7 Keys to CEO Success at a Private Equity Firm
If you are the CEO of a private equity portfolio company, chances are you don’t have time to read a long article because of your high-stress job.
Here, Hugh Shields, at Shields Meneley Partners, lists the key things to remember to help you manage successfully.
Get Up to Speed
Learn as much as you can about the partners in the PE firm who are investing in the company. Get absolute clarity about their expectations and timelines for successful exit.
Sharpen Your Financial Acumen
A CEO of a PE portfolio company needs to understand the P&L and balance sheet. Most CEOs know how to manage a P&L, but not a balance sheet because they have been able to use the corporation’s capital and the expertise of a CFO. In a PE setting, you have to know both. Most PE investments are highly leveraged and you must understand how to manage cash flow.
Partner with Your CFO
The role of the CEO and the CFO are changing in portfolio companies. Compliance is a big issue. Your CFO will not only spend more time on regulations and tax matters as the complexity of the role increases, he or she will also have more direct conversations with firm partners. You have to count on your CFO to carry out those conversations in a way that makes everyone comfortable.
It is All about Execution
A CEO must be both strategic and tactical since the average size of the company will be $225M. At that size, you will be running lean, and you must be willing to work in the trenches.
Speed is Critical
You will be leading a lean, flat organization. The advantage is that you can communicate directly to key managers and execute a strategy in a matter of weeks rather than the months required in large organizations.
Make Sure You Have the Right Talent
Larger PE firms may have formal human resources departments that work across portfolio companies. If not, recognize that your success is only as good as your team.
Lead Your Team
Traditionally, PE firms have thrown equity at the senior team believing that the financial incentive was enough to motivate these leaders. That doesn’t necessarily work anymore. You must understand what motivates each team member to make them want to do whatever it takes to get the job done.
CEOs who fail to get the strategy moving quickly, and seeing tangible results within weeks, if not months, won’t be around long. Don’t get left behind.