In Value Creation, Leadership Matters

As a private equity (PE) professional, you know value creation underpins successful investments. While financial engineering and market positioning are essential, leadership is the catalyst that turns strategy into action. Without strong, adaptable leaders, even the best-laid plans can fall short. In fact, it is often said that successful investors would prefer to put an average strategy in the hands of an excellent leadership team rather than the other way around, which underlines how important it is to make sure your leadership team is fit for purpose. In the blink of an eye, value can be destroyed when the wrong leadership is left in place. In PE-backed portfolio companies, leadership selection plays a pivotal role in the success of an investment. While much attention is given to selecting the right CEO and chief financial officer (CFO), the true catalyst for value creation often lies in building a robust and well-rounded executive team. This team should include leaders with complementary skills that collectively advance the PE firm’s investment thesis. Selecting not only the right CEO and CFO but also surrounding them with functional expertise tailored to the company’s strategic goals is essential for successful transformation, growth, and long-term value creation.

Why Leadership is the Key to PE Success

You invest in companies to enhance value and drive returns. But the quality of leadership within your portfolio companies ultimately determines whether those value-creation goals are met. Strong leaders build high-performing teams, align strategy with execution, and create a culture of innovation and resilience. Yet research shows that 82 percent of managers lack the necessary leadership talent, creating roadblocks to performance and growth.* Without the right leaders in place, portfolio companies struggle to realize their full potential. Leadership and talent management are critical drivers of value in a PE portfolio company. If not handled correctly, they can significantly inhibit value creation or even destroy value. PE firms often rely on the company’s leadership team to execute the value-creation plan. If the management team is ineffective, key strategic initiatives can stall or fail. One common issue is a lack of execution capability—some managers struggle to transition from a founder-led or family-owned culture to a high-performance, PE-backed growth environment. And often, inexperience with PE expectations can be a problem—PE-backed companies demand rapid execution and progress.

*Source: Gallup

Here are some simulated examples of the impact on valuations when expected performance targets are not met in a mid-to-large PE portfolio company:

How a Leadership Consultancy Can Help You Assess and Strengthen Leadership

To maximize returns, you need to ensure the leaders running your portfolio companies are up to the task. As a premier leadership consultancy, RHR specializes in evaluating, developing, and supporting leadership teams to drive business performance. Our tailored solutions help you:

• Assess Leadership Suitability: We provide rigorous evaluations of leadership skills, cultural fit, and adaptability to ensure alignment with your value-creation strategy.
• Develop Leaders for Peak Performance: Our coaching and development programs empower leaders to improve decision-making, enhance team dynamics, and drive operational excellence.
• Optimize Executive Team Effectiveness: Leadership is more than just individual capability—it’s about team alignment. RHR helps you build cohesive, high-performing executive teams that collaborate effectively and execute strategy with precision.

Why PE Firms Choose RHR

The most successful PE firms bring in external leadership consultants such as RHR to unlock leadership potential and accelerate value creation. RHR’s expertise can enable you to:

• Benchmark leadership teams against the required standard to uncover and mitigate risk
• Align executive teams to accelerate business performance
• Strengthen collaboration and trust across leadership teams
• Embed a high performance mindset throughout your organization

Our offerings include:

• Pre-deal leadership assessments – Evaluate executive team potential before investing
• Post-deal leadership coaching – Align management teams with your value-creation objectives
• Succession planning – Ensure leadership continuity for long-term success
• Executive team effectiveness programs – Optimize leadership collaboration and decision-making

Partner with RHR and Get the Right Leaders

For 80 years, RHR has been shaping the world’s top leaders and driving transformative success. Our expertise in PE leadership development ensures your portfolio companies have the right leaders in place to maximize value and drive sustained growth.

–Nick Twyman

Let’s Talk

Connect with RHR today to explore how we can help you unlock leadership potential and accelerate value creation.