Operating Models for Private Equity Firms

      Private equity firms look for companies that have the potential to grow much bigger than their current size. For whatever reason, the existing company isn’t maximizing its full capabilities. Many times, the problems are financial. 

      With an additional monetary boost and qualified advice, these organizations can increase their market share and meet growth expectations.

      In the current market, there’s a lot of competition among private equity firms to find organizations primed for growth. It’s grown harder to locate undervalued companies that can provide broad-reaching returns from a financial investment. Instead, private equity firms end up paying more — and putting more operational effort — into the organizations they invest in.

      Many private equity firms realize they can obtain a return from their equity investment more quickly if they deploy operational consultants to help a fledgling portfolio company. Functional consultants are typically experts in their field. They can assist in a consultant capacity or join the organization full-time until it realizes its success. 

      Types of Operating Models Used by Private Equity Firms

      Private equity firms use several models to maximize their portfolio companies’ operational performance. 

      Functional Operations

      One of the most common operating models is a functional one. The private equity firm develops a set of best practices to use across the board at all of its portfolio companies. A private equity firm that has found success with this model is Argosy Private Equity.

      Argosy Private Equity invests primarily in lower middle-market companies with an EBITDA of up to $10M. At each of its portfolio companies, management receives a playbook of best practices in five different areas, including human capital, strategy, operational excellence, transactional excellence, and growth. 

      Argosy uses three partners to assist its portfolio companies with implementing the new practices. Each company’s success is measured using specific KPIs and progress reviews. Management frequently meets with the partners to ensure they’re on track with Argosy’s expectations. 

      In some cases, Argosy will bring outside functional experts to provide additional assistance. Often, these experts work directly with the company’s board, CEO, or chairman.

      Another company, LLR Partners, uses a similar value-creation model for its portfolio companies. LLR Partners currently has 23 experts who work with growing companies in functional areas including finance, strategy, product, human capital, and sales. Each portfolio company receives lots of assistance from its partners, allowing management to focus on maximizing its performance at every level. 

      Like Argosy, LLR Partners employs an ongoing review process, ensuring that LLR and each of its portfolio companies collaborate through each growth stage. There’s no need for management to raise their hand when problems arise; instead, LLR remains an ongoing partner in the organization’s daily affairs.

      Industry Verticals

      Another operating model used by some private equity firms is industry verticals. In the industry vertical model, the private equity firm organizes the operational functions by industry sectors. One example of a private equity firm that uses this model well is Berenson Capital.

      Berenson Capital looks for executives with experience in specific industry sectors relevant to the companies it invests in. Most of Berenson Capital’s portfolio consists of B2B technology sector companies. 

      Depending on the focus of the growing portfolio company, Berenson will identify executives with relevant industry sectors, such as life sciences or compliance. 

      Berenson finds that bringing on executives with prior sector experience helps with deal sourcing and strategic planning. The company also looks for executives with previous experience as a CEO or leading various functional teams.

      Combination of Experienced Professional or Generalist

      Smaller private equity firms can employ a different approach to their operational strategies. For instance, Lion Equity, an investor in three active portfolio companies, combines engaging experienced professionals with individuals with broader experience. 

      At Lion Equity, consultants are brought on board to coach specific areas, including human resources, strategy, and operations. Lion Equity also has several individuals who take on the active CEO role at its portfolio companies. All the CEOs have prior experience in the CEO role in various industries. 

      The approach works well for Lion, which invests in companies in multiple industries. Since the company invests across sectors, a broader knowledge skill set proves helpful. This model is also incredibly adaptable. Since there’s no established playbook, consultants and CEOs can try different approaches. If one method fails, they simply try out a new one.

      A Traditional Model

      Some private equity firms are less willing to give up specific controls to operational partners. Instead, they seek to handle the majority of decisions and organizational changes themselves without the assistance of outside partners. 

      SFW Capital Partners is an example of a private equity firm that prefers to retain control. Rather than keeping partners on its payroll when they don’t have the right company to assist, they maintain an active database of executives. Their database is comprehensive and identifies each executive by their experience and background. 

      When SFW Capital Partners finds a new investment, they’ll contact the executives they feel are a good match to run the company. Usually, they’re able to find a good fit within a day.

      Private Equity Firms Must Act Quickly

      Private equity firms realize that it makes no sense to wait around to earn the return they’re looking for from their investment. Instead, they must begin improving company operations during the diligence period. 

      Most of the time, private equity companies begin their research and plans for organizational change when they identify a potential investment likely to accept their offer. They’ll get a broad understanding of the company’s market and current issues and determine how the private equity company can make its investment a success. 

      While speed is a crucial factor in realizing a return, the emphasis on gaining the trust of the portfolio company’s management team is also paramount. Without the team’s confidence, the investment can easily flag. There must be an authentic positive relationship between the private equity firm and the target company’s management. 

      With the right structural improvements, the appropriate speed, and a willingness to execute the private equity firm’s vision for the company, private equity firms and portfolio companies can realize substantial benefits.

      Cowen Partners: A One-Stop Search for the Best Talent in Private Equity

      Discover the best executive talent in the world with Cowen Partners Executive Search. Our team of industry experts and search specialists knows what you need and where to look to find it. 

      Private equity firms no longer rely on financial backing and minimal operational improvements to maximize their potential. Increased competition within the industry is pushing talent as the sole differentiator between successful and struggling firms. 

      Cowen Partners supports private equity firms and their portfolio companies by providing top-notch executive search to fill leadership roles with unmatched talent. Through a suite of service offerings, our highly experienced executive recruiters connect clients with curated candidates in less than six weeks. 

      Expertise Matters 

      Private equity professionals need a diverse array of interdisciplinary skills. The right blend of vision, passion, and drive — paired with a strong instinct for picking the right investment opportunities — is critical to a firm’s success. 

      Our 12-step due diligence process, backed by our senior partners’ years of experience, allows our private equity clients to leverage intricate knowledge of the industry and locate the right talent across disparate pools. 

      We don’t find executives for our clients — we curate them. Our long-standing connections within the private equity circles allow us to connect with world-class leaders and place them in your leadership-ready roles. 

      A Cowen Partners search goes beyond database recruiting. We provide invaluable industry insights that dig deeper into the precise talent pool necessary for a private equity-focused environment. 

      Professionalism with a Personal Touch

      The private equity industry is highly specialized with many complex organizational structures. Portfolio companies must find transformational talents to guide their firms through the transition phase and onward to future success. 

      Finding a proven executive search company is a critical step toward connecting with the incredible team of experts who will drive your company’s future growth. 

      Our clients remain our top priority, so we extend that personalized service to each of them. When you work with Cowen Partners, we start by getting to know your general company culture and specific position needs. 

      We believe that great leaders emerge from excellent relationships, not job postings. You can rely on our professional headhunters to get elite talent into your fold. 

      Find the Right Leader, Invest in Success

      Human capital is a critical piece of the puzzle for the success of any private equity enterprise. Management’s values, motivation, and vision determine how smoothly operations run. Our top executive search experts can assist you in identifying talented individuals with:

      • Interdisciplinary skill sets
      • Emotional intelligence
      • Managerial competence 
      • Intercultural acclimatization

      Cowen Partners’ private equity executive recruiters have widespread experience working with clients involved in mergers and acquisitions, pre-IPO private-equity-backed operations, and middle-market activities. Our search results will help cement your position as a powerhouse in the industry with the right team at the helm. 

      Functional Leadership Placements 

      A private equity management team requires a delicate balance of interpersonal skills and strengths. This balance is essential to providing the necessary leadership to steady the organization through any transitory period. Finding it means locating exceptional candidates who can easily pick up roles without any contractual or fundamental delays. 

      Whether you’re looking for a private equity CEO, CFO, CMO, CIO, CHRO, or any other executive, Cowen Partners will find the perfect candidate for your opportunity. 

      Guaranteed Client Satisfaction

      Greater minds translate into superior results for our private equity clients. You need the peace of mind that any professionals you pick will match your vision for your firm and will drive the best outcome possible. 

      The Cowen Partners team works tirelessly to ensure that our clients are satisfied with our services. It doesn’t matter what your hiring needs are — we will find you candidates who will exceed your expectations and do so expeditiously. Our average turnaround when filling executive positions is 38 days. 

      We’re committed to providing reliable services that have a lasting impact on our clients’ bottom lines. Our team strives to be transparent, honest, and ethical in our dealings, which is one of the reasons why Cowen Partners boasts of a 99% client retention rate.

      If you feel dissatisfied with our executive recruitment services, you have a 365-day replacement guarantee. We can assist you in finding a better candidate to fill your leadership role. Our experts will go above and beyond to ensure you are satisfied with your choice. 

      Making the Right Connections

      Tapping the right talent pool may require casting a wider net. Sometimes, that’s how you bring in skilled and experienced leaders who can kick start immediately. Leveraging our cross-border connections and four-step verification process can ensure you get access to choice, curated candidates. 

      Our global networks can deliver a wider and more in-depth search for your new executives. Whatever your talent needs are, Cowen partners can help you find, vet, and recommend the ideal candidates for the job. 

      Are you ready to kickstart your journey to find incredible talent for your private equity firm? Get in touch with us using our email form today and speak to an expert about your hiring dilemma.

      Cowen Partners Executive Search | Private Equity Executive Search Firm

      At Cowen Partners, our HR executive recruiters are exceptionally skilled at delivering in-demand candidates, no matter the need and across all industries. Backed by a proven executive recruiting process, we have been the partner of choice for startups, corporations, small businesses, non-profits, and more, meeting unique and critical recruitment needs across the entire C-suite, including CEOsCFOsCOOsCMOsCIOs, CTOsCHROsVPs of sales, other VPs, directors, and several other leadership roles.  

      With our executive recruiters, you get senior partner-led searches, due diligence-run networking, meticulous candidate vetting, and so much more, all geared towards one goal — placing the very best talent as soon as possible, all while ensuring a seamless fit with your company culture, your big-picture objectives, and other factors. Plus, we have one of the highest candidate retention rates in the industry while consistently delivering world-class talent faster than the competition. 

      That’s how Cowen Partners has become a leading executive search firm nationwide, and it’s why our executive recruiters have a reputation for excellence and success.

      Contact us to see why we are continually ranked as one of the best executive search firms around and why we have so many repeat and long-term clients, as well as referrals.

      We also invite you to continue exploring more executive recruiting insights from our team:

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