A question I get asked often is “How do I stand out in the private equity applicant pool?” My answer is simple, “Prove you think like an owner and come in with a specific angle on a deal.” It isn’t a traditional route for private equity placement, but it works.
As we slowly emerge out of the pandemic, investors are anxious to jump on new opportunities. As a result, there is a tremendous amount of private equity placement and hiring. However, with more openings come more applicants. At Lancor, we have found that a unique way to have applicants stand out is to showcase their ability to drive value through the lens of an opportunity. This presents a two-for-one deal for both the private equity firm and the candidate.
The way that PE firms can make better investments is by partnering with executives who have spent time in the specific sub sectors of the market that they want to invest in. These executives will know where the opportunities are and understand the intricacies of that business. This model cuts through the traditional hiring process which is “reactive” for the executive who is stuck simply waiting for a call. Instead, it puts them in the driver’s seat. This leverages the executive’s experiences for the PE firm that needs their operationally driven knowledge. It also helps when the PE firm wants to take a public asset private or vice versa. This approach is also an asset when the firm wants to invest in a disruptive business model. It is also a plus when a firm knows they may need to pay a high purchase price multiple, and need to understand which levers to pull to drive up margins and drive down costs.
This isn’t a model other search firms are using for private equity placement and I see it as an opportunity missed for them. It was an idea I came up with when I saw the inefficiencies of traditional search. Why not be “proactive” and empower the executives who want a new role by having them think like an M&A professional, having them really examine the industry they are in and seeing where the opportunities lie. Then the executive can bring that insight to a firm to invest and grow a business in a new way. Building this executive-led merchant bank began by my going to executives and letting them know that by building on their experience they can have more options, and greater wealth with an equity role.
I have worked across 3,000 different LBO transactions in my career (and with 15 of the top 20 global private equity funds in 2021 alone) to add differentiated alpha to transactions with the most seasoned executives around the world. The key to driving outsized returns is having operational insight and confidence long before you buy an asset, and then leveraging executive talent in often unique ways to build a customer centric view of value creation.