Private equity firms typically hold stock in a portfolio of different companies. Their ownership percentage — especially if it’s in the majority — often allows them to play a role in the hiring of executive and management positions. However, the hiring process employed by private equity firms differs considerably from traditional hiring processes.
Rather than looking for a person who fulfills the general experience and skills requirements for a role, private equity firms are also looking for people whose values align with theirs and whose outlook embodies what the private equity firm is seeking to accomplish by holding the company as part of its equity portfolio.
A private equity firm is an investment company that uses its available capital to purchase holdings in other companies that it sees potential value in. These companies may be struggling financially but have an impressive or useful product that would do well in the market if they had the funding to scale their business.
By providing the funding necessary to grow the company, the private equity firm benefits from the returns as profitability increases.
Because private equity firms receive their earnings from the success of the business they funded, it’s in their best interests to hire people who have experience with growing businesses, as well as the strategic know-how to take the company in a new direction.
The hiring process for a company owned by a private equity firm will vary depending on the type of position. When looking for executive team members, most private equity holders will want someone who fits the following characteristics:
The ability to grow the company is paramount. Without growth, the company will falter, and the investment won’t provide any returns to the firm. Thus, private equity executive leaders must be skilled in scaling businesses and enhancing business development.
To do this, they’ll need to identify key areas of the business that require significant improvement. Once they identify those areas, they can set up goals and targets for the team to meet.
For example, a new CFO could identify ways to cut unnecessary expenses and improve collection times for outstanding receivables. They could establish specific metrics and KPIs to identify when the business is performing well or when modifications to the operating strategy should be made.
Similarly, a new CEO’s beliefs should align with those of the private equity firm. Once the vision that the firm has for the business is established, the CEO is tasked with ensuring that the company charts its growth and has a solid operational strategy for achieving results.
They’ll also regularly meet with investors to discuss company performance and any potential concerns.
When choosing top team members, private equity firms want people who add value to the organization. They must have solid leadership skills, a deep knowledge of the company’s product, and significant leadership experience.
Oftentimes, when a new private equity firm invests in a company, it chooses to replace the existing team. The firm brings in new players they believe will better align with their beliefs.
The ability to continue to lead the company during turbulent times or changes in business strategy is important. Staff must respect the new leaders as well as believe in their vision.
If staff members feel accepted, receive tasks that are important to them, and thereby play a part in growing the business, they’re likely to give full respect to the new leader.
Finally, executives hired by private equity firms must have solid networking skills. They must be able to communicate well with everyone around them, including staff members, management, customers, and the investment board.
This goes back to respect: If everyone believes in the leadership of top-level management, they’re more likely to generate higher profitability for the business in the long run.
Executives must understand the intentions of everyone around them as well as the requisite skills and abilities their team members bring to the table. Using this knowledge, they can positively impact the company by allocating the workload to those who are in the best position to make decisive contributions to the company’s success.
Private equity firms seeking executive leaders who fit their strategies benefit most by hiring an executive search firm. The team at an executive search firm routinely has a host of clients they’re familiar with and who have specific knowledge and experience to fill particular roles.
The firm may also be able to reach out to people who are currently employed but have the necessary skills to develop and implement the company’s strategy.
An executive search firm operates in a different niche than a traditional search firm. Rather than attempting to bring new people on board as soon as possible, the executive search firm looks for quality candidates who will bring significant value to the organization.
While it may take a little longer to find someone using an executive search firm, the savings the business reaps from a quality leader are typically worth the time.
Private equity firms may also know of people who have run other organizations in their portfolio successfully. If these individuals are a good fit for the company, they may ask them to consider taking positions of leadership in their new investment.
Private equity firms earn their money by investing in companies that they feel have the potential to expand at a significant scale. To implement their vision, they need an executive leadership and management team who share their beliefs.
Therefore, finding the appropriate candidates is crucial to their growth and success. To identify talented leadership teams, private equity investors may use their own networks or hire an executive search firm that will mine its clients or seek out new ones who match the company’s professional prerequisites, values, and corporate outlook.
Our hands-on private equity executive recruiters have extensive experience working with private equity backed companies. Clients are typically $50 million in revenue to Fortune 1000’s. Successful placements span the entire C-Suite – CEO, Chief Operating Officer, Chief Financial Officer, Chief Marketing Officer, and include vice president sales, general counsel, operating partners, and other director-level leadership roles.
Cowen Partners delivers 3X more qualified candidates than the competition. Through our proven retained executive search process, our private equity executive recruiters find, vet, and deliver the top 1% of candidates for positions across the C-suite. Our process works for all industries, including technology, healthcare, manufacturing, retail, real estate, financial service, and more.
Learn how we deliver top private equity talent, no matter the need, with our industry-leading research and resources. Discover the strategy that made Cowen Partners the top executive search firm in Miami, Boston, Denver, New York City, Anchorage, Chicago, St. Louis, Las Vegas, Seattle, Dallas, Los Angeles, San Diego, and beyond.
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