Stephen H Baum Leadership

Why Business Owners and CEOs Love Private Equity

Riverside Company owns all  or part of nearly 80 companies, most of which would be classified by big banks as “small business.” This segment of business, especially those less than five years old, generate most of the jobs in the U.S. This week’s two-day conference was attended by almost 80 CEOs and CFOs. Why?

During the course of the conference, CEOs had opportunities to:
– hear world class experts speak on topics relevant to their businesses (new product innovationa and development, driving revenue by social media, emerging market pitfalls, salesforce effectivness, neuroscience-based marieting, economic forecasts, preparing the company for sale)
– participate in a peer problem-solving process (one of which I facilitated and for which I received a nominal payment)
– compare notes with other CEOs on economic outlook, customer behavior, people issues and more
– meet with Riverside experts on high stakes improvement in procurement, health care plans

Riverside paid full freight for all participants at a conference center near Dulles airport.  Their view is that this cost is an investment in the growth, profitability and transformation to a much better enterprise of the companies in which they invest. And in my  corridor conversations, these very  busy  CEOs eagerly look forward to returning to the annual conference — they gain perspective and knowledge useful in daily decisions.

Riverside Private Equity

One of the Riverside executives spoke of her nominal time frame of about 5 — 7 years from investment to exit. Sure there are people who lose their jobs in many of these deals. But the track record is one of net job creation as well as value creation for their investors and the managements. This is not the “slash and burn” P/E firm of the news stories. Nor are several of the other P/E firms for whose portfolio CEOs I am the leadership coach or where I have been an independent director. These firms, such as Centerbrdige Capital Partners and Castle Harlan also have on staff experts in such topics as lean manufacturing, global sourcing, doing business in China. The experts are of counsel to the management teams with which the firms partner.

Castle Harlan Private Equity

Centerbridge Capital Partners
Vistage International member-CEOs pay a fee for this sort of value delivered monthly over the course of years. P/E portfolio companies get this along with the capital and the rolodex that comes with the investment.

Vistage International CEO Membership Org

That’s my view. What’s yours?

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