Life in the “P Suite” – What Private Equity Want from their Portfolio-Company Executives.

Growth is intoxicating.

And that is why, more than ever leaders are approaching our team at Fraser Dove International and asking for help getting into private equity (PE) backed businesses. ?“It's where the action is” as one Healthcare CEO very succinctly explained it to me recently – and in many ways she is right. ?

While overall deal flow in Life Sciences slowed in 2023 there was still plenty of movement at the top tables and we saw a 40% increase in “covert searches” whereby PE-backed organizations were looking to upgrade key leaders in their investment portfolio confidentially.

With start-ups still struggling for cash and many of the global corporate businesses rightsizing, the PE ecosystem could well be a good bet this year for your career - the amount of dry powder (funds to be invested) to be deployed is estimated at a staggering $4 trillion!

But before you make the move into the Healthcare Private Equity you are first going to need……

A Software Refresh

The Private Equity world is different, and many Life Science executives try to make the shift but ultimately fail.? The reason is often years of corporate programming that simply doesn’t translate into the high metabolic rate of mid-cap private equity environments looking to deliver on an investment thesis.

I often wish I could give executives a software refresh to help them reorientate their skills and approach.? This would upgrade old beliefs and just as your PC does improve its operating system.

Upgrades would include Installing an ownership mentality, prioritizing data, and eliminating siloed thinking which is of no use in private equity portfolio businesses at all.? The pace required is ferocious and often with a “done is better than perfect” undertone meaning you have to learn to get comfortable with setting a high cadence and often prioritising execution over planning.

The other major mindset shift to achieve is concerning the role of the board itself.? In Private Equity, the board is far more actively driving the business and less of an administrative formality. ?This means it acts like a high-performance forum to ensure progress and it is the norm for passionate debate, probing questions, and demands to go faster to be heard. ?

What Attributes Do Private Equity Firms Look for When Hiring a Portfolio Company Executive?

Private Equity owners have often been the final interview stage for Portfolio Companies looking to onboard a new C-Level executive. ?But more recently they have started taking a far more active role in executive talent acquisition processes as a whole. ??We have seen this include helping shape up requirements at the start of the search and even advising on selection of hires a level or two below the C Suite.

This makes sense when you consider recent McKinsey research that stated portfolio companies that hire the right leadership talent early are 2.2 times more likely to outperform their peers.

Whether hiring CEO’s, CFO’s, Board Members or SVP’s Private Equity organizations are looking for what we call “Impact Players”.? ?

We define Impact players as candidates who have a unique mix that we simplify into a formula: IQ x EQ x CQ.

Breaking down the components as follows:

IQ – You have to have cognitive capability and an ability to do both strategy and execution. Being intelligent with your use of financial metrics is key as in a PE-backed business all the leaders have to be across the numbers, not just the CFO.

EQ – PE firms look for executives who can cultivate great relationships across their network. ?The ability to be self-aware, connect with peers in other Portco’s, and park the ego is vital.? Their ideal CEO’s have an Emotional Intelligence that enables them to better handle stress and show resilience in the face of the numerous challenges that come with rapid value creation.

CQ – Change Intelligence.? PE firms want CEO’s and leaders who have an ownership mentality, can create followership, and be catalysts for change. The entire investment thesis typically rests on the leadership team's ability to 3x-5x the valuation over a 5-6 year period and so to get appointed to a senior role in a portfolio business you have to be able to demonstrate a track record of transformational leadership.

Good For Your Head, Heart and Wallet

As we have made clear working as an executive in a Private Equity Portfolio company is a uniquely demanding and high-pressure role. But if that doesn’t put you off it can also be great for your head, your heart and your wallet!

Successfully establishing yourself in the Healthcare Private Equity ecosystem will create you a powerful network and result in some serious financial upside if you deliver on the investment thesis.

Many Private Equity businesses employ “repeat management” with trusted board members and executive teams so once you have proven your ability you can expect the ongoing career opportunities to flow.

Besides one thing I can promise you is…….you will never be bored!