Key Takeaways
- • Private-equity firms are holding portfolio companies beyond the typical three- to five-year window, according to WSJ Pro Private Equity reporting by Laura Kreutzer, and that longer horizon is driving changes in CEO leadership.
- • Russell Reynolds Associates notes that portfolio CFO turnover is already twice as high as public company CFO turnover, with an average of two CFOs per buyout deal and an average tenure of about 2.5 years against a five-year average holding period.
- • PitchBook data shows 8,074 of the 33,853 PE-backed companies globally at the end of September, nearly 24%, have been held for at least seven years.
- • Dan Hawkins, founder and CEO of Summit Leadership Partners, says PE firms are placing more focus on the CEO as portfolio company needs change.
Summary
Private-equity firms are holding portfolio companies longer than the traditional three- to five-year window, and this is producing more leadership turnover in the C-suite. According to WSJ Pro Private Equity, reported by Laura Kreutzer, CEOs hired under the earlier playbook may no longer fit as business needs evolve over longer holding periods. Older models built on financial engineering and rapid growth strategies are no longer sufficient on their own.
Dan Hawkins, founder and chief executive of leadership advisory firm Summit Leadership Partners, told WSJ that PE firms are "really starting to change what their [portfolio company] needs are, so there's a lot more focus on the CEO." The extended holding periods may also spill over to other executives, including CFOs.
Russell Reynolds Associates has previously found that CFO turnover at portfolio companies is already twice as high as at public companies. Its figures indicate an average of two CFOs per buyout deal, with a five-year average holding period producing an average CFO tenure of 2.5 years.
PitchBook data cited in the article shows that of 33,853 PE-backed companies globally at the end of September, 8,074, or nearly 24%, have been held for at least seven years. Many PE firms have historically aimed to hold investments for three to five years, so the current duration marks a notable departure from that norm.
Dan Hawkins, founder and chief executive of leadership advisory firm Summit Leadership Partners, told WSJ that PE firms are "really starting to change what their [portfolio company] needs are, so there's a lot more focus on the CEO." The extended holding periods may also spill over to other executives, including CFOs.
Russell Reynolds Associates has previously found that CFO turnover at portfolio companies is already twice as high as at public companies. Its figures indicate an average of two CFOs per buyout deal, with a five-year average holding period producing an average CFO tenure of 2.5 years.
PitchBook data cited in the article shows that of 33,853 PE-backed companies globally at the end of September, 8,074, or nearly 24%, have been held for at least seven years. Many PE firms have historically aimed to hold investments for three to five years, so the current duration marks a notable departure from that norm.
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