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The Mediator’s Playbook: How Executive Recruiters Facilitate Founder-PE Firm Agreements when Sourcing New Talent

In the high-stakes world of Private Equity (PE) acquisitions, aligning the strategic visions of PE firms and the founders of the companies they acquire is pivotal for achieving aggressive growth targets and operational excellence. However, this alignment often encounters its first significant hurdle regarding talent acquisition—a critical component for scaling operations and enhancing value. It is here that the intrinsic value of an executive recruiter becomes irrefutable.

 

As PE firms endeavor to transition their newly acquired entities into market leaders, the nuanced challenge of hiring the right talent to drive this transformation can lead to unforeseen friction between the PE firm’s forward-looking strategies and the founder’s deep-rooted knowledge of the company and its legacy team.

 

Executive recruiters stand at the crossroads of this dynamic, acting not just as facilitators of talent acquisition but as strategic mediators and trusted advisors. Their external vantage point and expertise in understanding the market’s demands and the unique DNA of the company make them uniquely positioned to bridge the gap between a PE firm’s aspirations and a founder’s vision. In scenarios where the discussion around the skills and people needed for the company’s next growth phase becomes contentious, an executive recruiter’s role transcends the traditional boundaries of talent hunting. They emerge as an impartial beacon, guiding both parties through a balanced consideration of new talent that aligns with strategic goals and cultural fit without being swayed by the founder’s bias or the PE firm’s push for rapid transformation.

 

There’s plenty of evidence that external hiring pays serious dividends for PE-acquired companies. Fortune reported on a 2022 study by researchers from the business schools of Harvard University, the University of Chicago, and Georgetown University, which found that 75% of PE-owned portfolio companies install a new CEO after acquisition, and 75% of those CEOs come from outside the company. Additionally, the research team discovered that companies that installed external CEOs in the first year had the best performance in terms of increasing equity value, beating companies that didn’t bring in external leadership by 27%.

 

Private equity pros understand this phenomenon. A survey by Hunt Scanlon found that 92% of PE dealmakers say top talent directly correlates to their ability to hit growth targets. Yet, identifying and attracting top talent with industry-specific expertise that aligns with investment strategy can be uniquely challenging. Founders and existing company leaders might not see the forest for the trees or hesitate to turn over control to PE leaders.

 

In those moments, a recruiter is the person who can point out these kinds of statistics and track records, smoothing the way to those necessary hires – without putting undue stress on the overall professional relationship.

 

Value Creation: A Strategic Approach

Value creation is, of course, the raison d’être for private equity dealmaking, and the approach to talent strategy must be oriented in this direction. A 2023 study published in the Journal of Business Strategy suggests a successful approach focusing on four elements to consider when it comes to recruiting “value creation staff” for the company:

  1. Structural approach to value creation: The organizational make-up of the value creation team: how value creation is staffed, whether there is a dedicated team, and whether the deal team or another group is charged with value creation.
  2. Profiles of value creation staff: Consider the backgrounds of prospective hires. These might include a business-focused or consulting experience, mixed experiences, or banking and investment backgrounds.
  3. Seniority of value creation staff: Some firms might hire only very senior people for value creation roles, while others focus more on developing junior staff who can grow within the firm.
  4. Incentive structure: Consider how the incentives for value creation (and deal-making) are aligned with the overall operational model.

Deciding on a strategy for value creation must come before any hiring plans. From there, a recruiter who is experienced with the intricacies of the PE world can help pinpoint the right types and sources of talent to fill the required roles and meet the decided-upon goals.

 

A Recruiter’s Strategy for Success

A savvy executive recruiter can mediate conflicts between a founder and a private equity firm over leadership styles and philosophies by understanding both parties’ perspectives, facilitating effective communication, and acting as a neutral mediator. In effect, they are the “reality check” for both parties, reminding them that they are all working towards the same goals.

 

What can recruiters do specifically? Each case will be different, and an experienced recruiter will need to use their skills to assess how best to approach the parties involved in a specific situation. Some common themes, though, might include:

  • Emphasizing mutual benefits
  • Identifying compromise points
  • Providing expert insights on industry standards and successful leadership approaches
  • Assisting in leadership assessments
  • Evaluating cultural fit
  • Encouraging long-term planning
  • Setting clear expectations for the new leader’s role

Ultimately, these actions have one overarching goal: building trust and fostering the kind of collaborative environment that can drive true success for the company and the PE firm.

 

An executive recruiter with PE experience can bring that sense of calm, comparative data, and industry insights to situations where there is a conflict or other challenge. Recruiters like Blue Rock Search come from a place of understanding business owners and PE equally and knowing how to leverage relationships to bridge that gap. With the support of expert recruiters, PE teams and founders alike can coalesce around a talent-centric approach that helps everyone come together around what they have in common: wanting the company to have the talent it needs to succeed and thrive.

 

About the Author

Ruben Moreno is a Founding Member of Blue Rock Search and leads the Blue Rock HR and Private Equity Executive Search practices specializing in the identification, assessment, recruitment, and onboarding of Chief HR Officers, Human Capital Partners, and their teams. As a subject matter expert and highly specialized executive recruiter, Ruben has been dedicated to partnering with his clients to identify, assess, and recruit the best Human Resources leadership talent available for over 15 years. He has helped place hundreds of HR professionals and built deep relationships within the HR Executive community across multiple industry verticals. His clients consider him a trusted partner who takes the time to understand their business and add value beyond executive search.

 

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