The secret CEO on challenges of working at a PE-backed firm

A seasoned portfolio company chief executive gives the inside scoop on what makes for an effective private equity-management working relationship.

Our anonymous CEO leads a private equity-backed financial services business in Europe and has extensive senior management experience at both public and private companies. Well-versed in working with private equity firms, the CEO offers their candid take on the pros and cons of having private equity owners, including during the pandemic.

What was your experience of liaising with private equity backers remotely while running a business during lockdown?

We had very supportive private equity shareholders who were close to the business, supportive of management and confident to let management deal with the various scenario plans and changes required. While they were concerned about the potential negative impact on the business, they stood ready to support the business with additional funding if required. Fortunately, it was not needed.

What are the greatest challenges of working at a private equity-backed firm?

Firstly, depending on the culture of the private equity firm, they can be supportive to the CEO or very intrusive to the day-to-day operations of the business. Having worked with both, and as an experienced CEO, I clearly prefer the former operating model.

“Be assertive in your role as CEO and your vision for the business”

Secondly, as CEO of a portfolio company it can be difficult to get visibility of the issues, fund strategy, investment parameters, etc, at a private equity level that may adversely impact on the business but may not be obvious.

And the benefits?

As an experienced CEO, alignment of the operating model with the private equity partners can be liberating, so that myself and my executive team have the ability to drive the business on a month-by-month basis without undue interference. However, this requires me to have strong stakeholder management and strong governance routines with the private equity company and other shareholders.

The other significant benefit is that decision making is usually quick, rationales for decisions are very clear and working in a private equity environment is much more dynamic as opposed to a large company or corporate structure.

Is there anything you wished operating partners at private equity firms better understood about your role?

Depending on the private equity company culture, there can be little regard for colleagues and customers within the business, with the view that it is basically a financial transaction.

What would be your top tip for a first-time portfolio company CEO?

Be assertive in your role as CEO and your vision for the business, and remember that private equity partners are not primarily experienced in running and operating a business. Build a strong relationship with the private equity partners and engage proactively with them.