Unlocking Success: Mastering Post-Close Succession Planning to Seize Opportunities

Nov 13, 2023

Authored By Jenny Gray

In the world of Private Equity, success often hinges on seizing opportunities with precision and speed. The best leaders understand the importance of strategic decision-making in the quest for high returns.

Today, we delve into an essential aspect of PE strategy – post-close succession planning and founder transition. In this blog post, we will explore the critical factors that determine whether a founder transition is needed, the value of proactive planning, and the role of Bespoke’s Strategic Resource Group (SRG) in understanding the executive talent landscape.

Is the Founder Transition Needed?

The first step in post-close succession planning is to assess whether a founder transition is necessary. Several key considerations come into play:

Private Equity Experience: Has the founder worked under private equity sponsorship previously? Not having this experience is not a deal-breaker but a founder who has worked with private equity sponsors successfully before may be better positioned to continue in the leadership role.
Feedback and Overconfidence: Is the founder open to feedback and capable of managing overconfidence? An effective leader in the private equity context requires humility and adaptability, traits that can make or break the process of achieving growth and scaling.
Operational Proficiency: Can the founder identify and rectify operational deficiencies within the company? Addressing these issues early on can lead to significant improvements in profitability, a key part of the value creation plan for most private equity sponsors.
Change Management: Is the founder open to change, and do they have experience managing through it? Leaders of PE backed companies need to demonstrate quick adaptation to market shifts, making change management skills crucial.
Emotional Intelligence (EQ) and Communication: EQ and effective communication are essential for a smooth transition. A founder’s ability to navigate relationships and foster a positive culture can impact the success of the company’s growth and value creation plans.
Operational Rigor and Data-Driven Approach: A data-driven approach and operational rigor are vital for value creation. The founder’s commitment and willingness to focus on these principles can shape the transition’s outcome.

Pre-Deal vs. Post-Deal Value Creation

Comparing a well-prepared company to a premium-built house, it becomes evident that the former offers immediate value to new ownership, much like a turnkey investment property. On the other hand, a “fixer-upper” company might come at a reduced price, but requires additional investment, vision, and time to reach its full potential. To maximize profitability within a three-to-five-year timeframe, it is best to make decisions around founder transitions and company “upgrades” as early as possible. By doing so, you enhance the company’s operational readiness early, giving more runway for value creation. If the incoming CEO has prior experience with similar plays, they can expedite the process, allowing you to realize returns sooner. Proactive planning prevents the inheritance of cultural or operational issues that can hinder profitability. This can also be a recipe for a smooth founder transition as there is more time for the founder to get comfortable handing over the keys to the castle.

SRG to Get Pulse of Landscape

With talent being the greatest value creating lever, having access to actionable data on upcoming candidates is paramount. Our Strategic Resource Group (SRG) illustrates not only the market landscape, but a perspective on potential quality of candidate and time to fill. We have also seen clients use SRG to bring on transition advisors or deal advisors who can often slide into the CEO seat post transition without a full-blown search. Unlike relying on intuition or flying by the seat of one’s pants, data-driven decision-making minimizes risks and maximizes profits. By partnering with SRG, you gain access to valuable insights about the market landscape, emerging trends, and potential opportunities. This data empowers you to make informed decisions, identify high-reward investments, and mitigate risks effectively. In the ever-evolving landscape of PE , it’s clear that proactive planning and data-driven decision-making are your allies. By partnering with SRG and embracing a well-prepared approach, you can achieve your mission of setting a new benchmark in investment profitability. Remember, meticulous planning leads to audacious success.

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Author:
Jenny Gray
SVP, CEO Practice

Based in San Diego, Jenny Gray is a Senior Vice President within our CEO & Board Practice. Jenny specializes in leading CEO & Board searches for our clients across growth equity to buyout with portfolio companies in B2B SaaS. She has also specialized in Go-to-Market and Chief Customer Officer searches. She has led over 50 successful searches since she joined Bespoke in 2019 and has placed executives across multiple portfolio companies including Thoma Bravo, Insight Partners, Clearlake Capital, K1, PSG and others.

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