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PE Portfolio Company

Career description

What is it?

The typical company owned by a PE fund is a mid size or large company with typically operations in several countries.

A career in a portfolio company owned by a Private Equity fund can take, not dissimilarly from a Corporate career, various avenues- the three main functions where future CEOs develop their core skills are operations, commercial and finance- and usually they also gain experience in other functions albeit, very rarely PE funds promote a CEO from the company’s ranks (internal candidates).

PE is used to take significant financial risk (high leverage) but is very risk averse in terms of Management. Typically they buy companies with strong CEOs and they recruit externally only when there are performance issues (and in those cases they look for sitting or former CEOs with preferably experience in the same sector the acquired company belongs to as well as former PE experience).

While PE funds tend to own companies for a 5 years period, it is the norm that CEOs continue in their role (and reinvest part of their sweet equity proceeds) under new ownership (especially if the sale is to another PE fund).

Working hours are usually longer than in corporate careers, with the average week being between 50-70 hours.

The competition for advancement within the portfolio company is variable, cash compensation is average (usually lower than in equivalent roles in corporates but may be higher due to the equity component, typically limited to senior executives only), and the work tends to be more dynamic than in the Corporate world (remember the 5 years agenda of a PE owner).

Managing short term profit enhancement and NWC initiatives is a core aspect of a PE portfolio company career.

Those aiming at the top of the company ladder will need to factor in less frequent changes in function, role than in a Corporate environment while assignments in foreign countries are more rare than in Corporates.

Why interesting?

Companies end up in the hands of Private Equity funds as a results of Corporate carve-outs, distressed situations, or are already in the hands of a PE fund and are sold in a secondary deal to another PE fund.

People are attracted to a PE portfolio company career for the dynamism and speed of change, especially at senior executive level (not too much changes below the “Bronze” level).

Time horizon is shorter than in a typical Corporate and the focus on the balance sheet is far greater across the board.

As a result of that shorter term focus, there a tendency to have more cash strapped budgets and a more limited number of learning opportunities- structured formal training programs, on-the job training, rotation programs.

The typical management approach is more pragmatic than in a corporate environment with far less politics and a closer link between accountability and responsibility.

What are the advantages?
Benefits / Advantages:
  • Sweet equity component (for senior executives only) can more than offset lower cash comp levels than in Corporates
  • Greater exposure to the balance sheet provides a learning opportunity in that area that is less frequent in Corporates
  • Great dynamism, pragmatism and focus on execution. Greater chances than in Corporates to see the impact and results of what planned due to the PE fund 5 years agenda

Career path tracks

Entry points

Exit points

Generic personality fit

What are the typical traits of someone in the PE portfolio company ladder?

The personality of someone suited to work in a PE portfolio company typically has a majority of the following character traits:

  • Goal oriented
  • Great at getting things done, focus on problem solving and execution
  • Accountable for results
  • Tenacious
  • Fast
  • Collaborative
  • Process oriented, planner
  • Cool under pressure
  • Able to prioritize
  • Risk taker


What are the magnets to a career in a PE portfolio company?

The PE portfolio company career path attracts people who:

  • Like to be more than an executive and want to have a stake in the business they manage
  • Look for substantial value creation within a relatively short time frame
  • Appreciate the greater risk of a leveraged organization as well as the lack of  “safety nets”
  • Are competent of a specific business and industry and want to stay there for the long term (PE gets in and out, Management Team stays)
  • Are comfortable with a much faster pace and higher risk/reward parameters compared to corporate careers


Generic role

Typical PE portfolio company roles depending on functional area/department


Sales

An area sales manager typically manages sales force within its defined regional territory. He/she is responsible for overseeing sales operations, meeting targets and managing the sales team in the region. Primary job responsibilities of an area sales manager would include:

  • Managing, training and motivating existing sales team to drive revenue growth
  • Develop and manage efficient distribution networks for sales
  • Develop efficient and creative sales and marketing strategies for the assigned territory and target setting for the sales team
  • Collecting customer and market feedback and reporting the same to the organization
  • Monitoring sales team performance, analyzing sales data, periodical forecasting and reporting to district heads

Differences with Corporates: greater focus and attention to balance sheet metrics like accounts receivable days and inventory days; monthly focus rather than quarterly


Ops

The operations manager role is mainly to implement the right processes and practices across the organization. It is also to supervise, manage and ensure the delivery of goods or services, despite unexpected issues and obstacles. The specific duties of an operations manager include formulating strategy, improving performance, procuring material and resources and securing compliance.


Differences with Corporates: greater focus on CAPEX spend and obsessive attention to inventory management, productivity improvements; monthly focus rather than quarterly


Fin

Cash is king in PE and the Finance function plays a pivotal role in the organization with the CFO being a near peer to the CEO. Higher than usual levels of debt require extreme attention to be paid to liquidity management and bank relationships.


HR

Human resources managers plan, direct, and coordinate the administrative functions of an organization. They oversee the recruiting, interviewing, and hiring of new staff; consult with top executives on strategic planning; and serve as a link between an organization’s management and its employees. In a PE world, there is a greater focus on cost management and less emphasis being paid on longer term development initiatives.

The speed and execution expected from the HR team in a PE world is much higher than in Corporates and it is not rare the case where HR is under the CFO domain.

High level compensation

Specific roles & responsibilities

Individual contributor (Entry level)
Responsibility:

Contribute to fullfill a functional task with defined responsibilites

Role:

Perform the functional tasks assigned in liaison/coordination with the other contributors according to Company organisation and processes. If senior, then often mentor/coordinate junior contirbutors.

First line manager (Amber level)
Responsibility:

Manage individual contributors

Role:

Ensure that his/her team achieves the goals of the functional role, managing people that could be geographically spread. Coordinate with the other managers according to Company organization and processes. Often define and implement goals/strategy for own team inside a broader strategic frame.

Manager of managers (Bronze level)
Responsibility:

Ensure that his/her teams do achieve the goals of their functional roles, managing teams that could be geographically spread and possibly encompassing more functional families. Coordinate with the other managers according to Company organisation and processes. Define and implement goals/strategy for own team inside a broader strategic frame. Can manage teams from a single function or start to be more generalist, managing more functions.

Role:

Lead the consultants’ team: plan their work, supervise work quality.

SVP or EVP (Silver level)
Responsibility:

Manage for the whole company a function or a large Business Unit and be part of the Executive Committee

Role:

The most senior functional role in an organisation (reports directly to CEO). Gives the strategic and operational functional inputs. Ensures that the functional country teams do achieve their goals, manages teams that are geographically spread. Coordinate with the other functional SVP and regional managers according to Company organisation and processes. Contributes to the overall strategy and management of the Company. In many organizations is in charge/supervises also Regions. In publicly traded companies, SVPs are the pool from which Named Executive Officers get selected (in based of the highest level of compensation) and their comp data is made public. Some of them work with different Board Committees

Group CEO (Gold level)
Responsibility:

Manage the Company/Group

Role:

The most senior role in an organization (AKA Chief Decision Maker). Gives the strategic and operational inputs, having the ultimate responsibility for the company. Works both with the Board and the company organization. Relates with external stakeholders (authorities, markets, investors, shareholders…) Ensures that the functional and regional teams do achieve their goals, manages teams that are geographically spread. Manages the Executive Committee, defines and implements the senior management policies. In a PE portfolio company environment, the CEO partners very closely with the CFO who typically sits in the Board of Director together with the CEO



Typical sacrifices

Specific sacrifices required in an PE portfolio company career
Drawbacks / Disadvantages:

On average, a PE portfolio company career carries a more demanding work life balance than a corporate career with a much greater emphasis on cost and balance sheet management. It’s more of a low frills environment in terms of T&E and perks than a Corporate and work environments tend to be more dynamic. While more formal than startups, the PE portfolio company world has a more relaxed dress code and etiquette than in Corporates.

Typical skills

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