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Managing the People Side of a Private Equity Transaction

April 26, 2019 by Doug Cunningham

So, you just completed a private equity transaction – congratulations! Celebrate your accomplishment, but don’t forget that, eventually, the champagne will run dry, and the last of the congratulatory emails and calls will trickle in. The deal represents a monumental achievement for you and your team, both personally and professionally. Now it’s time to pivot as a leader.

What happens next? There are inevitably going to be changes on the horizon for you and your organization. In order to manage this change, you’ll likely leverage your new private equity partner and your network of founders and CEOs who have been through similar transactions to better understand the situation and develop a strategy to succeed in the new norm. While no two “deals” are exactly the same, it’s private equity, so there are plenty of examples to follow.

One consistent theme we’ve heard from our private equity-backed clients is this: there will be a plethora of competing priorities for you and your leadership team as you manage through the ownership transition.

Here are a few tips to keep in mind:

Communication is crucial.
The ultimate question that each team member wants the answer to is: “How will this impact me?”. Giving people clarity on where they fit within the organization moving forward is big. Perhaps equally important is countering the perception that the corporate culture that everyone has worked so hard to develop and maintain will inevitably change for the worse under the new ownership structure. Chances are, your corporate values and culture will continue to be driven by leadership and the individuals on your team and not your new private equity partner. It will be important to reiterate this message in your communication plan and develop and implement a process that will highlight the culture throughout and beyond the transition.

Prepare your management team for change.
While the managers in your organization are excited for the new structure, be aware that the lion’s share of these “A” players have not led teams through a similar transition. They will be looking to you and the executive team for the tools and the messaging necessary to lead their teams. A consistent and effective top-down messaging plan that allows them to keep the organization’s mission/vision/values and purpose top of mind throughout the transition is vital. But they will also need assistance to effectively navigate through the inevitable turnover. Provide them with the support and tools they will need to recruit and retain new talent. And sometimes they just need someone to talk to!

In addition to the communication plan, consider the following priorities for managing the impact of the transition:

    • Take the time to work closely with your private equity partners in setting and agreeing on expectations for the timing, frequency and content of financial and operational results. This will eliminate or minimize ad hoc requests that will inevitably disrupt normal operations.
    • Agree early on with the new ownership group just how much unfettered access they will have to team members to mitigate the disruption that such meetings will have on the organization.

Finally, confidentiality during the negotiation and closing phases of the transaction presents obvious challenges with respect to just how much you can say and do to prepare the leaders in your organization to effectively manage their teams through the transition. Hindsight will likely reveal that this phase also presented you with the opportunity to do more.  While you may not be able to address all of their issues and concerns, at a minimum, you should make it a priority during this phase to offer periodic platforms, either individually or in a group setting, for your leadership team to ask questions and express their concerns.

Change is never easy and there will always be those who don’t handle it well, but put these tips into practice and your transition will be set up for success. We hope you find these tips helpful for managing change after a private equity transaction and wish you all the success that’s sure to come with it.

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