The most successful private equity exits are achieved by companies which change their leadership teams at least once during the investment cycle, according to the first Drax Leadership Insights report.
Making the changes early rather than later in the private equity cycle is particularly likely to improve the level of success, our report finds.
The Drax Leadership Insights Report 2017 reveals that 68% of the firms achieving the best exits in 2016/17 changed their Chief Financial Officer at least once during the PE cycle, with the best performing firms making the changes on average 19 months into the investment cycle.
It also reveals that 37% of the firms achieving the best private equity exits changed their Chief Executive at least once, making the change on average 13 months into the investment cycle.
Graham Roadnight, Drax Managing Partner, said: “Our findings challenge the conventional view that leadership teams should be left alone unless they show signs of coming unstuck. Our analysis shows that the most successful exits are achieved by companies which change their leadership teams, and particularly by those firms which change their teams early on in the PE cycle. This report shows that firms and their private equity investors should not be afraid of making changes to the management team as it can significantly improve the chances of a successful exit.”
The Drax Leadership Insights Report used its proprietary drxDATA platform to analyse the performance of the 450 private-equity backed firms which achieved a successful exit in the UK in the financial year 2016-17.
The report also found:
> The collective experience of a leadership team is a strong indicator of future exit success, with the most successful exits achieved by teams which had collectively done nine previous transactions and had 21 years of PE experience.
> Previous private equity experience is a strong indicator of future exit success for CFOs and Chairs, although previous sector experience is a more important indicator of future exit success for CEOs.
You can read the full report below or click here to download.