So You Want To Be A Private Equity CEO? Four Questions To Ask Yourself

Running a private equity portfolio company comes with unique challenges and a high level of stress. Before you take the plunge, make sure you’re cut out for the job.

“You agonize because you have loyalty, personal feelings, you like the person. Those are good reasons,” says Lorelli. “But when you’re agonizing, 11 times out of 10, you look back and say, ‘What took me so long?’”

He adds that PE CEOs need to be comfortable making decisions when they only have 50 percent of the information they’d like. “By the time you have 75 percent of the information you need to feel comfortable making the decision, it is too late to make it and one of your competitors has just outdistanced you by getting there first,” he says. “So you have to have a real comfort level with your own instincts. The stomach is really the most wonderful microprocessor.”

At the same time, you can’t unilaterally make big decisions to change direction—you need both input and buy-in from your PE partners. The ability to take that all in, have those conversations quickly and change course is critical. Rash decisions can also be disastrous. “It’s always a fine balance between being impulsive and being in analysis paralysis. That’s the heart of it,” says Faisal Hoque, founder and CEO of Shadoka, which manages a portfolio of technology companies. “You need data but you also need to be a risk taker whereby you can make faster decisions. The ability to balance those two factors—that’s experience.”

How many hats can you wear?

This is an issue primarily for smaller companies, but can apply to any size company in a turnaround. When money is tight and support is minimal, CEOs will look more like scrappy startup founders, juggling multiple roles and managing hundreds of details. That’s where the stereotypical “Type-A” CEO personality comes in handy, says Lorelli. “Actually, we don’t have a Type-A personality—we have a Triple-A personality. We make the Type-As look like Type-Bs.”

Before moving over to PE, Lorelli had twice served as division president at PepsiCo. The switch from consumer beverage giant with plenty of administrative support to CEO of Water-Jel Technologies—where he introduced Lean Manufacturing and oversaw a three-point gross margin improvement and 20-percent working capital reduction—was a very big change, indeed. “When I had to go to Staples to get something, I would walk the halls and yell out ‘Staples! Anyone need anything? I’m going now!’” he recalls. “You really have to be a roll-up-your-sleeves guy.” Those who can work without a staff and who can do double-duty as CEO and COO, will have a better chance of successfully leading a portfolio company to exit. “You have to be able to, in same paragraph, work at 50,000 feet and then fly down in your helicopter and chop hedges,” he says. “Because you’re operating at both altitudes all day long.”

Breier doesn’t want to guess at the chances he’ll still be CEO of Kindred a year from now. But he is optimistic, largely because he believes he chose PE partners who provided both a compelling case for shareholder value and also share Kindred’s values and goals of solving the problems of the aging American population. The pressure might be intense under new private ownership, but Breier argues it can’t be much worse than what public companies face today.

“I always thought looking out three to five years to create shareholder value was in my job description as CEO. But the world of activism and hedge fund-driven ownership has gotten so overblown that it puts a lot of stress on boards and on CEOs like myself to think far more short term than mid- to long-term,” he says. “In this day and age, God forbid you miss a quarter—they’ll take you out back and shoot you.”

Compared with the public company firing squad? Breier figures the devil he doesn’t know might just be the better bet.

More from our July/August issue: Lockheed Martin’s Marillyn Hewson: 2018 CEO Of The Year


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