Path to Exit: Ensuring Leadership Readiness in PE Portfolio Companies

Jul 10, 2024

Authored By Eric Walczykowski

Many firms are currently facing the urgency of portfolio bloat and the need to expedite exits to reinvigorate their investment cycles. When we think of a successful and lucrative exit within private equity, we know it requires more than just strategic foresight; it demands a robust and agile leadership team ready to meet the challenges head-on.

I recently sat down with Matt Richburg (Managing Partner, Ampersand Leadership Group) to discuss the essential steps and considerations for CEOs to effectively prepare their teams, ensuring not only a smooth transition but also the maximization of value during the exit process.

Below is a summarized Q&A of my conversation with Matt.

Eric: With many firms needing to exit portfolio companies within the next 12 months, what steps should a CEO take to ready their team for this critical process?

Matt: It’s crucial to have the right foundation, starting with the end in mind. Preparing the team involves understanding their readiness, especially the top team, which includes the CEO, CFO, Head of Business Development, and CRO. However, it’s equally important not to overlook the entire organization. The exit process can erode value if not managed well. This includes ensuring readiness for the extensive diligence process and roadshows that put significant stress on various functions. More clients are now formally assessing their readiness to identify hotspots and areas needing additional support, both at the top and throughout the organization.

You can see the full interview with Matt in our Tailored Talent vodcast series, here.

Watch the Full Interview

Eric: : I agree, it’s vital to understand both the team and the value we’re presenting to the next private equity buyer. How would you assist in preparing my team for this process?

Matt: We usually start with a leadership health check, assessing the team’s readiness for the exit journey. This involves understanding the end game, timeline, key value drivers, and roles. Through candid conversations and surveys, we gauge readiness across several factors, including talent, change management, and cultural implications. This helps create a thoughtful action plan to address areas needing support. For example, if the FP&A team is already stretched, we might suggest hiring or borrowing consultants to manage the increased workload during the exit process.

preparing for an exit - leadership team readiness

Eric: In my experience, one of the biggest challenges is managing the mental readiness for the diligence process. How do you prepare teams for this intense phase?

Matt: It’s essential to prepare not only for the business aspects but also for the emotional components. The diligence process is thorough, challenging every aspect of the business, which can lead to high tensions, especially for founders with significant net worth tied up in the deal. Emotional preparation involves being ready to face scrutiny and criticism constructively. Starting these efforts early, ideally from the day the asset is bought, lays a strong foundation for the eventual exit.

Eric: As we consider exiting to a private equity firm, how can I identify the critical roles for the next phase of value creation?

Matt: Identifying critical roles is highly specific to your situation and value creation plan. It’s essential to unpack your investment thesis and value creation plan to pinpoint the key drivers. Whether it’s a technology play requiring a strong CIO/CTO or a go-to-market strategy needing a top CRO, understanding these priorities upfront is crucial. Sometimes, the most critical role could be a CHRO who drives change management and talent assimilation.

preparing for an exit - emotional and strategic preparation for diligence

Eric: How do you manage changes at critical leadership levels without disrupting the value creation journey?

Matt:

Honest and candid evaluations are essential to determine current capabilities and future needs. Tough decisions must be made decisively and empathetically. Successful organizations make these calls with clarity, ensuring that the right talent is in place for future growth. Building a pipeline of future leaders involves identifying signs of potential and providing opportunities for them to stretch and grow, ensuring they are ready for future challenges.

Eric: From my conversation with Matt, it is clear to see that the preparation of a leadership team goes beyond mere readiness for the business aspects; it encompasses emotional resilience and strategic foresight.

The insights shared by Matt underscore the importance of a holistic approach to leadership readiness, ultimately setting the stage for sustained growth and success in the competitive landscape of private equity.

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About Ampersand Leadership Group

Ampersand Leadership Group supports private equity, CEOs, and Boards in selecting, developing, and aligning top talent to drive growth and investor returns.

Connect with Ampersand to learn more:

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About Bespoke Partners

Bespoke Partners is the largest recruiting firm solely focused on software and SaaS companies, and we specialize in firms backed by private equity sponsors. Bespoke Partners can help companies seize emerging opportunities by staying ahead in the software and SaaS leadership market.

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Author:
Eric Walczykowski
Chief Executive Officer

Eric is passionate about building high-performing teams that value doing their best, working together, overcoming adversity and learning.

As a proven growth executive, Eric has served as CEO, President, Board Member, Investor and Advisor for technology companies that achieved over $4.5B in successful exits.

Eric brings to Bespoke Partners significant professional services experience from Deloitte and Andersen, as well as the high-growth client executive perspective for private equity-backed technology companies.

Eric earned an MBA from the Kellogg School of Management at Northwestern University and a BS in Business from Fresno State University.

Outside of work, Eric enjoys spending time with family, coaching baseball, travel, attending live events and sipping good wine.

Featuring:
Matt Richburg
Managing Partner
Ampersand Leadership Group

About Matt

Ampersand Leadership Group supports private equity, CEOs, and Boards in selecting, developing, and aligning top talent to drive growth and investor returns. Matt collaborates with clients that span the globe and invest across a rich variety of industries including financial & professional services, healthcare, technology, media, consumer goods, chemicals & industrials, and education.

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