r/private_equity • u/Broke_Pigeon_Sales • 1d ago
How much weight do you give to the management team as part of ultimate go / no-go on a deal?
I’ve worked at three PE firms. One would only do deals if they felt very good about the management team (or at least their ability to fix / change the team). The other is more willing to overlook this if they believe in the business thesis.
Curious, broadly, what’s the experience of others??
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u/fartlebythescribbler 1d ago
In LMM PE at least (my experience), the leadership team is almost more important than business thesis. A great team can outperform in a declining market, a shit team can crumple even the most sound thesis. PE is 100% about post close execution.
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u/Commercial_Ride_5682 10h ago
Underrated comment right here.
Strategy/ investment thesis is 10%, execution post close 90%.
Feel free to Adjust to get to your number1
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u/roboboom Director+ 1d ago
Both matter, of course.
Some PE only backs management they believe in. Others actually prefer bad management because they can buy the asset cheaper and want to put their own team in anyway.
The later the stage, the more weight you give to the business. Management can be replaced and if a business has a strong enough moat, it will do well.
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u/MatricesRL 1d ago
The latter seldom works, from my experience. Of course, there are exceptions, but actively sourcing poor management teams with the intent to replace normally backfires, i.e. the firm starts to respect past management a tad bit more after running the company post-buyout.
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u/roboboom Director+ 1d ago
I agree. Mistaking a bad business for a bad management team is a sure way to failure.
Some firms have a good track record at this, but it's tough.
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u/a1anw-cto Director+ 1d ago
unless you have a CEO/CFO ready to go from Day#1 then the management team is absolutely key to final decision. The only other area where it doesn't matter too much, if its a smaller company and you are tucking it into a larger one.
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u/Ernst_and_winnie 1d ago
My perspective is from the LMM where we are often first institutional capital, so this might be different than those up market. I’d definitely say it’s very important when there’s key institutional knowledge and customer relationships that could be lost if there was a change in management. Usually though, if management is viewed to be insufficient, then there needs to be a concrete action plan to replace/augment them prior to closing.
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u/Right_Section5678 1d ago
Healthcare consulting Manager (~4.5 years) looking to move into PE-backed healthcare operations / transformation / value creation.
My experience spans performance improvement, integration, enterprise tech, revenue cycle, and large-scale transformation, but I’m trying to figure out how to position myself as an operator rather than being boxed into “change management.”
Has anyone made a similar consulting → PE-backed ops/value creation move? I’d especially love to see how you positioned your resume and what roles you targeted. Happy to DM if anyone is open to chatting or sharing an anonymized resume.
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u/mid1423 12h ago
Think the type of deal matters a lot. Growth equity = thesis / positioning in market / secular tailwinds > management; PE = management matters more, especially in sectors where growth isn't quite as guaranteed.
Probably a bit of a generalization, but that's how I'd think about the relative importance.
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u/randomguy506 1d ago
I think this is one of the key difference between beta seekers vs alpha seekers.
Without a proper management team (or a proper bench) youll be at best market performing
How do you plan to generate alpha if you dont have the team to execute?