Thinking about selling your business to a private equity firm? If you’re the entrepreneur, watch out! According a recent survey conducted by AlixPartners, private equity acquirers fire 58 percent of portfolio CEO’s within two years of the deal close. Astonishingly 73% of CEOs will be booted during the life cycle of the investment.
Why the carnage? If you are considering selling to a PE firm because you believe you will get to stay in charge while reducing the financial risk, think again! PE execs want their portfolio CEO’s to have experience as a Private Equity portfolio CEO, it’s super important to them. 33% of PE execs want their portfolio CEO’s available ROUND THE CLOCK! And forget meeting with them once per month – no way say the PE firms, only 12% of PE firms said that was acceptable.
PE investors don’t think their portfolio CEOs are changing fast enough (didn’t you create the company?). 78% of them cite “the pace of change” as the biggest issue with their CEOs. Another hot button – for at least 50% of the PE firms – how to measure and reward performance targets/ and metrics.
I used to say to my colleagues ” the CEO is the first one to go!” – and this study provides the proof.
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