How Executives Can Stand Out in Private Equity: Greg Head’s Insights on Value Creation

In a recent LinkedIn post, Greg Head discusses a critical distinction private equity firms make when evaluating executive talent, highlighting how positioning can determine an executive’s perceived value. Head recounts an experience with a private equity partner who reviewed sixty candidates for an Operating Partner role over a quarter, ultimately hiring none.

The PE Partner’s Search for Return Generators

The core issue, as Greg Head points out, was the candidates’ framing of their experience. Instead of focusing on quantifiable results, the executives presented typical career summaries detailing their management scope.

“Every executive came in describing what they had managed. Team size. Budget. Tenure. Scope. He wanted to know one thing: ‘What EBITDA do you produce in the first 12 months and how do you do it?’ He got 60 career summaries.”

Head emphasizes that this focus on EBITDA generation is paramount in the current market. He elaborates on the significant financial implications for Operating Partners within middle-market PE firms, who often receive substantial carry points, contrasting this with the more capped bonuses typical for corporate VPs.

Categorization: Cost Center vs. Return Generator

According to Greg Head, the divergence in how executives are perceived hinges not on their credentials—which were uniformly strong among the candidates he observed—but on their categorization from the outset. PE firms, he argues, quickly sort individuals into either ‘cost centers’ or ‘return generators’ during initial interactions.

“PE firms sort operators into cost centers or return generators in the first conversation. Your positioning determines which category you land in before the second question is asked.”

Head’s analysis suggests that executives seeking roles within PE environments must shift their narrative. The emphasis should be on demonstrating a proven ability to drive financial returns, specifically EBITDA, rather than simply listing past responsibilities and scope of management. This strategic positioning, Head contends, is key to aligning with the fundamental goals of private equity investment.

The Importance of Quantifiable Results

The insights shared by Greg Head underscore a broader trend in executive recruitment within the financial sector. The demand is for demonstrable impact and a clear understanding of how an executive’s actions directly contribute to fund performance and portfolio company value.

“Here is the number that matters in this market: Operating Partners at middle-market PE firms earn 1% to 3% carry points in the fund.”

As Greg Head notes, the substantial financial upside for Operating Partners is directly tied to their ability to generate returns. This reality shapes the expectations of PE partners during the hiring process. The ability to articulate a track record of producing specific financial outcomes, like EBITDA growth, becomes a more critical hiring factor than a long list of managerial duties.

In conclusion, Greg Head’s post serves as a strategic guide for executives aiming to capture the attention of private equity decision-makers. By focusing on quantifiable achievements and aligning their value proposition with the PE industry’s focus on return generation, candidates can significantly improve their chances of success in a competitive landscape.