Private Equity Fund Seeks Talented CEOs for Long-Term Relationship
Perhaps you’ve wondered what a private equity fund looks for in an executive. We’ve done a lot of thinking about the same question with the hope of finding “the one” (or, several “the ones” given that we invest in numerous businesses, but you get the idea). In simple terms, we’re often looking for someone who compliments our own set of experiences and perspectives and can help us get to the right answers through a shared vision. Heading into ClearLight’s 18th year, we can confidently say that, more often than not, Great Industry + Great CEO = Great Investment Results. As a talented executive, you are a critical part of our investing strategy.
Further, in light of elevated competition for good deals, we’ve increasingly realized that knowing the right CEO for an investment opportunity can be the difference between deal, or no deal. This need to know backable executives typically manifests itself when the founder of a target company seeks to retire after a transaction or a private equity firm, like ClearLight, wants to pursue a proactive investment thesis in an industry where having access to a “been-there-done-that” executive is the missing ingredient to kick off a search for a business to buy together. In either scenario, it’s often the CEO candidate that moves the needle in yielding a closed transaction. Thus, having a mechanism to routinely interface with proven executives looking for their next career challenge has become a strategic imperative in the deal business.
Given that our firm’s heritage stems from the successful sale of an operating company, and the leadership our firm is largely comprised of former C-level executives, we place a premium on knowing and working with top tier executive talent. And, regardless of the situation, great leaders are always called upon to (i) define vision & strategy, (ii) identify the gamebreaker positions and (iii) hire right when necessary to construct a team of “A-players”. So, the following are some things we look for in an executive to run one of our companies as key indicators of likely success.
- Prior GM / CEO-Level Experience. There’s no substitute for experience, and we like to see someone whose been in key leadership positions before with full P&L responsibility. This is not to diminish the potential effectiveness of a first-time manager, we just have a preference to back someone who isn’t stepping into the seat for the first time.
- Strong Mix of IQ / EQ. Yes, you need both. Einstein said, “…intellect…it has, of course, powerful muscles, but no personality.” Having the skills to not only define and execute strategy but also to lead and motivate your team is an important combination that often produces great outcomes. To be sure, we like working with someone that would score well on an IQ test, but we also like to see someone who can develop and inspire followers committed to a common mission. We can usually tell pretty quickly whether a CEO candidate truly cares about people and has a compelling philosophy around culture development.
- Track Record of Value Creation. We all know that past performance is not always indicative of future results, but it’s a helpful indicator in determining an executive’s likelihood to execute on strategy and drive growth. We gain confidence if we see a pattern of long-tenured leadership positions culminating in one or more liquidity events.
- Relevant Industry Expertise. It’s always helpful if we can count on a CEO having muscle memory and a strong network in an industry. Most sectors reveal an array of nuances once you immerse yourself within them, so it’s good to work with executives that have seen the movie before. An established network can also be helpful in surfacing off-market add-on investment opportunities and gaining industry intel that might not be available to a layperson.
- Passion for a Business or Industry. We’ve found that CEOs with a passion for a given sector tend to be innovators that find ways to stay ahead of the competition, delight customers and are also more effective at attracting top talent to join the cause. Warren Buffet famously said that he tap dances to work – not to worry, we won’t be holding any dance competitions, but it’s nice to see an extra spring in the step.
So, if you possess the attributes described above, please get in touch with us. We look forward to sharing information about the current deals we’re pursuing and learning about any investment ideas you may want to discuss with the goal of finding a way that we might help you achieve your aspirations at this stage of your career.
About ClearLight Partners
ClearLight is a private equity firm headquartered in Southern California that invests in established, profitable middle-market companies in a range of industry sectors. Investment candidates are typically generating between $4-15 million of EBITDA and are operating in industries with strong growth prospects. Since inception, ClearLight has raised $900 million in capital across three funds from a single limited partner. The ClearLight team has extensive operating and financial experience and a history of successfully partnering with owners and management teams to drive growth and create value. For more information, visit www.clearlightpartners.com.
Disclaimer: The views and opinions expressed in this blog are solely my own and do not necessarily reflect any ClearLight opinion, position, or policy.