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What You Should Know Before Working for a Private Equity Firm

June 14, 2018

Scott Staples

I’m the CEO of a company owned by a private equity firm, and people ask me all the time: What’s that like? How do you manage when your boss is a PE firm?

Personally, I love it. People go into PE because they’re good at business, and I like working with talented men and women. But not all PE firms are the same. In the same way that not all publicly owned companies are the same. There are some similarities, of course, but they’re made up of different individuals with different objectives. Some are very hands on and want to weigh in on every detail. Some are very hands off and just want to see the numbers. And some are a combination of the two. Regardless of type, here are some things to consider before signing on to work for one:

Know Your Numbers

No matter what kind of PE firm it is, it’s probably made up of strong business people driven by results. Growth and profitability is literally the name of the game, and PE firms are looking to do both quickly. That’s why it’s so important for you to know the numbers of your business inside and out. Your board members will want to know your revenue, your margins and your EBITDA. They’ll want to know the details of how you will drive profitable growth. And, they don’t want any surprises, so be sure to communicate this information early and often.

Keep Your Eye on the Horizon

Some PE firms are like house flippers: They want to get in, increase the health and valuation, and get out. Others are focused on the longer term. Symphony Technology Group (STG), which owns First Advantage, for example, is home to dozens of very successful businesses and some of their most-successful investments were held onto for 8-10 years. That is rare patience in a PE firm.

Before you begin working with a PE firm, figure out what their goals are in terms of timing. Understand their culture and ask yourself if you’re up to the challenge of overhauling a business within that timeline. One of the most important things you can do is to identify what their exit strategy is and how you can help deliver it.

An Entrepreneurial Spirit is Key

When I founded Mindtree in 1999, I loved the thrill of building a business from nothing. I enjoyed making the most of my resources to deliver something amazing in a limited amount of time. I feel this same entrepreneurial passion in my current role as CEO of a PE-backed firm. Although First Advantage has been in business for many years, being PE-backed creates that same sense of urgency and entrepreneurial spirit to deliver results. And more than other businesses, PE firms are driven by ROI and strong business cases. This means we have to be smart in how we leverage our resources, make sure there is timely payback on investments, and avoid using cash to solve our problems.

At Mindtree, I spent a significant amount of time working with PE firms – Bain Capital, Texas Pacific Group, and The Carlyle Group, to name a few – and I got a good feel for what working at a PE-backed firm might be like. For me, it has been, and continues to be, an amazing experience. But I’m an entrepreneurial guy. If you require a lot of structure or are used to results developing over the long-term, working for a PE firm may not be for you. But if you’ve been bitten by the entrepreneurial bug, it may be a perfect fit.

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