The financial meltdown of 2008-2009 and the resulting global recession dealt a painful blow to private equity investing, and the industry is still recovering. From 2003 to 2007, when credit was easily accessible, multibillion dollar “megadeals” were commonplace. But in the post- LBO era, characterized by more conservatively capitalized transactions, private equity firms are increasingly focused on middle-market companies with strong management teams and strategies. Tight money is also encouraging the move toward middle-market investing. Companies that are doing well in their niche, but lack the skills to expand into new areas are particularly attractive to the private equity industry.
The private equity industry understands that strong, effective leadership is critical to the success of their investment. As approximately one-third of portfolio company CEOs exit in the first 100 days, and two-thirds are replaced during the first four years, a private equity firm will act assertively to put the right CEO and management team in place.
A large part of the solution for private equity ventures revolves around both building talent within the organization and performing the transformation quickly and deliberately. Private equity acts quickly and decisively because their goal is dramatic, rapid improvement.