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GETTING PE PORTCO LEADERSHIP RIGHT Chief Executive assembled veteran CEOs, investors and leadership pros to get a clear view of what it takes to steer a portfolio company today. Some takeaways. BY JENNIFER PELLET VIRTUALLY EVERY INDUSTRY has been impacted by Covid, and the private equity sector is no different. From exit time horizons and operating practices to buying opportunities and availability of capital, the pandemic brought both challenges and opportunities to PEbacked companies—some of which are still unfolding. For companies in industries less negatively impacted by Covid, for example, valuations have held steady thus far but are likely to dip when the capital markets tighten. “It’s hard to believe, but the valuations that we’ve seen in the public markets are still relatively robust overall,” says David Rubenstein, co-founder and co-executive chairman of The Carlyle Group. “I think we have to recognize that there’s a little bit of a, well, I won’t use the word bubble, but if there was a correction in the public markets at some point over the next year or so of 10% or 15%, I wouldn’t be shocked.” In the meantime, the boom in SPAC activity that began in 2020 has the potential to continue. “I think that every company is being courted by multiple SPACs these days, which means that the terms are going to be strong for the owners of those assets selling into SPACS,” says Bob McCooey, SVP and head of capital markets at Nasdaq, who adds that appreciation is swelling for the method’s speed and greater flexibility. “It has felt like the new way where companies are going to go to market. There’s been an argument, ‘With [SPACs] we can just put the stock into the market and let the market
determine what the price is. And we, as the owners, can sell shares on day one or day five, or whenever we want to, we’re not subject to lockup periods. We don’t want a big increase in our stock on day one and not be able to reap the benefits.’” Another area of uncertainty is how the sudden embrace of a mostly or entirely remote workforce will play out over time. Many expect a significant number of workers to remain remote, or for a hybrid model of remote and in-person workdays to become the norm. It’s a shift that will make engaging employees and aligning them around investors’ growth goals more challenging—and it’s coming at a time when human capital management is more critical than ever, notes Ted Bililies, managing director and chief talent officer of AlixPartners. “For many years, private equity really looked to financial re-engineering to create value and, shortly after that, operational improvement,” he says. “Human capital is the next horizon, maybe the last horizon, to creating value.” Today’s portfolio CEOs will need to create an inspiring vision, set a strong personal example and lead with authenticity to succeed, says Bililies. “You’ve got to articulate the purpose and the values of the organization, you’ve got to demonstrate strong emotional intelligence, and you’ve got to be able to hold people accountable and help them develop.”
ACING BUYOUT LEADERSHIP A pioneer of the private equity revolution, The Carlyle Group’s David Rubenstein (at left) has worked with hundreds of portfolio CEOs and written two books on leadership. His advice for leaders coming in as CEO after a buyout:
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Make a difference fast—and keep it going. “You’re not going to change the company dramatically in the first 100 days, but you can show that you’re serious about making improvements. And it’s even more important what you do in the first 1,000 days, because if you don’t make
