Private equity backed companies are a unique challenge to recruit for. On the one hand, these types of companies need executives with proven track records, on the other hand, even the most accomplished executive from a blue chip company may balk at the pace, urgency and unique board structure that is common in the PE world.
If you are recruiting for a private equity backed company or thinking of joining one yourself as an executive, here are some important considerations.
Important Skills for CEOs of Private Equity Backed Companies
In our experience recruiting executives for portfolio companies, we see operations at all stages of development and funding but there are a few commonalities we look for when assembling qualified candidates and those qualities include:
- Entrepreneurial and growth-focused mindset: we look for candidates who can master the urgency of working with a company that has a specific (and usually tight) timeline for return on investment
- Collaborative and team-oriented: our experience with portfolio companies has demonstrated time and again that high growth companies need proven, team-building leaders
How a CEO in a Private Equity Backed Company Reports to the Fund
CEOs who are veterans of public companies may be used to chairing the board and having a large role in decision-making. In a portfolio company, on the other hand, board control is much more likely to reside with the sponsoring entity and be comprised of a number of industry experts appointed by the private equity firm.
The right CEO, therefore, will be able to size up and successfully navigate through the way the sponsor elects to set up the board and adapt to their management style.
Negotiating the Compensation Package
We find that the negotiation process for C-level positions in private equity backed companies can often be longer and more involved, largely because candidates much gather their information from the sponsors and company directly (because it is not available publicly).
Candidates will want to evaluate the following:
- The company’s capitalization table
- Expected infusions of capital and timeline
- Equity dilution and the value of equity in each round of funding
- Percentage of ownership and breakdown of founders, investors and other owners
Further, there are unique compensation options for C level executives in PE-backed companies, including potential co-investments and equity incentives that determine an executive’s eventually payout upon exit.
Business stages and the Private Equity Backed Company
C level executives will be recruited for private equity backed companies at all stages of growth, and therefore finding the right fit involves a lot of nuance in matching the right executive to the right challenges and opportunities. Distressed companies, companies in turnaround, firms in various stages of fund-raising all require different skillsets in executive decision makers. Further, each private equity backed company will have a different goal in terms of whether they see the company being sold or taken public, along with various other liquidity outcomes.
How We Work to Recruit Executives for Private Equity Backed Companies
We at ACCUR Recruiting Services have extensive experience in assisting private equity firms staff their portfolio companies. Over time we have developed an expertise in selecting seasoned executives from Fortune 500 companies who have the mindset and skills to engineer successful outcomes in PE-backed entities in various stages of growth.
Contact us to find out how we can assist you in finding the right executive team for your portfolio company.