Following record growth between 2020 and 2021, demand for talent across all industries increased at levels unseen in decades. Fueled by economic recovery from the COVID-19 pandemic and access to inexpensive credit, private equity (PE) firms acquired small and mid-size organizations to add to their ever-growing portfolios.
Toward the end of 2021, demand for executives to lead these organizations was extremely high. People short-listed for CEO and CFO roles at private-equity-backed companies could essentially name their price.
Stiff competition led many private-equity organizations to do just that. They ended up doling out money to candidates who they deemed most suitable for their next endeavors.
Private equity deals have since slowed due to the federal government’s attempts to lower inflation by increasing interest rates. However, this doesn’t mean that PE companies have gone away.
In fact, many are still looking for the elusive cash cow — the right place to invest their money and reap significant returns quickly. This means that they’re still hiring and looking for qualified talent that delivers results.
Traditionally, companies have hired their executives based on factors such as their credentials, experience, education, and connections. A suitable CEO or CFO has extensive expertise gained from time spent in multiple key departments, including operations and finance.
As a result, they have formed strong relationships with key stakeholders. This means they know how to communicate with everyone from existing executives and vice presidents to board members.
Getting to the top of a public company is neither an easy nor straightforward process. Even when in possession of all the qualifications a company wants in its next leader, a side remark from a valuable customer or connected board member can easily disqualify you. There has always been an emphasis on relationships regardless of technical skill.
Private equity companies’ perspective differs from that of established public organizations. They aim to receive a quick return on their investments — within two to three years. Most PE firms don’t think in the long term; once they pull out from their investment, they close the door and never look back.
Due to that thought process, most PE companies don’t care about an executive’s connections or glorified educational achievements. They’ll consider a candidate with a degree from an Ivy-league university just as they would one from a state-funded college — as long as they can meet the PE firm’s goals for scaling the organization.
As such, a well-written and comprehensive resume will only get a candidate so far; they’ll also need to show their aptitude for the position in other ways. For instance, a PE firm may test a candidate’s general and emotional intelligence through specialized assessments, which helps them determine whether the person is a suitable cultural fit.
Other private equity firms dive deeply into a candidate’s experience at other organizations. They will look for people who have handled initiatives that directly relate to what the private equity firm hopes to achieve.
For instance, suppose that the PE firm aims to attract a barrage of new customers in the next six months. When selecting their next CEO, they’d seek a qualified candidate with experience handling a similar sales objective.
Ideally, a private equity firm will define what it wants in its newest executive. Defining competencies helps the company understand what to look for when parsing resumes or speaking to recruiters. It eliminates some confusion and often provides the firm with better prospects than they might have had without taking that step.
Environmental, social, and governance (ESG) refers to specific initiatives to improve the world. ESG-oriented organizations typically take a robust approach to reducing pollution or their carbon footprint, and they usually incorporate DE&I into their company culture.
ESG has become a trend in the business world, but it doesn’t appear to be a passing fad. Businesses genuinely want to benefit society through their operations. An ESG-minded approach is an excellent way to do so, and it also makes a favorable impression on potential investors and other stakeholders, like clients.
Private equity firms aren’t immune to ESG’s impact on other businesses, and many are adopting ESG-oriented strategies in their hiring practices. For instance, they may look for candidates with experience working in an ESG-dominated company or who strongly support ESG initiatives.
Many private equity firms consider ESG-oriented companies to be solid investment opportunities. Of course, if they acquire an organization with a stringent ESG outlook, they’ll need to find the appropriate person to lead it — and that candidate will agree with the company’s ESG approach.
In some cases, family-owned companies make excellent PE acquisition material. When the founder doesn’t plan to pass down the organization to an heir, they often gladly sell their companies to PE firms for the right price. This can give them the funds they need to create a new business or enter their golden retirement years with substantial cash.
However, PE firms that acquire family-owned companies must be conscious of the organizational culture if they plan to hold onto key employees. Often, family-owned businesses have a long history of operating in a certain way. Completely revamping product lines and processes can shock remaining workers.
Hiring an executive sensitive to the company’s work culture is paramount. They’ll need the skills to form strong bonds between the current team and the owning family while still fulfilling the PE firm’s reporting requirements.
The economy doesn’t make leverage buyouts and acquisitions quite as attractive as before inflation and interest rates became significant issues. However, this doesn’t mean that private equity firms aren’t still looking for qualified talent.
They will always need people to run their new acquisitions. And they’re going to use the intervening time to source suitable candidates who they can turn to when the need arises.
Generally, private equity companies look for performance-oriented, high-energy, ambitious, and driven candidates. In return for high compensation, they expect selected executives to deliver the results they’re looking for according to their playbook.
Candidates interested in working for a private equity company at the executive level should pay attention to their qualifications. It’s never a bad time to start preparing for your next opportunity.
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.
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