For private equity (PE) firms, the initial holding period following an acquisition — a period typically lasting two or three years — is when organizational transformation and change-management efforts kick into high gear. Whether the goal is cutting overhead or improving demand gen, having the right talent on board is crucial to increasing enterprise value. Yet the existing leadership teams at acquired companies are often ill-equipped to navigate large-scale change. In some cases, the most important roles for successful transitions don't exist at these companies today. Let's look at three of them.

chief revenue officer (CRO)

PE firms frequently evaluate acquisition targets in black-and-white terms. Theirs is a buy-to-sell strategy with the goal of maximizing return on invested capital. PE firms are somewhat different from other types of buyers. For example, strategic buyers that operate in an adjacent industry and family offices typically have longer holding periods.

PE firms, on the other hand, must focus on driving immediate bottom-line improvements at acquired companies. And along with value-adding efforts like reducing overhead, identifying new channels for growth is a clear way to do that. In that context, having a highly skilled CRO on hand can be a game changer for a newly acquired business.

Woman sitting on a window sill having a chat with two colleagues.
Woman sitting on a window sill having a chat with two colleagues.

chief marketing officer (CMO)

One area of focus for PE companies in recent years has been acquiring businesses that are undervalued — not on account of neglect or mismanagement, but simply because their potential value isn’t readily apparent. It's a compelling scenario for PE firms, but one that frequently comes with unique challenges, as well.

For starters, the strategy in that case isn't to zero in on cost reductions or other performance improvements during the holding period. Instead, marketing takes center stage. However, developing and implementing an effective, ROI-oriented marketing strategy requires a seasoned marketing leader. You’ll need a CMO with deep experience in both digital media strategy and demand generation to achieve the desired outcome.  

VP of HR or chief people officer

M&A activity can put significant strain on your workforce and create organizational instability. After all, job loss — driven by the need to eliminate redundancy and operate with greater efficiency — often accompanies PE deals. And that’s why progressive PE firms today seek to mitigate talent-related issues from the outset in order to ensure a successful outcome.

Common talent-related issues include:

  • feelings of uncertainty among retained employees about the future of the organization and their own job security
  • the need for cultural change — in fact, one study found that "changing organizational culture" was the number-one reason employees leave following M&A activity

Overcoming these challenges is among the most important hurdles for acquired companies to clear. For starters, you'll need to have robust communication and change management plans in place, with buy-in and alignment between supervisors and managers across functions. And when these companies don't have senior HR leadership on hand — ideally someone with previous M&A experience — they tend to struggle as soon as execution gets underway.

key takeaways

There's usually a gap between where a company stands at the time of the acquisition and where that company needs to be by the time of a sale. That's simply part of the game plan for PE firms. But without the right leadership on board, like the three roles outlined in this article, closing that gap becomes far more challenging.

Fortunately, the talent experts at Tatum can help. We’re the trusted experts when it comes to talent solutions for leading portfolio companies. We understand the unique demands of investor-owned companies — and we have a long track record of successful partnerships with private equity (PE) firms to back it up.

Find out why we were recently named one of America's Best Executive Recruiting Firms by Forbes. Connect with Tatum below today.

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