Achieving the right results with a private equity backed business is an intense performance driven experience. As the general time frame of a PE investment is c 5-7 years from acquisition to exit, there will always be an ongoing race to grow and deliver value within a defined timeframe.
To increase margin and build top line requires the C-suite to continually demonstrate agility, stamina and resilience; the ability to embrace change, make quick commercial decisions, focusing on short term objectives, is key for any CEO and CFO in this type of entity.
Being fit for the business marathon is essential and many would describe the role of a leader within a PE backed organisation as being a “player-coach” remit. The pace of the business transformation needs to be driven by the hands-on example set by the executive team and they need to work closely and communicate well with the private equity led board. Although it can be an exhilarating and rewarding working environment, it can differ greatly from a Plc or family owned business and may not suit everyone.
“Many senior executives tell us that they wish to work for a private equity backed business as they are often attracted by the potential financial rewards generated when the company is sold. We always advise individuals to fully research the exit strategy, understand that job security will depend on performance and also ensure they are aware of the reporting requirements and participation required between the company and its financial investor”, says Taryn Wilkinson, of recruiters, Walmsley Wilkinson Associates. “In fact, many private equity firms in the UK maintain a portfolio of experienced candidates that they can parachute in to deliver results within a newly invested business.”
Although there can be uncertainty and significant change within a PE backed organisation, bthe British Private Equity & Venture Capital Association (BVCA), which is the industry body and public policy advocate for the private equity and venture capital industry in the UK, states that over the longer term, private equity continues to comfortably outperform public markets. The overall since-inception return has been steady, increasing to 14.5% in 2017 and demonstrating significant levels of stability in overall returns. The statistics are impressive ie 2,980 companies are currently backed by UK private equity and venture capital with 385,000 people employed in the UK and £27 billion invested in more than 3,900 UK companies by private equity and venture capital in the past five years.
To achieve strong returns within the required timescales, will require the CEO to no doubt face setbacks, put in place turn-around solutions quickly, be candid and transparent with investors and ensure that the strategy and operating plans are robust enough to deliver the required financial results by the end of the business marathon race.