Value creation in Private Equity: The role of the Interim Executive

Eighteen months ago, there was a widespread view that private equity firms were in position to realise significant financial returns from investee companies. The stars were aligned: Low interest rates, capital markets rising, new fund raisings and attention was being focussed on deploying the deep wells of dry powder.

Fast-forward to today and the landscape has changed. Interest rates have spiralled, debt burdens have grown heavier, and geopolitical events have resulted in disruptions to supply chains. The pervading economic uncertainty has led to further ambiguity around new investments, while at the same time, causing a fundamental reset on portfolio valuation creation plans and exit strategies.

Pushing further and faster on value creation

As hold periods lengthen and economic headwinds put more pressure on leadership teams to perform, it’s critical that investors have the right kind of portfolio talent and capabilities in place to weather the downturn and emerge stronger than before.

Imperative to this is the ability of dealmakers and those tasked with value enhancement to appreciate the distinct phases of ownership. Talent strategies must be inextricably linked to the value creation plan, engaging appropriate talent at the right time to accelerate value and mitigate risk throughout the investment life cycle.

Along with employing traditional strategies, such as generating liquidity by elongating hold periods and pursuing top line growth, it’s critical that dealmakers and portfolio leads pay acute attention to the new kids on the block when it comes to next-level value creation. These leaders must be sensitive to the value of data, run more sophisticated operational improvement exercises, explore bolt-on opportunities, and confidently implement commercial productivity initiatives centering on pricing and margin expansion.

Funds need to be asking themselves whether they have the specialist resource in house to deliver on these critical initiatives. Enter the Interim Executive.

Adding Interim Executives to the talent toolkit

Engaging an Interim Executive should not be confused with retaining a management consultant.

In the traditional sense, a consultant will apply a strategic lens to what and how something should be done, leaving the fund and their management team(s) to execute and deliver on the plan.

A professional interim, on the other hand, delivers an end-to-end service – strategy through to delivery – driving the project or programme every step of the way, while taking accountability for achieving the desired outcomes.

In terms of the composition of an Interim Executive, they typically bring extensive industry and ExCo experience. Often having earnt their stripes in a consulting environment earlier in their career, many can point to a solid track record of working with and for PE, and possess a roll call of achievements that inspires confidence.

When it comes to timing and point of entry, it’s commonly acknowledged that the most important phase of the ownership cycle is the first 12 months – the defining period during which investors can make significant value creation gains. Whether the requirement be for expert resource to lead on due diligence, business plan creation, M&A activity, growth strategy, transformation initiatives or exit prep, what’s clear is that investors should move quickly to add an Interim Executive to their talent toolkit for this critical period.

“Hesitation only enlarges, magnifies the fear. Take action promptly. Be decisive.”

David J. Schwartz

Short-term capability to ensure long-term success

Ensuring enduring business success for the portfolio and investors requires a strategic approach that balances short-term actions with long-term goals.

While establishing and successfully navigating short-term priorities is essential for value creation across the portfolio, it’s important to note that they should always be aligned with their ‘north star’– a unique vision and strategy for each and every portfolio company.

A balance must be struck between achieving immediate milestones and executing a comprehensive value creation plan that leads to sustainable, long-term success for the company and its investors.

The role an Interim Executive can play in a PE environment is instrumental in maximising potential, driving value and delivering favourable returns.


To learn more about how our Executive Interim management practice provides proactive business solutions to maximise value, contact Martin Smith

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