Private equity firms examine every line of the financial model and pressure-test the commercial thesis from multiple angles. However, an assessment of the leadership team is often the least rigorous part of diligence. Deal teams will spend weeks validating a revenue forecast and only a matter of hours forming a view on the CEO expected to deliver it, according to a recent report from ECA Partners’ Samantha Martinez. “The consequence shows up after close,” the study explained. “A thesis that depended on a management team’s ability to move fast stalls because the team was never built for the pace PE demands. By the time the gap gets discovered, options are narrow and the clock has already begun.”

“Leadership is a pre-close risk workstream, not a post-close discovery,” the ECA Partners report said. “The firms that treat management due diligence with the same rigor they apply to financial and commercial diligence de-risk execution before they own the asset, and they walk into day one with a talent plan already built.” READ MORE