The type of relationship and level of cooperation between a private equity firm and its portfolio company are instrumental in determining whether a company performs as expected or fails to deliver value. Done well, the private equity/CEO relationship is highly symbiotic, producing significant benefits for both sides.
In a recent survey, more than 90% of CEOs at private-equity-owned companies said that their owner had a positive effect on their company’s performance. An almost equal percentage of CEOs said the private equity firm enabled them to succeed in their role.
Of course, the private equity/CEO relationship is not without its challenges. CEOs are accustomed to running their own show, but once they become part of the private equity firm, they have to answer to a new boss. Private equity firms have few qualms about removing an underperforming CEO.
When a private equity/CEO relationship fails, it can be due to one of several common reasons.
The most successful relationships require mutual and ongoing effort. Here are four ways to make that happen.