narrative of successful public company CEOs dominates the business culture, but with an increase in PE deals, the demand for CEOs tailored to a portfolio company’s mission and pace grows. In 2020, amidst the pandemic, PE firms saw a record-breaking number of deals, hinting at a bullish trend in the PE world. 

Traits of Successful PE CEOs 

PE firms seek CEOs who: 

– Possess an ownership mentality. 

– Understand financial metrics instinctively. 

– Have exemplary team-building skills. 

– Can leverage the abundant support provided by PE firms. 

Challenges in the PE CEO Role   

Being a PE-backed CEO is both exhilarating and demanding. McKinsey’s insights indicate that these CEOs must operate with a dual mindset: they must sprint and yet think of the long run. Their decision-making timelines are often compressed, with every delay potentially eating into returns. 

Strategies for Success 

New CEOs in the PE domain must: 

1. Understand Stakeholder Perspectives: Grasping expectations and aligning with the sponsor and board’s visions is critical.
2. Maintain Flexibility in Decision-making: While following the investment thesis is essential, being open to new strategies for value creation is equally important.
3. Prioritize Speed: Given the rigorous pace in the PE world, CEOs must act swiftly.
4. Utilize PE Sponsor Resources: Leveraging internal operating groups, functional experts, and other resources can significantly enhance the company’s performance.

Conclusion 

The PE-backed CEO role is evolving, with a growing emphasis on early preparation, building extensive networks, and constant learning. BlackmoreConnects exemplifies a valuable resource for those aiming to thrive in this dynamic environment, offering them the tools and community they need to succeed.