The outlook for private equity exits remains as unpredictable as ever. While late 2024 brought renewed optimism\u2014driven by expectations of interest rate cuts, narrowing valuation gaps, and a rebound in M&A\u2014market turbulence in early 2025 has thrown fresh challenges into the mix. Persistent inflation concerns, election-year volatility, and geopolitical instability have left many investors hesitant to pull the trigger on deals, keeping exits sluggish.<\/p>\n\n\n\n
Yet for PE-backed CEOs, preparation remains key. That was the consensus at Chief Executive<\/em>\u2019s 5th Annual PE-backed Leadership Summit in New York City, where industry leaders discussed strategies for thriving amid uncertainty. Their advice? Align with sponsors, stay laser-focused on value creation, and be ready to move when the window for exits reopens. Some takeaways. <\/p>\n\n\n\n Align on vision.<\/strong> As Mark Fields, former CEO of Ford Motor and current senior adviser for TPG Capital, put it: \u201cBe very clear and up front with your investor about the value creation plan,\u201d including the specific levers for value creation, whether that\u2019s operational improvements, digital transformation, ESG initiatives, etc., as well as how that investor expects to make money. \u201cIt\u2019s really important to have a clear understanding of, \u2018What is my mandate?\u2019\u201d<\/p>\n\n\n\n Fields also recommended boning up on the kinds of questions investors are asking and how they ask them. \u201cThink about sprinkling that in as you are either reporting out on the business or looking at making innovative investments, perhaps through new adjacencies.\u201d Those kinds of proactive answers will communicate to investors that \u201cthis CEO not only knows how to run a business, but they know how to create value\u2014and that\u2019s music to a PE investor\u2019s ears.\u201d<\/p>\n\n\n\n Pascal Yammine, CEO of PE-backed Zilliant, recommended focusing on alignment. \u201cWe had a lot of changes in our investor team, which made it extra challenging. In one of our first meetings with [our investor], we had ideas of how we were going to talk about our goals, where we\u2019re at, where do we need to be? In the end, I just created one slide, two boxes: \u2018Here are your choices. We can be this, or we can be that. Which is your focus from an investment perspective?\u2019 That made it very simple. And he was clear\u2014he said, \u2018I want that. That\u2019s what we focus on.\u2019 So every decision from there became reminding him, \u2018This is the decision we chose, here\u2019s the reason, and here\u2019s what comes with it.\u2019\u201d<\/p>\n\n\n\n Be a vigilant leader.<\/strong> Paul Aversano, managing director of Alvarez & Marsal advisers, noted that a common mistake is not replacing underperforming management when the writing is on the wall. \u201cWhen you talk to our PE clients, their greatest mistake or regret, if the deal goes sideways, is they didn\u2019t change out management quickly enough,\u201d he said.<\/p>\n\n\n\n Another error: Taking your eye off the ball when things are going well. \u201cThere\u2019s a level of complacency that starts to creep in,\u201d Aversano said. \u201cI force myself and my team to be extra vigilant when times are good. Be prepared for the unexpected.\u201d<\/p>\n\n\n\n Diversify value levers.<\/strong> Aversano noted that more than 50 percent of value creation over the past decade came from multiple expansion rather than operational improvements\u2014but that traditional PE model is becoming less reliable. \u201cWe are seeing clients looking for ways to add value where historically they didn\u2019t look,\u201d including ESG and digital transformation, he said. \u201cFinancial engineering has gone by the wayside, and now firms are looking to create value to overcome that multiple contraction and to overcome business performance in general, inflationary costs and so on.\u201d<\/p>\n\n\n\n That said, make sure your focus is appropriate for the cycle you\u2019re in, said Mark Williams, CEO of Magna Legal Services. \u201cIf you\u2019re heading into a sale, you\u2019re focused on boosting EBITDA, watching costs and shining up the business for sale\u2014you\u2019re not going to start new initiatives. But if you\u2019re fresh into a new investment, you invest in growth, start new initiatives and build for the future. You need to focus the team in a different way depending on where you are in that life cycle.\u201d<\/p>\n\n\n\n Be ready to deal.<\/strong> As the PE industry braces for even more upheaval, preparation is still key. Elizabeth Broomfield, managing partner for middle-market PE firm Aquitaine Capital, and Georgeta Precup, operating partner with Albaron Partners, both offered optimism about the exit market, noting the narrowing valuation gap between buyers and sellers offering a more realistic outlook for future deals. \u201cThe gap still exists, but it\u2019s smaller,\u201d Broomfield said, pointing to how sellers are beginning to accept lower multiples.<\/p>\n\n\n\n For CEOs preparing for exits, the recommendations were clear: Use the current lull to get prepared, focus on profitability over growth at all costs and ensure your company\u2019s governance and technology infrastructure are sound. \u201cGet your numbers tight and make sure the story is clean and defensible,\u201d Broomfield said.<\/p>\n\n\n\n Precup cautioned CEOs to remain prepared for alternative outcomes. \u201cWhat if rates don\u2019t get cut as expected? Let\u2019s be prepared just in case.\u201d<\/p>\n\n\n\n Be transparent.<\/strong> Whether it\u2019s delivering bad news early or maintaining clear communication throughout the investment cycle, trust will be built on openness and willingness to share tough truths. As Broomfield succinctly put it: \u201cDon\u2019t B.S. me.\u201d Fostering a transparent relationship with sponsors not only allows for better resource allocation, timely problem-solving and alignment on strategic goals, but if the business hits a pothole, sponsors will be less likely to panic.<\/p>\n\n\n\n In times of uncertainty, in particular, leaders should regularly engage in proactive conversations with investors. \u201cWhere CEOs go really wrong is when they hide bad news, because it\u2019s like a snake in the grass,\u201d said Fields. \u201cIt rears its head later on, when it becomes a much bigger problem for the company to face, and it erodes trust. And when that trust starts eroding, that\u2019s a problem.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" Deal activity continues to lag, but preparation still remains key. Industry leaders at Chief Executive\u2019s 5th Annual PE-Backed Leadership Summit in New York City shared best practices.<\/p>\n","protected":false},"author":31,"featured_media":361938,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[871,879],"tags":[],"class_list":["post-361937","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-leadershipmanagement","category-strategy-2"],"acf":[],"yoast_head":"\n