LPs struggle to track GP succession plans

Some brand name private equity firms have set succession plans in motion, while others have yet to unveil future leadership structures.

Last year, San Francisco-based Hellman and Friedman successfully, and quietly, carried out a succession from one generation of leadership to the next.

Co-founder Warren Hellman gave the chairman role to Brian Powers, who in turn passed the chief executive title to former managing director Philip Hammarskjold. Patrick Healy, head of the firm’s London office, became the deputy chief executive.

Hellman remains on the investment committee, but his departure marked the last day-to-day management roles held by the firm’s original leaders. Friedman left the firm in 1998 to found mid-market private equity firm Freidman Fleischer & Lowe.

Hellman & Friedman’s smooth leadership succession was one of several successful transitions at private equity firms in the past few years. Having a clear succession plan in place remains a core concern to LPs, but as PEI reports in its forthcoming June issue, not all firms have a clear plan in place that they’ve shared with the market.

Many major firms still have founders firmly at the helm and thus haven’t yet had to address the issue.

But, as one source pointed out, when they are ready to relinquish control, finding the right person to take the reins may prove difficult. “The original founders of a lot of these firms are starting to get to the point where they’re thinking about transitioning ownership or stewardship of the firm,” said the source, adding that for junior professionals with plenty of capital already, the prospect of picking up the “pretty big mantel” of firm leadership may not be appealing.

One LP pointed out that while it may seem logical to groom a firm’s top private equity dealmakers for future leadership, many private equity firms have become so large and multipronged in scope that outside managers may need to be brought in.

The forthcoming issue of PEI explores this topic in greater detail, also highlighting rising stars with leadership potential at firms including Silver Lake Partners, Kohlberg Kravis Roberts, the Carlyle Group, CVC Capital Partners and Charterhouse Capital Partners.