How Human Capital Transforms Private Equity

A surprising insight from recent PE data: Firms focusing on human capital first Are seeing 2x better integration results — Than those leading with financial engineering. Here's what people-first PE transformation looks like: 1. Cultural Integration Priority When acquiring companies: - Map cultural DNA early - Identify integration barriers - Build trust foundations 2. Leadership Capability Building When developing talent: - Enhance strategic thinking - Build transformation skills - Create growth mindsets 3. Talent Retention Strategy When keeping key talent: - Create compelling futures - Offer growth opportunities - Enable quick wins 4. Employee Engagement When driving transformation: - Share the value story - Enable decision-making - Reward initiative 5. Knowledge Transfer When combining strengths: - Share best practices - Enable innovation - Build new capabilities Financial engineering creates value. But people deliver it and the multiple lies in the human engagement. Leading a transformation? DM me "TRANSFORM" to explore human-centered integration approaches.

🌟 PE’s new MVP: Most Valuable People. EY’s latest report puts it plainly – the next big gains in private equity will come from the talent side of the equation. Quick digest: 🤸 Agile talent = agile company: Firms are auditing skills at acquisition like never before. Do we have the data scientists to digitize? The operators to streamline costs? If not, they bring them in fast. 📚 Upskill to unlock value: Rather than viewing employees as fixed costs, progressive PE owners treat them as assets to invest in. Training on new systems, leadership coaching for managers – it’s all on the table to boost performance. 🔄 Cross-portfolio “dream teams”: Some PE funds are even rotating expert talent across their portfolio – a crack team for pricing, a SWAT team for supply chain – spreading know-how where it’s needed most. 🙌 Retention is a strategy: With deals taking longer to pan out, keeping your best people engaged and rewarded isn’t touchy-feely stuff – it’s essential to hitting the business plan. Churned executives = delayed exits. PE used to be about financial engineering. The future is about people engineering – building the right team, culture, and capabilities to transform good companies into great ones. https://lnkd.in/gmCUxZaN

The Key to Success in Current PE Investments: Operational Effectiveness In today's market, Private Equity (PE) investments are facing unique challenges and opportunities. To make these investments more successful, the question arises: What is the current driving force behind success—financial engineering or operational effectiveness? While financial engineering has its place, it is operational effectiveness that truly stands out in the current market. Why Operational Effectiveness Matters Focus on Financial Metrics Alone Is Insufficient: While traditional PE firms are focused on hiring executives with proven success on improving metrics like EBITDA, revenue growth, and cost-cutting, these are not the sole factors of success, and the wrong hires can be made (ie: resulting in turnover, poor talent development). Talent Development and Management: A vital but often overlooked aspect of operational effectiveness is talent development and management. Talent is the lifeblood of any organization, and the ability to attract, develop, and retain professionals is crucial. A strong team is essential for realizing the full potential of an investment. Especially when the investment timeframe is longer. Leadership Alignment: Success in PE-backed businesses is closely tied to the alignment between executives and sponsors. This starts with recruitment. The executives and sponsors must agree on the profile targeted before the search even begins. Once in the door, this alignment is not limited to financial targets but extends to shared values, goals, and strategic vision. Investment in Talent Throughout the Organization: It's not only the top executives but also the doers and managers who significantly impact the success of an investment. They are on the front lines, implementing strategies and driving day-to-day operations. Focusing on their development and effectiveness is a fundamental aspect of operational excellence. Collaboration with PE Partners As we collaborate with our PE partners, we find that discussions on leadership styles, executive alignment, and workforce planning are central to achieving operational effectiveness. We provide valuable insights and consulting services that span the entire talent spectrum within an organization. Our emphasis is on nurturing a strong and capable workforce, from the top-level executives to the managers and doers on the ground. In conclusion, we are seeing a lot more focus on talent operations and recruiting process improvement within PE firms. Most of our clients are portcos who are not ready for an in-house talent team, but have a focus on improving recruiting and talent operations, and have a focus on not only hiring a high quality executive but also a high performing team to support them. #privateequity #hiring #perecruiting

Private Equity’s growing interest in mid-sized Professional Services firms is reshaping leadership incentives—but not without challenges. Nearly half of senior leaders we spoke with (47%) report uncertainty about their long-term financial upside post-acquisition, a concern that can lead to disengagement and turnover. Unlike the rigid structures of traditional Partnerships, mid-sized firms often offer senior leaders equity participation with greater flexibility. Compensation typically blends fixed salaries, profit-sharing, and performance-based bonuses, with a stronger emphasis on performance incentives rather than broad profit sharing. Some firms have already started adopting Private Equity-style compensation structures, linking bonuses to billable hours, revenue origination, or overall profitability. This shift makes the transition to PE ownership more seamless, aligning leadership incentives with investor priorities and emphasizing measurable, results-driven performance. However, firms that still rely on legacy equity participation models may struggle with the transition. When leaders perceive a reduction in financial upside or the dilution of their equity stakes, they often feel disconnected from the firm’s new direction. If left unaddressed, this sense of loss can lead to disengagement and eventual turnover—undermining the long-term success of the acquisition. The market is clearly moving toward performance-driven, incentive-led compensation, a model that has been effective in many fast-growing firms. However, retaining top talent requires more than just financial incentives. The most successful firms strike a balance between aligning leadership rewards with Private Equity’s focus on measurable returns while also fostering a culture that keeps Partners engaged. Beyond structuring compensation through equity rollovers, long-term performance incentives, or revised profit-sharing models, these firms actively cultivate a sense of ownership and purpose among their senior leaders. A culture where Partners feel valued, empowered, and aligned with the firm’s strategic vision are proving to be just as critical as financial upside. Firms that prioritize leadership engagement, provide transparency on value creation, and maintain a collaborative, entrepreneurial environment will be far better positioned to drive sustainable growth and long-term success. Our recent report, Talent at Risk, explores these trends in greater detail. To gain access, follow this link: https://lnkd.in/e6uRdC4U

🔎 What actually sets standout LPs, VCs, and Private Equity managers apart in today’s market? The latest conversation with Patrick Miller from J.P. Morgan Asset Management offered some grounded insights—here’s what’s shaping investment strategy in 2025: 🤝 Long-Term Partnerships - Venture capital isn’t about trading in and out. The most effective LPs and GPs focus on stability and building relationships that last through market cycles. Founders like those behind Airbnb and Uber launched in volatile times—steady hands matter. 📈 Institutional Experience - Teams with decades of experience bring perspective and best practices, especially during downturns. Patrick’s team, for example, sits on over 215 boards and has invested across multiple cycles, helping GPs navigate transitions and growth. 🌐 Network & Introductions - It’s not just about capital. The right introductions—to LPs, founders, and industry leaders—can unlock unique opportunities and differentiated access. A strong network is often the edge in winning top deals. ⚖️ Fund Size & Ownership - There’s nuance in fund structure: smaller funds can deliver outsized returns through ownership concentration, while larger funds may rely on a higher hit rate. Both models have their place, but understanding the math behind them is crucial. 🤖 AI’s Impact - 71% of Q1 venture dollars went to AI. Early-stage AI startups are scaling faster and more efficiently, sometimes reaching profitability before raising later rounds. This shift has second-order effects on the entire capital stack—something every investor should watch. 👥 People Drive Performance - In private equity, sector specialists and proven operators are the key to value creation. The right person can take a company from $10M to $100M+. In both VC and PE, it’s about backing teams with differentiated expertise, networks, or strategies. 🧑💼 Mentorship & Initiative - The best advice for anyone in this space? Find a mentor, show initiative, and create value before you ask for anything in return. Building genuine relationships and returning value on someone’s time is what creates a lasting “viral loop” of opportunity. Curious how these trends will shape the next decade of VC & Private Equity? Share your comments below. #VentureCapital #LPs #Startups #AssetManagement #PrivateEquity #VCs #Investing Link to Podcast in Comments Below 👇

Lately, I’ve noticed a recurring theme in news headlines – lots of CEO ousters and M&A announcements. And as this Fortune article notes, Goldman Sachs expects business mergers could increase by 20% in 2025.    So perhaps this is a good time to remember: most M&A transactions don’t succeed.    In fact, surveys estimate 70-90% fail to meet objectives.    But it doesn’t have to be this way.   I’ve been involved in too many of these transactions to list. And while we’re getting better at understanding the obstacles to being successful, one piece is still missing in broader due diligence and planning efforts – the value of people. Not in the theoretical sense of what’s a person worth. In the actual sense of, who are the people that will create value and grow the combined business? Do they have the necessary skills? Do we need to change the organization to ensure they succeed? Do they need more resources?    You get the point. There’s a lot of work that needs to happen focused on the key people responsible to deliver objectives. Yet most pre-M&A work is spent on financial, legal and regulatory issues. And most post-M&A work is spent on appointing new CEOs, CFOs, P&L leaders, communicating to new employees and blending policies and benefits. All important, but incomplete. This is especially true if it’s a private equity buyer and they want to sell the company in three years.    PE firms and business strategists need a new playbook, one that is forward-looking and answers the question: Do we have enough talent at the challenge? We’ve done a lot of work on this issue to improve success rates for clients both from a business and individual perspective. Read what I shared in this IMD article.    🔗 https://lnkd.in/eChsgDAF   #MergersandAcquisitions #privateequity #acquisitions #humancapital