Fortune reported in July that the top three private equity stocks had outperformed the S&P500 by 9.6% in the past five years. That includes two significant bounceback cycles for stocks, one at the beginning of the pandemic and the other again earlier this year.
Despite the success, the post-pandemic economy remains precarious. If private equity firms want to succeed, they must pay particular attention to those that they put in charge as they seek to set the course for their corporations in one of the most uncertain periods in recent memory.
Private equity has been thriving both during and since the pandemic. In early 2023, McKinsey reported that 2021 was the biggest year ever for private equity. While 2022 came down from those lofty heights, it remained high, historically speaking, especially compared to the larger market declines that year. Private equity did slump in the second half of the year, though, as it faced struggling valuations, deal volumes, and overall performance.
More recently, EY provided a mid-year update for 2023, pointing out that private equity funding bottomed out in the first quarter of the year before a strong bounce-back in Q2. Nevertheless, the rebound may be short-lived. Stubborn inflation, correlating rising interest rates, and an overall uncertain economic short-term view continue to dog any sense of consistency moving forward, either positive or negative.
This is a time of unprecedented success coupled with remarkable uncertainty. Private equity firms are seeking to forge new deals, consider diminishing take-private opportunities, and blaze the trail for the future success of their firms.
This is all set against the backdrop of classic PE concerns, as well. Portfolio companies must consider things like talent management, customer service, and financial pressure during acquisition by a PE firm.
These traditional concerns, combined with the highs and lows of the current economy, highlight the need for quality leaders in the private equity sector. Whether it’s taking advantage of opportunities or minimizing risks, PEs must seek out C-suite members for portfolio companies that can make informed decisions and minimize risk.
It doesn’t matter how big or small a firm is in terms of its portfolio companies’ revenues or EBITDA. Each individual company they acquire requires the right leaders. PE companies of all shapes and sizes cannot rely on traditional executive recruitment standards if they want their portfolio companies to succeed.
PE companies of all shapes and sizes cannot rely on traditional executive recruitment standards if they want their portfolio companies to succeed.
Established executive recruitment formulas might help if the goal is to create stability at the top of the org chart for the long term. However, in private equity, the goal is fast improvement and increased valuation. To achieve this, private equity firms must widen their scope. They must think creatively if they want to install leaders in new acquisitions with an eye toward turning a profit quickly.
This requires an experienced hand at the recruitment helm — which is where working with an executive search firm like Stanton Chase can be a game changer. A quality executive search consultant can help smooth a brand’s transition into a PE portfolio.
They can help create pipelines of potential leaders ready to step into gaps when a new company is acquired. They can also help identify those with the raw talents and abilities to lead—things like adaptability, agility, and innovation—even if a candidate doesn’t have a proven track record yet.
A good executive search recruiter can also increase the speed with which the executive search process takes place. This can help PE firms identify and recruit top prospects as soon as they hit the market or even before they’ve publicly put their hat in the ring as a candidate looking for a new position.
It doesn’t matter if a PE firm is big or small, old or new, generalist or industry-specific. The unique environment and fast turnaround time of managing a portfolio company make it challenging for private equity firms to hire leaders.
Executive search is an essential and necessary solution required to reshape and revamp those companies, especially in the current unstable economic environment. With both challenges and opportunities popping up at every turn, search firms can provide the right tools to confidently guide the leadership talent process every step of the way.
Jill Leibowitz is a Director at Stanton Chase Los Angeles. She is currently based in Chicago, Illinois. With over 20 years of experience in media, entertainment, sports, and advertising, Jill brings a wealth of knowledge to her role. Her most recent positions include VP of Content for Publicis Media and Director of Production and Content Strategy for One10 Marketing, a renowned travel and events company.
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