Second Annual Private Equity (PE) Leadership Survey | 2017

Replacing a portfolio company CEO comes at a high cost.

Market conditions are forcing PE firms to hold their investments longer than ever. Seeking new ways to create value, they are eyeing the clear links between a portfolio company’s overall performance and its talent, culture, organizational design, and—in particular—its leadership team.

Our second annual private equity survey, performed jointly with executive search firm Vardis, focuses on the critical relationships between PE owners and portfolio company CEOs. The 104 survey respondents across the US and EMEA included PE investors (38%) and PE-owned portfolio company executives (62%). In this report, we explore why PE-CEO relationships unravel so frequently and why it’s important to shore up these relationships—long before the deal closes.

What this report reveals:

According to investors, the most common reason for replacing a CEO is a lack of fit with the portfolio company’s new strategic direction.
An overwhelming 78% of PE investors named pace of change the most significant source of conflict between PE owners and portfolio company CEOs.
Although 3% of PE investors said they were happy relying on scheduled monthly meetings, 31% of CEOs prefer planned monthly meetings with investors.
An astonishing 73% of CEOs are likely to be replaced during the investment life cycle, and 58% of replacements occur within two years.
With so much at stake, it’s critical to establish clarity and alignment in the early days of the holding period.