For private equity firms looking for a leader to take their portfolio brands to the next level, highly experienced retail executives have been a common choice.
Over the past couple of years, more PE firms have been handing the reins to retail veterans familiar with the logistics around scaling brands. As digital marketing tactics and cost per acquisition continue to be costly and less effective, traditional skills like store leadership, merchandising, and wholesale distribution are more valuable for brands wanting to scale. Omnichannel rollouts and category expansion create additional revenue, brand awareness and market penetration, especially for digitally native brands.
However, PE investments can have relatively short life spans of about three to seven years. The crux of these investments is to maximize returns within the timeframe. Thus, the most ideal candidates have a track record of success demonstrating the skills and experience necessary to rapidly grow a brand’s value across several channel, regions and with a breadth of category expertise.
While every company has a unique set of needs, there are key features that PE firms often look for in C-level retail executives.
Track record
Regardless of the business category and stage of growth, they often look for one non-negotiable trait in an executive: Proven success.
While private equity investments involve inherent degrees of risk, PE firms seek to mitigate risk as much as possible when hiring executive talent. PE firms want retail executives with playbooks, who can hit the ground running join their portfolio brands and quickly replicate the success they’ve had in the past, such as achieving profitability, scaling rapidly, expanding into new channels, or leading a turnaround.
Part of what makes experienced retail veterans an attractive option for PE firms is their 360-degree knowledge of the omni-retail ecosystem. This trait is especially in demand now as the pureplay DTC bubble has burst and as consumers engage with brands across an ever-growing number of physical and digital experiences.
Ability to work with a founder
After investing in an early-stage brand, it’s not uncommon for PE firms to keep founders involved in the company in some capacity. Founders often possess a certain magic that’s difficult to replicate, and their continuing involvement is often critical to maintaining the brand’s ethos under new ownership — making it crucial for an incoming executive to understand what it takes to navigate this dynamic.
Working alongside the brand’s founder is no easy feat partly because the identity of a brand can sometimes be closely intertwined with its founder. PE firms are looking for executives who can scale the business while also maintaining the founder’s vision and strong connection to its loyal community. In the quest to appeal to new customers, brands risk losing their loyal shoppers when they drift away from their core purpose and positioning.
Additionally, hiring a seasoned executive solely focused on growth could cause a power struggle with the founder and divide teams. From an operational standpoint, the ideal executive must appreciate the nuances of the previous culture and balance this through the next phase of growth. They must have a strong instinct for knowing when to push back and when to compromise.
Action-oriented
While an effective strategy is a key part of scaling a brand, the ideal executive profile is someone who can move from strategy to execution with limited time and resources, which can be challenging at times for leaders coming from well-resourced companies.
Executives committed to delivering strategic growth initiatives are critical for PE firms as they drive towards their timelines. With the average PE timeline to exit is less than 10 years, they’re seeking executives focused on tackling growth-driving initiatives that maximize brand value in the short and midterm.
Strong leadership
PE firms are looking for operators to help them realize their goals but they also want an executive who can inspire confidence among employees, fellow senior leaders, and investors. Low employee morale and high turnover are some of the common issues plaguing companies that undergo an acquisition — challenges that executives from larger retailers might not completely understand.
Scaling requires resilience, passion, persistence, and hard work to inspire a team to be committed. The ideal executive is also a talent magnet who can inspire accomplished individuals to join the company. Therefore, great storytelling and communication are highly sought-after skills in these portfolio roles.
Key takeaways
The ideal profile for Private Equity portfolio brand leadership positions isn’t always cut and dried. PE firms must deeply vet how well candidates align with the brand’s values and the firm’s strategic vision. But most importantly, executives at a portfolio brand must drive results.