Key Takeaways
- • Bain's 2021 Global Private Equity Report argues that PE firms often struggle to place the right executives in portfolio company roles quickly enough, and that linking talent decisions explicitly to the value-creation plan (VCP) is the fix.
- • A Bain/Hunt Scanlon survey of 122 PE professionals found 92% said waiting too long on talent issues had caused portfolio company underperformance over the past five years, with almost 70% reporting this in at least half their deals.
- • Only 34% of survey respondents said they link VCP objectives to clear, actionable executive position descriptions, though close to 80% use the VCP to set growth targets.
- • Deal teams view CEO changes as risky: 93% described such a move as risky or highly risky, yet when action is taken it succeeds about 75% of the time, per the survey.
- • Bain recommends defining talent requirements during due diligence, working backward from quantified return objectives, and specifying the experiences, capabilities and motivations each role requires.
Summary
Talent decisions remain one of the most demanding challenges private equity firms face, according to Bain's 2021 Global Private Equity Report. The report cites a packaging company acquired on a revenue-growth thesis, which hired an industry veteran with a strong sales record. His hard-driving, command-and-control style clashed with the company's decentralized, entrepreneurial culture, alienated sales representatives and threatened the deal.
Bain argues that the highest-performing firms link talent decisions rigorously to the explicit requirements of the VCP. They work backward from quantified return objectives to define critical roles, measurable goals and the experiences, capabilities and motivations each executive needs. Bain describes this as a left-brained, analytical process comparable to underwriting other deal elements.
A Bain/Hunt Scanlon survey of 122 PE professionals shows firms recognize that management drives deal success, yet many hesitate to act. Ninety-two percent of respondents said delays on talent issues had caused portfolio company underperformance over the past five years. Although close to 80% use the VCP to set growth targets, only 34% link objectives to actionable executive position descriptions.
Bain cites examples where role clarity mattered. When Berkshire Partners acquired Carter's, it expanded the board with a former Sara Lee CEO experienced in selling to Walmart and added supply chain experts to support the new distribution strategy. When Carlyle acquired Illinois Tool Works' industrial packaging group for $3.2 billion in 2014, creating Signode, it built a global procurement function led by an executive who needed both sourcing expertise and the ability to work within a decentralized organization.
Bain warns that without a precise, mission-driven definition of required talent, firms tend to overweight past experience. Quoting an operating partner at one firm, the report notes that evaluating candidates mainly on IQ and track record misses leadership traits essential in nuanced portfolio situations.
Bain argues that the highest-performing firms link talent decisions rigorously to the explicit requirements of the VCP. They work backward from quantified return objectives to define critical roles, measurable goals and the experiences, capabilities and motivations each executive needs. Bain describes this as a left-brained, analytical process comparable to underwriting other deal elements.
A Bain/Hunt Scanlon survey of 122 PE professionals shows firms recognize that management drives deal success, yet many hesitate to act. Ninety-two percent of respondents said delays on talent issues had caused portfolio company underperformance over the past five years. Although close to 80% use the VCP to set growth targets, only 34% link objectives to actionable executive position descriptions.
Bain cites examples where role clarity mattered. When Berkshire Partners acquired Carter's, it expanded the board with a former Sara Lee CEO experienced in selling to Walmart and added supply chain experts to support the new distribution strategy. When Carlyle acquired Illinois Tool Works' industrial packaging group for $3.2 billion in 2014, creating Signode, it built a global procurement function led by an executive who needed both sourcing expertise and the ability to work within a decentralized organization.
Bain warns that without a precise, mission-driven definition of required talent, firms tend to overweight past experience. Quoting an operating partner at one firm, the report notes that evaluating candidates mainly on IQ and track record misses leadership traits essential in nuanced portfolio situations.
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