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Private Equity Succession Planning Do’s and Don’ts

Submitted by Michelle Young at Toptal

Authored by Melissa Lin, Finance Editor at Toptal

Edited by Lynn Patra

Executive Summary

Private Equity Succession Planning: Portfolio Companies
Don’ts in Private Equity Succession Planning for Portfolio Companies
Do’s in Private Equity Succession Planning for Portfolio Companies
Succession Planning for Private Equity Firms Themselves

Introduction

While growing investor enthusiasm has contributed to a flood of capital (a historic $3 trillion over the last five years), the private equity industry faces increasing competition among PE firms, record-high multiples, and other factors making it difficult for them to generate attractive returns. One aspect for consideration is succession planning, especially since CEO turnover at portfolio companies occurs at a rate of 73% and has been shown to increase hold time and decrease returns. While succession planning is undoubtedly important for the continuity and sustainability of any company, it may be even more true for those in the private equity industry.

This article defines succession planning and examines the best practices and mistakes to avoid in succession planning for PE portfolio companies (beyond just the CEO level). It also explores succession planning within private equity firms themselves, something PE firms have been uncharacteristically proactive about confronting recently.

What Is Succession Planning for Private Equity Portfolio Companies?

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