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Ted Bililies
Partner & Managing Director, Global Leader of Transformative Leadership
New York
This is the 10th year AlixPartners has published a research report on leadership, focused on private equity (PE) firms and their portfolio companies (portcos).
The first of these reports focused on CEO succession by identifying the usual practices—and the best practices—in finding and developing the next generation of top executives. Since then, the study has broadened to include topics like culture, adaptation to disruption, and leadership strategies for the first 100 days.
In the decade during which we have conducted this research, we have frequently documented the increasing importance of (1) leadership and talent management to the PE industry and (2) the companies in which the industry invests. Many factors have risen in prominence during this period, and they have come together to make human capital more valuable in creating tangible value.
As a result, PE executives have consistently said leadership effectiveness has become the most important lever for creating value in their portfolios.
Our findings: challenges confronting PE and portco leaders
Each year, findings from the AlixPartners PE Leadership Survey deliver valuable insights on themes relevant to the success of PE investments. This year, we heard from 361 PE and portco executives, who told us their priorities, described the pressures they face, gave their opinions about the importance of leadership and their evaluation of their own leadership capabilities, and listed ways things could be improved.
Keep reading to learn more about the key findings from this year's report or click below to download the full report findings.
Key findings
Key Finding #1
PE Firms and Portcos Have the Same Goals—But Disagree About How Well They Are Doing
The work of PE firms is straightforward: They buy companies, expecting to sell them at a later time with improved enterprise value. Achieving that result begins with finding companies with unrealized potential and developing a deal thesis—the animating idea for value creation, usually a transformative combination of cost cutting, organic growth, strategic talent and operational upgrades, and additional acquisitions. CONTINUE READING
Key Finding #2
Different Means to the Same End: Where PE and Portco Leaders Diverge
Even though PE firms and portco goals are aligned, the entities have different jobs. For PE firms, job number one is allocation of capital—meaning, finding and buying targets and, often, infusing additional capital into portcos for modernization, growth, or further acquisition. PE firms create value through deals. For portcos, the job is using that capital well: —meaning, putting in the right new technologies and using them effectively, finding and keeping customers, and continuously reducing general and administrative costs as a percentage of sales. Portcos create value through enhancement of EBITDA (earnings before interest, taxes, depreciation, and amortization) performance—ideally, expanding EBITDA multiples in the process. CONTINUE READING.
"Given current uncertainties undermining many pillars of private equity, the priority is now to accurately address value creation programs focused on lowering breakeven points, assessing how risk factors are changing, and relying on execution by experienced leaders."
Key Finding #3
PE Ownership Creates a Pressure Cooker for Leaders
PE has a reputation for being tough—even ruthless—about cost, unrelenting about performance, impatient about pace, and therefore hard on leadership. This year’s survey added new insight into what it’s like inside the PE pressure cooker. We supplemented the survey with data collected for the AlixPartners Disruption Index, a survey of 3,200 senior executives worldwide, among whom 989 (31%) had at least significant PE ownership. CONTINUE READING
"Investors commonly push portco leaders for accelerated value creation plans, and they expect results. That pushing can put a great deal of pressure on the portco leadership team as they navigate difficult decisions on what to do and when to realize meaningful impact."
Key Finding #4
PE Firms and Portcos Can Do More to Support the Work of Leadership
Since we began conducting this study 10 years ago, the importance of executive leadership, talent management, and culture in the PE industry has continued to grow. So, too, has the industry’s recognition of that reality. But PE firms and portcos have major differences of opinion about the quality of leadership, and there are big gaps between what they could do to strengthen leadership and what they are doing. CONTINUE READING
"Transformative leaders understand that without deep and continuous change at the human level, the organization will be much less successful at navigating the waves of disruption ahead."
Key Finding #5
Human Capital Partners and Chief Human Resources Officers Play Critical Roles in Improving Portco Performance
Many PE firms and portcos have responded to the changing competitive environment by beefing up their talent management. In the past 10 years, we have documented progress in some areas—particularly in the use of formal assessments of CEOs, other top executives, and their teams as part of the due diligence and onboarding process, a change that has improved their hiring. (See below) Starting a few years ago, some firms—at that time, mostly the largest ones—created a new senior position to manage leadership issues, often called the Human Capital Partner. CONTINUE READING
"Senior-team alignment and culture are extraordinarily important for value creation in private equity—especially as holding periods have grown longer and deals have become more complex. The best PE firms and portfolio company executives make sure that the human side of change is at the forefront of their planning."
Decade of data
Our experts have spent ten years researching leadership trends and collecting insights from Private Equity and Portfolio Company executives. Click below to download our "Decade of data" analysis and see what's changed in the years since the debut of the inaugural PE Leadership Survey.
Download the analysis
About our survey
Each year, findings from the AlixPartners PE Leadership Survey deliver valuable insights on themes relevant to the success of PE investments. In previous years, themes we explored included:
- Key success factors in the first 100 days after a PE investment deal
- The impact of portcos’ human capital management practices on PEs’ internal rates of return
- New imperatives that portco and PE leaders must meet during times of disruption
- The role of a portco’s organizational culture in investment performance
- Leadership capabilities for a new era of value creation
Our survey collects insights directly from private equity and portfolio company executives regarding the challenges of value creation. The survey explores how market trends are influencing different facets of leadership, investing and growth, investor/portco relationships, succession planning, and talent strategy. This year’s survey was administered online from October through December 2024. Respondents consisted of 161 private equity firm managing directors, operating partners, or founders, and 200 portfolio company executives, the majority of whom are CEOs or CFOs. Sixty-six percent of the PE firm respondents come from companies based in North America, as do 62% of the portfolio-company respondents; 29% and 37% come from Europe, including the United Kingdom. A large majority (80%) of portfolio company executives come from companies with annual revenues greater than $500 million. Among private-equity executives, 25% work for firms with $20 billion or more in assets under management, 20% from firms that manage between $5 billion and $20 billion, and 55% from firms with less than $5 billion under management
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