Executive Transitions in Private Equity: Managing Leadership Change for Maximum Impact

February 24, 2025 – Leadership changes in portfolio companies are intricate processes that play a crucial role in shaping the future direction of these newly acquired businesses, according to a recent report from Blue Rock Search’s Ruben Moreno. What are some key traits for success in C-suite roles, and how can you ensure smooth transitions that minimize disruption and maximize performance? From focusing on hiring skills to setting out a smart transition strategy, here’s what Blue Rock Search advises based on working with leadership talent for over two decades.

“A successful transition starts with identifying likely successful leaders,” Mr. Moreno said. “What does that really mean in terms of recruiting? Although they may be so, the trick is to avoid assuming that ‘great leaders’ are inherently talented. Great leaders are those who have deliberately challenged themselves throughout their careers, are eager to learn and grow, and have developed the skills to pass those strengths to others.”

The Harvard Business Review identifies eight core traits for successful leaders, as follows:

• Authenticity: Motivating and leading people requires allowing them to know you and responding to feedback, so they can trust you.
• Curiosity: Transformative leaders, especially in PE, must be inspired to look at questions from all angles and think outside the box.
• Analytical prowess: Effective leadership requires analyzing gathered data, identifying barriers, gaps, and pain points, and using insight to create new solutions.
• Adaptability: In PE especially, keeping pace with changing technologies and expectations is critical for value creation.
• Creativity: From big-picture thinking to small shifts, creativity is a key trait for leaders— for themselves and to be nurtured as a cornerstone of company culture.
• Comfort with ambiguity: All the answers won’t always be available. Successful leaders can juggle competing ideas and priorities and identify an effective balance (without burning themselves out).
• Resilience: Today’s business landscape can be challenging, so resilience is crucial for long-term successful leadership.
• Empathy: Without empathy, even the cleverest leaders can struggle. Interact with people, learn from their perspectives, and build a culture of mutual understanding and support.

Identifying Effective Leadership: Beyond the Resume

“While resumes can provide a great snapshot of what candidates have done already, they’re inherently backward-looking,” Mr. Moreno said. “PE firms need confidence that their portfolio companies will be led by someone who understands today’s challenges and is ready to lead into the future.

Ruben Moreno leads the Blue Rock HR executive search practice specializing in the identification, assessment, recruitment, and onboarding of chief HR officers and their teams. As a subject matter expert and specialized executive recruiter, he has been dedicated to partnering with his clients to identify, assess, and recruit the best human resources leadership talent available for over 12 years.

Prioritize some of the qualities listed above, especially resilience, adaptability, curiosity, and comfort with ambiguity. These can all be tested with simulation-based assessments, often administered by your executive search company as part of your package.”

Industry expertise is, of course, relevant—but it’s not the only thing that should capture your interest when vetting candidates, Mr. Moreno explained. No notes that those intrinsic and hard-to-quantify qualities can be far more valuable than on-paper qualifications, especially in PE’s fast-paced and often-changing world.

“The skills you hire for may also vary depending on the portfolio company’s growth stage,” Mr. Moreno said. “We’ve previously discussed the importance of stage when hiring PE talent, and it remains a vital part of the transition equation. Where PE firms might seek leaders with innovation and fearlessness to oversee a startup company in their portfolio, a growth-stage company might be better suited to leaders who excel in scalability and improvement. Likewise, a mature company needs a leader who can demonstrate stability and a knack for efficiency. Still, a transformative overhaul requires seeking leaders ready to take risks, collaborate, and architect a fresh vision.”

Related: Avoiding Bad Hires for Private Equity Portfolio Companies

The one other piece of the talent puzzle? The talent pipeline, according to Mr. Moreno. “It’s easy for PE transitions to be all about bringing in fresh talent who will hopefully achieve the desired results and create value,” he said. “But it’s essential to always keep an eye on tomorrow. A successful strategy includes investment in a future pipeline of up-and-coming leaders, preparing them earlier in their careers to absorb increasing amounts of responsibility and develop the necessary skills to take on top roles in the future. By cultivating this pipeline now, PE firms can be better prepared to place successful C-suite leaders in the years to come.”

Managing Smooth Transitions

A primary challenge for PE-acquired companies is often the absence of a robust human capital transition map—starting even before the deal is finalized, Mr. Moreno explained. “Whether the intention is to introduce new leadership right away or wait a year, succession planning must be integral to the strategy from the outset,” he said. “Without it, transitions can become disorganized, leading to widespread confusion and frustration across the company. CEOs and other top leaders who succeed right away tend to be the ones who quickly build connections with their teams and stakeholders, adjust their leadership to the needs of the organization and the people, and identify the necessary moves to get the ball rolling in the right direction, depending on the evolution stage of the company.”

As researchers from McKinsey put it, “Inertia will stick out like a sore thumb.” PE firms should look for leaders ready to hit the ground running and make talent (and other) decisions right away, rather than waiting it out.

McKinsey also offers four tips for leadership success in newly acquired companies; it can be helpful to seek out leaders who are prepared to engage these strategies:

1. Build a relationship with the board. PE boards are hands-on, and a mutually respectful, collaborative, and communicative relationship benefits everyone.

2. Quickly assemble an ‘A-team.’ Look for leaders who are confident and experienced in talent management. They’ll get the right people in place and get things moving.

3. Launch an achievable 100-day program. Promising leaders will bring thoughtful, targeted plans on day one and have the skills to get them done.

4. Leverage the PE sponsor’s resources. PE firms that offer support and resources are more likely to attract top talent to their portfolio companies, and that talent, in turn, is more likely to succeed during the transition and beyond.

“Smooth leadership transitions are critical for PE portfolio companies’ long-term success and value creation,” said Mr. Moreno. “When you initially hire with an eye on these skills, you set your teams up to achieve and exceed goals.”

Blue Rock Search is a 100 percent minority/female-owned executive search firm. As a member of the SRA Network, the firm is also a Hunt Scanlon HR/Diversity Recruiting Power 65 recruiter. The firm’s consultants specialize in the targeted identification, assessment, and placement of executives across five distinct practice areas: Private equity, human resources and diversity, franchise, higher education, and CX. Blue Rock’s processes, technology, tools, and search methodology are designed to flex to the needs of its clients.

Related: Why Investing in Top Private Equity Talent is Key to Future Growth

Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor  – Hunt Scanlon Media