As the private equity landscape continues to evolve, an increasing number of leaders are assuming the role of CEO within portfolio companies. This unique position comes with a distinct set of challenges and demands. In this playbook, tailored for private equity professionals, we provide guidance for newly appointed CEOs of private equity-owned companies. Drawing from insights and interviews with industry experts, we shed light on the specific nuances and expectations that define this role.

1- What Makes This Role Different

1.1 The CEO’s Unique Challenge:

• CEOs in private equity-owned companies must excel in traditional CEO responsibilities while operating at an accelerated pace.
• Access to guidance for this specialized role is limited, making it crucial to understand its unique demands.

1.2 The Essence of Leadership:

• Private equity firms prioritize CEOs who exhibit an ownership mentality.
• Nonhierarchical thinking, financial acumen, and exceptional team-building skills are highly valued.
• Large PE firms provide extensive support, including operational teams, experts, advisers, and a network of fellow CEOs.

2- The CEO’s Role in the PE Ecosystem

2.1 Working with a Hands-On PE Board:

• Oversight from the PE board is intense and interactive, resembling a “super management team.”
• CEOs should foster strong relationships with board members and leverage their expertise.
• Understanding the PE industry’s history and language enhances communication with the board.

2.2 An Executable Investment Thesis:

• CEOs must align their decisions and actions with the investment thesis.
• A deep understanding of financial metrics and value-creating levers is essential.
• Silos between departments have no place in a PE-backed company; CEOs should foster a nonhierarchical culture.

2.3 Speed to Value:

• Private equity operates on tight timetables, demanding urgency from CEOs.
• Monthly delays can impact returns significantly, emphasizing the need for swift action.

3- Coping with the Pressure

3.1 Comparison with Peers:

• CEOs in PE-owned companies are compared to their peers across the portfolio.
• Quick talent decisions are encouraged, with the honeymoon period being short.

4- Four Ways to Succeed

4.1 Build a Relationship with the Board:

• CEOs should engage with the PE board in a hands-on manner.
• Understanding board members’ expertise and perspectives is crucial.
• Aim for alignment between stakeholders’ views and the CEO’s plan.

4.2 Quickly Assemble an A-Team:

• Effective talent management is vital, as CEOs often need to rebuild the C-suite.
• Diversity on the management team and board enhances decision-making and performance.

4.3 Launch an Achievable 100-Day Program:

• Develop a feasible plan grounded in a deep understanding of the business.
• Continuously assess and adapt the plan, remaining open to opportunities.
• Establish comprehensive reporting tools tied to strategy.

4.4 Leverage PE Sponsor Resources:

• Identify and integrate key resources provided by the PE sponsor.
• Define your leadership style and purpose, focusing on contributions and impact.
• Model the leadership behaviors required for success.

5- The Future of Private Equity-Backed Leadership

5.1 Evolving Landscape:

• Private equity-owned companies are on the rise, necessitating specialized leadership.
• Playbooks for this unique leadership role are becoming increasingly important.

5.2 The Winning Strategies:

• This playbook is informed by insights from leading PE professionals.
• Embracing these strategies will help CEOs navigate the challenges and rewards of their role.

As private equity continues to shape the corporate landscape, the role of CEO within portfolio companies remains distinct and dynamic. This playbook provides a comprehensive guide for private equity professionals in the USA, offering valuable insights and strategies to succeed as a private equity portfolio-company CEO. By understanding the unique demands of this role and leveraging the resources available, CEOs can thrive in this challenging and rewarding environment.

If you need help securing your next CEO role are are looking for exceptional talent for your private equity firm or portfolio company please reach out to Raw Selection’s Managing Partner Alex Rawlings at Alex.Rawlings@Raw-Selection.com to discuss your requirements and how we can help you identify the best talent.