There are perks associated with becoming the leader of a company owned by private equity investors, but the move can also derail a CEO's career, according to The Wall Street Journal.
Jeffrey Cohn, managing director of global CEO succession planning at recruiters DHR International, told WSJ that executives need a different mindset to succeed with private equity owners. "If you don't know what you are getting yourself into, it could be the worst experience of your career," he said.
CEOs of private equity-owned companies face strict personal accountability and intense scrutiny. They also have to be able to handle the speedy decisions that private equity firms demand. However, leaders of these companies can also reap significant financial rewards.
"We can often attract highly qualified — even overqualified — CEO candidates to PE-owned companies because the financial rewards are proportionately greater," John Wood, a vice chairman of recruiters Heidrick & Struggles International, told WSJ. "You can make a lot more money running a $1 billion business for private equity owners than a $5 billion company that's publicly traded."
It's tough for some CEOs to decide whether to take the reigns at a private equity-owned business. Ralph de la Torre, MD, initially wasn't sure his strong-willed temperament would suit private equity investors when he became CEO of Boston-based Steward Health Care System. Founded in 2010, the system is owned by private equity firm Cerberus Capital Management.
Dr. de la Torre quickly realized key players at Cerberus wouldn't micromanage as long as he kept them in the loop. During his first year as CEO, Dr. de la Torre, a self-described workaholic, would phone Cerberus executives during early morning hours and at midnight several times a week. Over time, they convinced him to communicate during normal work hours.
Regarding the choice to lead a private equity owned company, Dr. de la Torre told WSJ executives should not join a portfolio company unless they are certain they have the unique leadership skills it takes to achieve the private equity investors' goals.
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