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Private equity-backed boards need nuance, and adding expert senior executives can support founders while helping to build a better business.
Presented by Allura Partners
Private equity-supported businesses deliberately construct value-focused and hands-on boards. Bringing seasoned chairs to the table is essential to ensure a well-run board with strong governance and high-impact outcomes, says Allura Partners managing director Andrew Smith. This, plus strong non-executive director appointments, gives significant value to the business as it can add that managerial experience without paying an executive-level salary.
“These board members often bring new ideas based on lived experience of how to navigate or find solutions to issues that arise,” he says.
Founder directors
With many deals in the founder-led landscape, it’s important to understand the founder’s ambitions, the reason for partnering with an investor and what they want the partnership to achieve. “Founders transitioning out of the business entirely creates an environment for the incoming CEO, along with the board, that requires high levels of emotional intelligence, excellent communication and clarity on what these changes mean for the team, customers and strategy,” says Smith.
For founders looking to move out of the day-to-day running of the business, but onto the board and remaining involved, the same points are valid. However, it’s also essential to ensuring their role moving forward is clear – in transition and on the board – to provide maximum value, stability and success in the new structure. It’s important the business sees the founder(s) are supportive of the structural changes and the new leadership.
“Private equity-backed businesses are looking for board members who can fill knowledge gaps, hit the ground running and add value across the business,” says Smith. “There is stiff competition for paid board work, so clear evidence or a track record of adding value to an organisation makes you an attractive addition.”
These aspiring directors will come from different sectors, have certain networks and relationships, and show ways they can help grow the business.
“In a team working together towards a strategic goal, on a mission, there’s no room for passengers,” says Smith.
Sell or list
Many private equity-backed boards plan for a dual-track exit from day one. Will they sell to another company or list on a stock exchange? Chair and non-executive appointments in private equity are therefore often weighted towards industry experts who understand the regulatory landscape enough to drive the credibility that makes for a clean, compelling and well-priced exit transaction.
“By being part of a growth journey and gaining experience in an exit process, you add a desirable string to your bow,” says Smith.
Learn more about executive search for private equity-backed/high-growth businesses.
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