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

Thank you for visiting my blog.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so please leave a comment.

Jim Weber, President

New Century Dynamics Executive Search

www.newcenturydynamics.com

Beg For Customer Complaints

– Grow Your Business – Maximize Value for Exit Planning

by David Shavzin

It’s More Than a Three-Question Survey!

• You want to grow your business!
• You want your business to run more efficiently!
• You want new customers!
• You want to keep all of your current customers!

What if there was one way to do all four things?

You spend so much time looking for new customers – advertising, marketing, selling, networking… But what about a focus on keeping your current customers? Are you too focused on new customers walking in the front door, while current customers are walking out the back door?   Read more...

"Time is short! Find me a Specialist!"

"Time is short!  Find me a Specialist!"  Those may not be the exact words, but that is most definitely the message.   My clients have specific needs that must be addressed and do not have time for a generalist to learn how to attack the problem.  They want people who have been there and done it.  Most of my clients are small to mid-cap companies. Many are owned by Private Equity Groups, (PEGs).  The rest are a mix of privately held emerging brands and more established niche players.  Virtually all are working to make their brand relevant in a very dynamic and challenging business environment.  Time is of the essence, so their planning horizon is short.   Certainly, shorter than for larger, Fortune 500-class companies. 

Most recently, my clients have been facing the following situations:

• Change of ownership
• PEG buy/sell transaction
• Pre-IPO
• Public to Private
• Chapter 11
• Debt Covenant Issues
• Turnarounds
• Start-up
• Joint Ventures
• Installation of Management Accountability Systems
• New CEO
• Major Systems Upgrades

Other searches have required experience in franchising, consumer packaged goods, and experience in family-owned businesses.  Industry-specific experience is almost always required.  I have even had searches requiring the candidate to move to remote, less than desirable locations.  This parallels the demand for our consulting practice, but not as much.

Most people know that tenures have decreased significantly.  Three to five years in position is not uncommon for C-level executives.  Three years or less is common for other senior-level executives. Much of this is related to heightened levels of accountability due to intense competition.  This level of senior-level turnover can affect the entire management team.  Some of it, of course, is due to a change of ownership which often means a new management team, or changes for key executives.   As the planning horizon shortens, the enterprise focus is on the most best ways to enhance competitiveness.   Companies in the small to mid-cap sector need people who can make an immediate impact.  Generalists requiring a learning curve are eschewed over candidates with more specialized skills and experience.  It has become an ad-hoc world.

The good news is that most of you have lived through the situations listed earlier.  You have been through the break-up of Conglomerates.  You have seen global competitiveness affect your employers.  You have seen employee-led Leveraged Buy-outs.  Without a doubt, you have seen the productivity benefits of technology.   These global changes have resulted in right-sizing; down-sizing; re-engineering; and outsourcing.   You have likely seen several ownership changes, IPO's, and the public to private transactions, and probably have experience with PEGs.  By now, you have a wealth of experience and skills for specific situations.  Face it, with reference to Peter Drucker, we have been living in turbulent times.

The objective is re-branding oneself as a specialist, but not necessarily one specialty.   If you look back on your career you will find common themes.  You will notice that you have thrived in situations which have been identified in this post.  Those situations can become the themes for your positioning as a Specialist.   The good news is that word-processing programs allow you to have multiple resumes which you can tailor to a given specialty.  It doesn't mean that you are fabricating a career history.   It means that each version of your resume puts more emphasis on the specialty (read skill-set) you wish to promote. 

Time is short for small to mid-cap employers, especially for PEG Portfolio companies.  They need specialists to help resolve immediate issues.  Become the Specialist they seek for success in your job search or in your freelance career.!

Thank you for visiting my blog.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so please leave a comment.

MAKE YOURSELF IRRELEVANT - MAXIMIZE VALUE FOR EXIT David Shavzin; Shavzin Associates & ITB Partners

You want to exit at some point, you want to maximize what you get for your business. Exit planning or succession planning, you need to focus on it! A buyer is looking for something as close to a cash machine as possible. And, one that does not depend on keeping you around...more - read the full article

THE PANEL DISCUSSION

Two weeks ago I was a panelist for a CFO Roundtable luncheon meeting.  Our topic was the general employment situation for CFOs.  I have been a member of this group for a number of years, so I was well acquainted with my host and most of the guests.    This was the first time I had met the two other panelists.  One has been in business for 28 years focused mostly on recruiting for plant-level jobs.  The other is a Partner and Founding Member of a firm focused on academic, not for profit, and some Fortune 500 searches.   It was interesting to have their perspectives and for the most part we were pretty well aligned in our experience.  There were some obvious differences, however, which made for a more interesting discussion. 

The members of this CFO Roundtable Group are primarily employed by small to mid-cap concerns representing most industry segments.  Their employers are PEG portfolio companies, emerging privately financed companies, and some family-owned businesses.  There was no representation from a major public company, educational, or not for profit.  One of the attendees is a recent placement and current client.  Even though the focus of this Panel Discussion was on CFOs, it became evident that the issues for this group are relevant to all senior level executives.

The moderator kept the discussion focused and moving so as to accomplish as much as possible during the lunch hour.  The broad topics were related to the ideal CFO candidate background; employer preferences to hire employed candidates vs. unemployed candidates; age discrimination; cultural fit; current CFO tenure; and the use of LinkedIn during job search.  Undeniably, these areas are of great interest to CFOs currently in job search and for the rest who know they could be in the market at any time.  It is interesting to know that all of these issues are closely interrelated.  A bullet point recap of those topics and findings follows:

•       A traditional background with experience in Big 4 Public Accounting is still preferred.

•        Preferred hire is currently employed, ceterus peribus.

•        LinkedIn is an important tool which may be growing in popularity with major Executive Search Firms.

•        Tenures are shorter.  The new normal is three to five years.

•        Cultural fit is very important to both the client and the candidate.

•        Age is an issue but not in every case
• 
  

During the Q&A there was a lot of discussion around corporate cultures.   The issue was related to how the recruiter could be helpful in presenting the client culture, and how a candidate could go about learning more about their culture.  The time spent on this topic is understandable as the members of the audience have enough experience to know that ensuring a good cultural fit at the beginning of employment is vital to minimizing the risk of a short tenure situation.   Additionally, many have recent experience in difficult situations which they don’t want to repeat.  We all agreed that helping the candidate, and ourselves, better understand the client’s culture is necessary for all parties concerned.  It is not such an easy task, however, as so many companies are in a state of flux.

My take-away from the meeting, and the theme for my responses is that the recruiting criteria for CFOs in the small to mid-cap segment are highly dependent on the company’s situation.  Employers are looking for specialists to help them with immediate priorities.  When those priorities are met, or at a liquidity event, new priorities are established which may render the CFO expendable.  One would need to build a matrix to catalogue the various attributes required of candidates for each particular situation.  I will explore these issues in greater depth in the coming weeks.

To summarize, employers in the small to mid-cap segment are looking for CFOs to help them with immediate issues.  They are looking for candidates with a traditional accounting track and prefer to hire someone who is currently employed.  This is a preference, not a hard and fast rule.  Tenures are shorter as the need for the particular talent is more specific and because a change of ownership will force the need for a change.   Cultural fit is very important, but age is not as important if the candidate meets the hiring profile.   The point for CFOs and all other C-level Executives is to identify ways that they can position themselves as a specialist.

Thank you for visiting my blog.
Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so please leave a comment.

Jim Weber, President

New Century Dynamics Executive Search

www.newcenturydynamics.com