WORKING FOR PRIVATE EQUITY GROUPS: WHAT YOU SHOULD KNOW

As I have written so much about my work with Private Equity Groups (PEGs) and their portfolio companies it makes sense to explain what they do and how they operate.  PEGs are reshaping American Industry across all segments.  They are significant to the job market.   It is important to understand how they manage their selection process and what they look for in new hires.  If you are not currently working in a PEG Portfolio Company, you likely will before your career comes to a close.

So, what is a Private Equity Group?  A PEG secures its funding from high net-worth Individuals to make investments in undervalued small to mid-cap companies.  They will generally take a controlling position in the target company up to 100% ownership.  Their goal is to improve results in a three to five year period allowing them to sell at double their investment, more or less.   They may also invest in companies with significant growth potential but having difficulty raising capital.   PEGs have been known to invest in companies whose owner wants to cash out, or to buy out other investors.   Their fundamental investment goal is to find companies that can benefit from their expertise and generate a significant capital gain after a defined holding period.   They are looking to grow revenues, improve productivity (read systems and processes) and to eliminate waste.

Types of PEG Transactions

·        Turnarounds

·        Public to Private

·        Divestitures (Carve-Outs)

·        Family Business Exit Strategy

·        Funding emerging brands needing capital

If the target company wasn’t a fast-paced, high-energy environment prior to the PEG involvement, it most certainly will be after.  This is true especially early on as the two groups learn to work together.   The level of communication and thirst for data by the PEG is intense.   Redundant, unnecessary, or functions better handled by a third party are eliminated resulting in a more stream-lined organization.  The remaining team members are expected to pick up the slack.   Accountability is expected.  If the CEO cannot meet his objectives he will be replaced.  So, when looking for people to hire a premium is placed on people who are self-sufficient, self-reliant, and can tolerate the stress of a high-intensity organization.   Is this really that much different from most major brands?

The PEGs I have worked with are directly involved in hiring the CEO as one would expect, as well as the CFO.  Depending on the nature of the transaction, the CEO may or may not stay on after the investment however, the CFO is usually replaced.   This is not uncommon for most acquisitions as the new owner wants “their people” in key positions.   The first task for the new CFO is usually to get control of cash flow and to install a KPI Dashboard.  Other hires are the responsibility of the Executive Team with the customary curtesy interviews by the PEG Executive responsible for oversight of the company. 

Considering the selection process for PEG Portfolio Company job openings, experience is the key.  They do not have time or interest in on-the-job –training.  They are looking for people who have solid educational credentials, whose careers have been launched working for established and respected brands.  Industry segment experience is the base-line.   If the job is in a small to mid-cap brand then experience in a small to mid-cap company is required.   There is a preference for people whose career is still ascending.  Sure, there may be a preference for someone who is on the younger side and still hungry, however, experience and success trumps age.   A number of short tenured situations are a big red flag.  As with any hiring authority there may be certain quirks to their ideal selection process.  One client I worked with disqualified people who had stepped out of the corporate world to try their hand in an entrepreneurial venture,   whereas other clients valued that kind of experience.   So, in most ways, a PEG’s selection process is not very different from any other well-managed company, except for the specific experience they may require.

Important Notice: 

I just landed a Search Contract to find a Sr. Director IT for a restaurant company based in the Ohio Valley Region. The position reports to the CFO with base salary to $160K. If you know anyone who might be interested in this opportunity, please send them my way.   JimWeber@NewCenturyDynamics.com

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Jim Weber, President

New Century Dynamics Executive Search

www.newcenturydynamics.com