The best leadership teams add 20% more growth to a private-equity backed business every year compared to an average leadership team, according to the latest findings by drxDATA, the proprietary data insights platform at Drax, the Leadership Capital firm.
The drxDATA 2019 Leadership Insights Report reveals that the top leadership teams of private-equity backed businesses dramatically outperform their competitors over the space of a single year, resulting in the delivery of significant additional value throughout an investment hold period.
The analysis found that an Upper Quartile team will deliver 20% more growth per year and 126% more growth over a typical investment hold period than an average team. However a Lower Quartile team will deliver 8% less growth per year and 34% less growth over a typical investment hold period.
The findings by drxDATA show clearly that choosing the right leadership team for a private-equity backed business has a significant impact on the shareholder value created within that business over the hold period.
The key differentiators between the best and worst teams were situational experience of growing businesses, which the best teams will have, and domain experience of working in a particular sector, which the worst performing teams will have.
drxDATA analysed the performance of all the 252 private-equity backed firms with an equity cheque above £5 million which achieved a successful exit in the UK in the financial year 2018/19. The best performing exits were defined as those placed in the top 25% of all exits by growth investment.
The survey used the drxDATA Success Propensity Model to assess the performance of leadership teams in terms of situational, domain, functional and behavioural experience.
Samuel Robberts, Head of drxDATA, said: “Our findings show clearly that it is the leadership team of a business that determines the ultimate success of that business. This means that it is critically important to have the right team in place for the job and to support them throughout the investment life-cycle as they pursue value creation strategies and maximise the opportunity for growth."
"Building a well-rounded team, with complimentary experiences and behaviours, is crucial to developing an efficient business that can accelerate to success. There is no such thing as a guaranteed winner in Private Equity, but with the right insights, such as those provided by drxDATA, it is possible to stack the odds in your favour.”
You can read the full report here.
For more information contact:
Head of drxDATA
Tel: 0203 949 9565