The Key to PE Firms and Portfolio Company CEOs Collaborative Success: Trust - Merritt McKenzie
The relationship between a platform company CEO and the company’s private equity (PE) investors can be both fruitful and, if not intentionally managed, challenging. Creating a successful partnership is a complex dance, where everyone needs to know their individual roles and expectations, while making sure that all parties are aligned on strategic objectives. Without this alignment, there is potential for the portfolio company’s earnings to be impacted, the efficiency of business growth to be challenged, and any future transactions to fail the desired multiple. Successful outcomes for all parties are much more likely when there is a strong and tight relationship between the PE firm and the CEO.
Attaining a great partnership is dependent upon a solid foundation.
In my research for this article, I interviewed several executives in my network who are experienced board directors, managing partners of PE firms, and CEOs in companies that are backed by PE firms. They generously shared their thoughts, feedback, and advice with me.
These were the most common themes I uncovered:
TRUST, COLLABORATION, and ALIGNMENT OF INTERESTS.
Trust, being one of, if not the most important value. It is the basis of all true relationships and critical for collaborative success.
TRUST: Both the CEO and the PE firm must show mutual respect and confidence in each other. The firm trusts the CEO to execute on the strategic plan, and the CEO trusts that the firm will provide the necessary support and resources to do so. Everyone is committed to follow through on their agreed-upon roles and responsibilities.
But, we must remember:
IT’S A MARATHON, NOT A SPRINT
Obviously, there is no straight-line path to assured success. However, by maintaining the grace and mutual respect you have for your partners with different areas of expertise, as well as aligning on strategic goals and economic incentives, the two invested parties will WIN TOGETHER. As with most business relationships, the key lies in open communication and setting expectations right out of the gate.
As the CEO-PE firm partnership continues to evolve along with market innovations and needs, it’s important to keep in mind:
While partners may come from different backgrounds and bring different skill sets to the table, they have to trust and believe in each other! Couple that with a passion for the vision, the mission, and the strategy, and you’ll create a successful partnership, which in turn yields the best results for the portfolio company.
Merritt McKenzie is a growth strategist in the healthcare field. With 25 years of experience, he strives to build high preforming diverse teams in organizations. Merritt has proven to be successful sustaining high levels of employee morale and bringing teams together through common goals. As the Chief Operating Officer at Phoenix Physical Therapy, he works to create more effective and efficient operational strategies that both benefit the patients and the growth of the organization. A holistic leader, Merritt ensures high standards of patient care, business strategy and execution, team collaboration and organization growth.
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