March 6, 2025 • 32 mins
What happens to leadership teams when private equity enters the picture? In this revealing episode of The Private Equity Experience, Emily Sander, Rory Liebhart, and Ed Barton discuss the dramatic shifts that occur when PE firms acquire companies. Drawing from their battle-scarred experiences, they explore how founders navigate new stakeholder relationships, why CFOs often become CEOs, and the critical importance of meeting financial covenants. Learn why "business as usual" isn't an option, why flash reports become non-negotiable, and how to identify hidden talent during reorganization. Whether you're a founder considering a PE partnership or an executive navigating post-acquisition waters, this episode offers invaluable strategies to survive and thrive when the deal closes.
#PrivateEquity #Leadership #MergersAndAcquisitions #CEOTransition
Timestamps:
00:00 Introduction to Post-Deal Changes
01:04 Initial Leadership Changes
04:32 Navigating Founder and CEO Transitions
09:43 Collaborative Solutions and Team Dynamics
11:27 The Role of Chief of Staff
15:34 Legal and Insurance Considerations
29:25 Recognizing and Promoting Hidden Talent
==============================
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Who Are We?
Three insiders. One mic. All things private equity — explained. Hi 👋 We’re Ed, Rory, and Emily — a CEO, a CFO, and a Chief of Staff — here to demystify the world of private equity. Between us, we’ve sat in the founder’s chair, run PE‑backed companies, and worked on the deal side, so we know the wins, the pitfalls, and the jargon (and we’ll explain it).
Through the Private Equity Experience Podcast, our book On‑Ramp to Exit, and a library of free tools and templates, we share real‑world stories, practical strategies, and insider insights to help you navigate every stage of the PE journey — whether you’re leading a portfolio company, joining a deal team, considering PE, or just PE‑curious.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
emily-sander_1_02-11-2025_15 (00:34):
So we are chatting about deal has
closed.
So, PE partners have come in,due diligence has happened,
decision has been made, whathappens to the leadership team?
What happens to the founder'srole?
How does this all work?
So, we've each been through thisa few times.
We've got some, some fun.
(00:57):
Adventurous stories with somebattle scars.
So
rory-randall-liebhart_1_02 (01:00):
many
emily-sander_1_02-11-2025 (01:00):
where do you, where do you guys want
to start with this one?
rory-randall-liebhart_1_0 (01:04):
well, it could go any number of ways.
I think you touched on a coupleof specific roles, but, you
know, as far as just generallykind of high level, what can one
expect change wise?
Because change is a constanthere in these scenarios.
maybe we can talk about that,and just what, what, uh, what
may feel different, what may,may not feel different, but, uh,
(01:24):
in general, you know, you'reunder a new ownership group, so
that, that basicallynecessitates a lot of change.
emily-sander_1_02-11-2025 (01:32):
Yeah.
Well, I mean, it's like, let'sstart with the CEO.
Right.
And then I think CFO is alsolike the second one who's most
impacted, but like the CEO, andif that's the original founder,
that's a much differentstructure and outlook and
ballgame for, for thatindividual.
So,
rory-randall-liebhart_1_02-11 (01:46):
a new CEO when there wasn't one
aside from the founder, perhaps.
Maybe we can start there.
emily-sander_1_02-11-2025 (01:52):
Yeah.
Okay.
All right.
Take us through thathypothetical scenario that we
may or may not have seen acouple different times here.
rory-randall-liebhart_1_0 (02:00):
I'll, I'll give the baton to Ed on
this one.
He's got a little moreexperience than I do in this
particular role.
Yeah.
squadcaster-j7bi_1_02-11- (02:05):
Yeah, I was gonna say in a lot of, in
a lot of cases, um, certainlywhere my experience has been is
the private equity team.
So deal closes and they may havesome question as to whether the
CEOs got the right, got theright chops to be able to
operate in that environment.
Um, and their normal approach isnot, we're going to forklift you
(02:27):
out day one and put someone in.
Although, you know, I've seenthat happen, but normally they
give it some time rather theygo, okay, we're going to give
you some help.
that help might be in general, anew chief financial officer
going to, who's going to come inand help set the stage for, so
(02:47):
I'm kind of shifting us back tothe chief financial officer.
Because almost every one of myexperiences with one exception
have been, I've been hired as achief financial officer and
ended up as a chief executiveofficer after the deal.
And it was, they wanted somebodyin who, who they felt
comfortable was going to be ableto give them visibility in the
(03:08):
language that they understood,which was generally gonna be
numbers and KPIs and, andprogress against plan
rory-randall-liebhart_1_02-1 (03:13):
Mm hmm.
squadcaster-j7bi_1_02-11-202 (03:14):
to allow them to be able to
evaluate the performance of thechief executive officer and
management team.
in the last couple of cases, itwas, you've done this before, so
you can help try and coach theCEO through, and if you can't,
then the, you've built thatlevel of trust as a chief
financial officer with theprivate equity firm, and they
(03:35):
tend to go, okay, you're eitherin the interim seat or you're in
the permanent seat, I've had acouple of both, um, to be able
to run this, to run thisbusiness.
Now, the, the.
chief executive as, as you'rekind of going through that, that
cycle, the chief executive, aswe've talked about numerous
times, this is a significantchange in how they do business
(03:56):
and, and how they operate andhow they think.
And, you know, if the privateequity folks encourage you to
hire a somebody to help with thetransition, that somebody is
probably got two missions.
One is to get to know thebusiness well, just in case.
(04:17):
two, is truly to get you set upfor success.
So listen to, listen to kind ofthe advice you're getting and
don't just dismiss becausethat's a generally going to end
up in a bad spot.
rory-randall-liebhart_1_02- (04:30):
you
emily-sander_1_02-11-2025_15 (04:31):
Do you want to talk through
rory-randall-liebhart_1_ (04:32):
really quick there and touched on
something really importantthere, which is this concept and
notion of professionals thathave been there and been through
this and done that before.
And I think that is somethingthat is consistent that I've
observed in private equitytransactions either, you know,
into or out of is, You know,having a team of people that
(04:54):
know the playbook, because thereis a fairly, you know, at a high
level there's a lot, there's apretty defined playbook of how
this all works.
And so when Ed talked aboutbrought in as the CFO, you know,
or to, to evaluate, as somebodythat's been there and done that,
to evaluate, you know, in a lotof ways the rest of the team
(05:14):
capabilities that we have.
I think that, that happens alot.
Um, you know, I, I was part of aprocess, you know, not too long
ago, like this in 2024 orlooking at a role that was, you
know, going into a PE backedcompany at the time of close,
because no one else on that teamhad ever been through something
(05:36):
like that and they need somebodyto do that connective tissue.
Now, I wasn't going to be a CEOcandidate, but sometimes what
it's describing is like.
You go in, there's a CFO, hiscase, and you're recognized as,
oh, this person's actually themost capable of actually leading
this from the chief executiveseat.
And then, and then you kind oftake it from there and reshuffle
(05:58):
the deck.
That's actually how I first kindof got my first CFO role, is I
actually came in and worked forEd, because I had previously
been the CEO, or excuse me, CFO.
Became the CEO, needed a CFO,because he wasn't going to wear
two hats.
Uh, so that, that was kind ofhow these things happened.
Right.
You know, and then you findyourself in these scenarios
where, because you've done itonce, that means you'll then go
(06:20):
through it again, and then youkind of get in a situation where
that becomes your career, andthat's like the whole, the whole
thing is, you know, you're sortof singled out because of just
having been through it and doneit, so, super important.
Yeah.
Yeah.
emily-sander_1_02-11-2025 (06:33):
Well, I've seen something similar with
the chief of staff role where alot of VC or PE firms will bring
in a chief of staff Who has beenthere done that?
Pair them or partner them with afounder who's like this is their
first rodeo like everything'sbrand new they're like what the
heck is happening It's excitingand fun and challenging but like
what it what is happening And sohaving someone ride sidecar with
(06:53):
them can be really beneficialand like you said Like you
mentioned Ed chief of staff Uh,CFO, sometimes COO, who can
translate into the language thecapital partner is used to
speaking in, it can beinvaluable.
Because if someone's like, Idon't like, I don't like, you
want a flash report, you want tolike KPIs, like, what are you
looking for?
And then someone who's a littlebit closer.
(07:15):
And embedded into the companywho can then translate the other
way and say, here's like, what'sgoing on.
Here's the puts and takes,here's all the different levers
you can, you can pull.
But I think the commonalitybetween those, those roles that
I just mentioned, chief ofstaff, CFO and COO is, is they
have a holistic view
squadcaster-j7bi_1_02-11 (07:35):
Right.
emily-sander_1_02-11-2025_15 (07:35):
of the business.
rory-randall-liebhart_1_02-1 (07:36):
Mm
emily-sander_1_02-11-2025_1 (07:36):
not just like specific function.
And I think that is, is a bigpiece of what they're looking
for.
rory-randall-liebhart_1_02 (07:41):
hmm.
Super true, and, you know, you,you, you get touched on
something really important, too,this, this.
This is one of those places andtimes where, you know, there's,
there can be some stuff lost intranslation and that's
unacceptable when they doactually, I've seen more
instances of founders not beingable to speak the language and
then having a really tough timepost, in this operate phase as
(08:03):
we call it in our book.
Because you just can't get withthe program.
If you're just a trueentrepreneur and you're used to
running everything yourself inyour own exact way, um, and
because the company is you, youare the company in some ways
changes incredibly, um, intothis phase.
And so kind of either sink orswim in a lot of cases.
(08:27):
Sometimes it works well when youbring in a operating CEO to sort
of compliment the founder andtheir vision and their ideas.
As much as, you know, 50 50, andmaybe more times than not, it
actually doesn't work out verywell.
And so, changes end up gettingmade, really.
So,
emily-sander_1_02-11-2025_ (08:44):
What would we, what would you say?
What would we all say?
Like, given our different.
experiences and perspectiveswith this, of like how well that
works.
Like if someone's like, ohgreat, someone who's like kind
of from the board, but like kindof independent from them,
they're just here to help meversus like who the heck are
you?
Like I'm not trusting you as faras I can throw you.
squadcaster-j7bi_1_02-11-20 (09:02):
the best private equity firms get
buy in from the chief executive.
on that process before the dealcloses,
rory-randall-liebhart_1_ (09:11):
Right.
squadcaster-j7bi_1_02-11-2 (09:11):
they kind of say, Hey, this is what
we're going to be doing.
They get the seat, the chiefexecutive involved in the hiring
process.
They, it becomes a collaborativehire and the understanding.
And again, I I've been part ofthose of my most recent, most
recent plant was, was thatstructure where it was, you
know, here's, here's, it shouldbe collaborative and here's the
(09:33):
approach we're going to use.
And here's what we're trying toaccomplish.
Um, And then, know, I think ifyou do it that way, you've got a
fighting chance, 50 50.
If you don't, and again, I'll goback to, you know, the last one
that, uh, that Emily and I wereat together.
That one was like, we're sendingthis person in, they fired the
(09:55):
prior president, the chiefoperating officer and chief
financial officer.
They had me show up on a Mondayand said, you know, you've got
these roles.
A chief executive officer, didnot buy into this process and
didn't last, you know, 90 dayspast my arrival.
rory-randall-liebhart_1_0 (10:11):
Yeah.
emily-sander_1_02-11-2025_1 (10:12):
and further to that, we had someone
Um, like we had, I'm going to becareful here.
An executive come on our teamwho like, we spoke to them
before they officially started,but it was like, you're getting
this person.
Um, so I've been on, we've beenon like the receiving end, uh,
of that as well, which can havemixed, can have mixed outcomes.
(10:32):
Um,
rory-randall-liebhart_1 (10:33):
matter, again, my observation has been
It, it takes at least, there'sat least like kind of a three
month coming in period whereeverything is great, you know,
these founders and othersinvolved on the early ends,
their bank accounts are ratherflush, things are great, but
then when it comes to actually,um, you know, hitting plan
numbers that you set forth infront of, know, potential
(10:57):
suitors, ultimately kind ofputting yourself out there as
this is my operating plan andI'm going to hit it.
when that doesn't come so easy,then things get a little bit
strained, and then within, youknow, a certain amount of time,
it really, I see it a lot where,you know, there's loggerheads
between founder, uh, and, and PEgroup, and sometimes CEO in the
middle, trying to do damagecontrol both ways.
(11:18):
Um, and yeah, it gets, it getscontentious, but the best thing
I've seen is when you deal withthose things early on, rather
than let them linger.
emily-sander_1_02-11-202 (11:27):
that's the key though.
Right.
Cause you come up with thisbusiness plan and like, there
has to be agreement anddiscussions on that in, in the
upfront process.
And then like your job as aleadership team is to execute.
On that business plan.
And if you are doing that, theneveryone's going to be fine.
rory-randall-liebhart_1_02-1 (11:43):
by the way, by now you have much
less wiggle room with yourbusiness and your operating plan
because you've probably put on asignificant
squadcaster-j7bi_1_02-11-2 (11:48):
Yep.
rory-randall-liebhart_1_02-1 (11:49):
on your books.
squadcaster-j7bi_1_02-11-2 (11:50):
Yep.
rory-randall-liebh (11:50):
restrictive, um, negative covenants, you
know, you name it.
There's not one, you know, one,and, and lenders are typically,
you know, they're, they're,they're, um, they're issuing
debt based on your history, butalso, you know, the credibility
of your plan, backstop, IPVfund, and something else
guaranteed.
Um, but that being said, youknow, start missing numbers, it
(12:14):
creates a whole lot of havoc.
And, you know, people tend toend up doing human things, which
is getting out of each other'sthroats a lot of time,
especially if you've
squadcaster-j7bi_1_02-11-2 (12:20):
and, and,
rory-randall-liebhar (12:21):
investment and ego tied up in the business,
squadcaster-j7bi_1_02-11-20 (12:24):
and those covenants normally do not
have a ton of wiggle room.
I mean, they're normally,they're normally fairly, fairly
tight.
Yeah.
And they're fairly tight.
Um, so, you know, if you startdeviating from plan more than 10
percent or so, you're going totrip covenants and
rory-randall-liebhart_1_0 (12:37):
Yeah.
squadcaster-j7bi_1_02-11-20 (12:38):
my, my Where I've seen this go bad,
um, a couple times has basicallybeen this, the, we start getting
off numbers the CEO comes upwith a new idea.
So they
emily-sander_1_02-11-2025 (12:51):
Yeah.
Danger.
rory-randall-liebhart_1_0 (12:52):
There you
squadcaster-j7bi_1_02-11- (12:53):
type, okay, we're
emily-sander_1_02-11-2025_1 (12:54):
no, no.
squadcaster-j7bi_1_02-11- (12:54):
Mary.
Now, and I've even been guiltyof some of these Hail Mary type
ideas because, you know, we're,we're missing numbers.
And I'm like, okay, you know,we're going to invent a new, um,
a new product that, you know,reads websites to blind people.
So I mean, you know, it's, no,it,
emily-sander_1_02-11-2025_1 (13:09):
But you know, those like
deliberately and likethoughtfully, like you do them
quickly on the fly, but it's,I've seen people just like flail
and it's like, no, no, no, no.
Stop panicking.
Stop panicking.
Just like go back to thefundamentals.
Like hit your, hit your mark.
Like,
squadcaster-j7bi_1_02-11-2 (13:23):
they go the other direction.
And, and I've, I've recentlytalked to a founder where they
basically were like, yeah, we'remissing numbers, but that's not
my problem.
Cause it's not my money anymore.
I got my, I got a bunch of mymoney out, so I'm not worried
about it.
And, you know, I, I used to stayup at night worried about
worrying about whether we couldmake payroll.
That's not my problem now.
And I'm like,
rory-randall-liebhart_1_02-1 (13:41):
if you
squadcaster-j7bi_1_02-11 (13:42):
that's not gonna,
rory-randall-liebhart_1_02-1 (13:43):
of your money involved, but you
know,
squadcaster-j7bi_1_02-11- (13:44):
That, that's not going to last.
You're not going to last toolong in the, in the king seat.
If, if you're not payingattention to the, to the, uh,
the capital.
And that's, you know, that,that, well, what me worry is not
really going to be a success.
So I've tended to see, you know,those two extremes where it's
like they start to flail becausethey freak.
And they're not logically movingthrough, okay, how do I get back
(14:07):
on track or, or is somethingfundamentally changed?
They don't want to have thedifficult conversation with
their private equity sponsor.
They don't want to go, you know,hey, we're, we made a premise
here in our business plan thatis no longer holding and trying
to understand why.
they go, well, I got a new greatidea, you know, we're gonna,
we're gonna go make a chopsticksrocket launch holder thing, or
(14:30):
You go to the other or they gothe other direction where
they're like, you know, screw itI can't do it.
No, you know, is their problem.
Not
emily-sander_1_02-11-2025 (14:37):
which on one end is like, why are you
doing that on the other end?
It's like, that's what they didto be successful before.
Like if something goes wrong,they have to do something.
They have to come up withsomething.
And so I think.
Like what we're highlightinghere is there's like a mind
shift and like approach change.
And there's also like, you're ina different financial position.
Like you just might not have,like when you're at a founder
(14:58):
led company and you're like oneof you're the original founder,
if you want to move moneyaround, you can.
And in this scenario, you've gota plan and the wiggle room is,
squadcaster-j7bi_1_02-11-202 (15:07):
of cases, you don't have those, you
don't have those tight covenantseither.
those tight
rory-randall-liebhart_1_02-11 (15:12):
I
emily-sander_1_02-11-2025 (15:12):
yeah,
squadcaster-j7bi_1_02-11-2 (15:12):
ones that are really going to, and
you
emily-sander_1_02-11-2025 (15:14):
yeah.
squadcaster-j7bi_1_02-1 (15:15):
someone else to answer to.
You, you might have your, yourfamily to
emily-sander_1_02-11-202 (15:18):
That's a big one.
squadcaster-j7bi_1_02-11-2 (15:19):
you, you know, you might not take a
paycheck.
You might, you might struggleyourself, but in this particular
case, it's the, you've gotupstream folks to answer to, and
you've got covenants to meet.
And if you're going to fail onthose, you, you're, you know,
that's going to be a bad answer.
rory-randall-liebhart_1_02-11 (15:34):
I mean just to put a finer point
of that if you're not used tohaving a a you know an active
like an actual board to answerto You know, it's it can be it
can be culture shock, you knowin a lot of ways for a founder
that may have a board But it'smore like friends of many
(15:56):
investors and
squadcaster-j7bi_1_02-11-2 (15:56):
Yep, and
emily-sander_1_02-11-2025 (15:58):
think there's like a nuance in there.
I want to call out that, thatthere are times within the, the
premise of we have a businessplan execute, execute to the
plan where like, Hey, we hadthis plan and now it needs to
change for like valid,legitimate reasons.
So let's talk about that.
Like, let me not just do that onmy own, but Hey, like COVID
happened or an industry shifthappened or just like, this
(16:19):
isn't working like we expect itto.
And here are some of my ideasabout.
You know, moving to an adjacentapproach and like those
conversations can and shouldhappen.
And a founder and CEO can bringthose ideas to the table knowing
that they might get told no, butsometimes it is like, what's the
creative process and what ideas,what new ideas can you bring to
(16:40):
the table?
squadcaster-j7bi_1_02-11-202 (16:41):
is going to know that market and
that business's capabilitiesbetter than anybody.
Same with that management teamthat that when you start going
on and we're getting a littleoff topic, but when you get a
little bit off course on yourbusiness, engage the management
team and then engage the privateequity folks.
And this becomes a group, agroup, collaborative, uh, group.
(17:02):
solution session rather than,you know, it's all on your
shoulders or it's not yourproblem.
It's, it's, it's in the middle.
It's actually everybody'schallenge, everybody's problem,
and everybody can contribute.
And your job as a chiefexecutive is to manage that
process.
emily-sander_1_02-11-2025_1 (17:18):
and I think like one of the things
there is everyone's first optionis for this to work like with
the management team intact.
I mean, like, because they doknow so much about the company,
the industry, et cetera, likeeveryone's option A is to make
this work.
They will have, like, there willbe contingency plans for option
B, C, D, E, F.
But like, it's in everyone'sbest interest, interest to get
(17:39):
this thing to work.
to work.
rory-randall-liebhart_1_02-1 (17:42):
On paper.
Anyway.
Yeah.
Yeah.
emily-sander_1_02-11-2025_1 (17:44):
And the, and the next thing is, you
know, from the investorsperspective, they've just
invested a whole bunch of moneyin this thing and they want
results.
So basically like when we'retalking about prove that you're
executing to the business planis like prove that you are
tracking and making progress tothe results that the PE firm
wants.
(18:04):
Is that like a simplifiedversion
rory-randall-liebhart_1_02- (18:06):
Oh, I mean,
emily-sander_1_02-11-2025_15 (18:06):
of
rory-randall-liebhart_1_02- (18:07):
You know, it's, that's spot on.
I mean, again, I keep comingback to this concept of debt.
It's such a big part of this,this operative phase of a
private equity.
There's a lot of it and it'spretty much always there.
Um, and so hitting your businessplan means you're able to
generate through cash overservice.
New debt.
It's, it's, it's, So that's amajor deviations from that are
(18:29):
just problematic.
It's, you know, you know, afounder led business pre pre
transaction.
You might be bootstrapping,might be on your own money.
It might be equity from friends,family, seed investors, angels,
et cetera.
And you don't really actuallyhave a, a payback period or, you
know, anything reallyspecifically defined, but now
you're in a more structured, itjust, there's more structure,
like from top down, it's justmore structure in this world,
(18:51):
governance wise.
Financing wise all of the above.
So yeah, hitting numbers isprobably more way more important
than
squadcaster-j7bi_1_02-11- (18:58):
Yeah.
The, the,
rory-randall-liebhart_1 (18:59):
getting to
squadcaster-j7bi_1_02-11-20 (18:59):
key that, the key that we used Emily
and the companies that I've runor been chief financial officer
in, have been has been theconcept of a flash report a
weekly flash report where weidentified based upon our
business based upon our businessrequirements and a business plan
what are the four to six not 600not two what are the four to six
(19:23):
key drivers to ensure that we'reeither on track or off track and
can be early warnings to be ontrack off track or ahead of plan
behind plan we would report thatout internally Every week, we
would report that out to theprivate equity team every week.
And you know, I, I wouldgenerally voice over on my
weekly calls when I was a chiefexecutive.
(19:43):
I would use that as the briefingsheet, and we would, you know, I
would voice over a, a narrativearound it.
I would generally ask my, my,uh, C-level folks and department
heads to get me inputs, but youcan't allow.
It's that classic, like, thefurther you get off track, it's
that, you know, one degree, onedegree off, off, you know, on an
(20:07):
airliner.
you decide to go from Seattleand you're headed to London, you
may, you may very well end up inParis.
And that's, that's a problem.
The further you go withoutmaking the course correction,
the harder it is to coursecorrect.
And so we use the flash report,and it was a weekly, like, it's
a weekly cadence.
And with the clients I've gottoday, they have flash reports
and it's a weekly cadence.
(20:27):
And you know, at least then, youknow where you're at and you can
start making, um, start makingadjustments accordingly to, to
get yourself on track or toreset expectations.
emily-sander_1_02-11-2025 (20:38):
Yeah, we should do a whole episode on
flash report.
We'll take a note of that.
Okay, so we talked about likeCEO founder changes CFO changes
which might be a brand new CFObrought in by the PE firm What
are some other like call outchanges to the leadership team
that people should be aware of?
squadcaster-j7bi_1_02-11-2 (20:57):
The, the biggest one that I, and I,
and I'm going to, I'm going togo right into your wheelhouse,
Sander.
Um, the biggest one is I havefound, and it didn't matter
whether it was at Beeline withKarina, whether it was, Um, at
G2 Web Services with Karina, orwhether it was at Fusion Zone
Automotive with Emily.
(21:18):
Anytime I've been in a chiefexecutive role where you've had
a private equity sponsor, is achange in how you have to manage
those, disparate departments,those dis, you kind of
internally manage.
And I have relied on either inname or in function, a chief of
staff, where a lot of timesfolks don't have such a such a
(21:40):
function in their organizationprior to private equity you're
generally going to need it afterbecause there's so much
additional reporting there's somuch additional intelligence
that's needed you're moving thatmuch faster that the
coordination becomes very veryvery difficult to have the ceo
or cfo trying to do all that atonce and it's Beyond it's a
(22:02):
broader scope than even a chiefoperating officer is going to
have.
And so that's that, that changeis one that I, you know, I will
pound on the table.
I think when I did yourleveraging leadership podcast,
um, a year or so ago, I kind ofsaid, look, this is something
you need to consider if you'rein that position.
And I'd say it again here.
emily-sander_1_02-11-2025 (22:21):
Yeah, no, I mean I see like lots of
Capital partners pretty muchdemanding like you will have a
chief of staff.
You can go find one or will wehave one, um, in our team that
we can deploy into, into thisportco.
And I also see a lot offounders, like five to 10 people
in.
rory-randall-liebhart_1_0 (22:37):
Yeah,
emily-sander_1_02-11-2025_1 (22:37):
One of their first hires is a chief
of staff now.
And it's like, they're doingfunctional roles and then they
hand off as they recruit andhire people.
But it's, it's becoming more ofa thing because they are that
like Jack or Jill of all trades.
And they can be a sweeper andkind of porpoise in and out of
like the tactical and practicalstrategic back down again.
And, you know, altitude ofinvolvement is high.
And then they kind of dive deepdown into the organization.
(23:00):
So, um, yeah, it's a.
rory-randall-liebhart_1_0 (23:02):
other stakeholders in this new world,
you know, um, coordinatingvertically and horizontally, you
know, whether whether it's liketo line up the requirements of
lenders with the operations ofthe business, line up the
governance of a board with themanagement of the business,
coordinating all of those thingsand making sure that all these
things are running.
(23:22):
Oh, and by the way, executing acore business plan.
I mean, there's just so muchinvolved that you do need that a
conductor in a lot of ways.
Even if you have very capable Clevel executives individually.
All right.
emily-sander_1_02-11-2025_1 (23:36):
And sometimes, I mean, I remember
talking to people further downthe org, VP directors,
management level, who like theirworld, like maybe not had been
as, uh, changed as much by PEinvestors coming on, but they
knew things were different andthey knew things were at a
different pace and differentthings were happening around
them.
And, you know, if, if the CEO.
(23:59):
And a C suite team, like this istheir first rodeo.
How are they going tocommunicate that down to their
people?
So just helping at all levels ofthe organization, like it's
going to be fine.
Here's what's happening.
Here's what we need to do.
Everyone go this way.
I'm like, good job going thisway.
And now we're just going torinse and repeat and keep making
progress.
So I think even someone just inand out of the organization like
that can be, can be helpful.
(24:21):
Um, what else I'm trying tothink in our last few minutes
here for this one.
Big transition has happened.
new board structure, maybe somenew leadership members.
squadcaster-j7bi_1_02-11- (24:35):
other piece, and this is going more on
a CFO side as well, um, I knowwe put it in the book, um, but
there's a lot of new reportingthat's going to, that's going to
happen.
And one of the, one of thepositions that I have tended to
be late in hiring to my owndetriment has been someone who
is, uh, financial planning andanalysis specialist, um, whether
(24:57):
that's at mid tier, senior, oreven junior.
Um, and we've had some, I mean,between Rory and I, we've had
some really talented folks,
rory-randall-liebhart_1_0 (25:06):
have,
squadcaster-j7bi_1_02-11-20 (25:06):
um, have, that have been, that have
been in that FP& A role.
Um, but that is, that is,
rory-randall-liebhart_1_02- (25:13):
you know, C level officers
themselves.
Like, it's been
squadcaster-j7bi_1_0 (25:15):
Liebhardt.
So, I mean, those are,
rory-randall-liebhart_1_02- (25:18):
and then, I mean, others, others
that have kind of, um, you know,worked for me over time as well.
squadcaster-j7bi_1_02-11-2 (25:23):
Yep.
Yeah.
It's, it's a,
rory-randall-liebhart_1_0 (25:24):
role.
You can
squadcaster-j7bi_1_02-11-2 (25:25):
it's a cri.
It is an absolutely criticalrole and a lot of times what I,
what I see is, is CFOs and CEOs,especially those that have gone
through the transition andthey're kind of riding through,
so they were there before, theydon't realize kinda what the
tsunami of reporting is gonna beand the level of detail that
they're gonna need.
And I, I would put high on mylist of like, here's something
(25:49):
that needs to change.
The reporting is going to beforced on you.
The, the data gathering, thedata driven decisions and all
this other, you know, kind of,kind of wonky stuff is going to
come down on you.
You should be pretty quicklyprepared to bring on an FP& A,
uh, analyst or at least, uh, Ifnot, bring someone on.
(26:09):
Talk to the private equity folksabout can they provide you with
some help initially to get youset up with reporting packages
and, and because they should bereasonably familiar given that
they did the underwriting, whatthey're looking for for KPIs and
other things.
So ask them to help at thebeginning and, and they may see
the need and authorize you tohire, uh, even if it's not in
(26:30):
your budget, but that's going tobe something that is, that's a
big change and that's going tobe something
emily-sander_1_02-11-2025 (26:34):
Yeah.
squadcaster-j7bi_1_02-11- (26:35):
needs to embrace quickly.
emily-sander_1_02-11-2025_1 (26:37):
And they often, the PE firm also
often has a associate because weuse, you know, we use basically
their associate level on afractional basis for a number of
our companies we've been at.
So that's a good call out.
Yeah.
rory-randall-liebhart_1_ (26:51):
Again, when you take on additional
stakeholders at an institutionallevel, that sort of thing.
Yeah.
You may never have gone throughfinancial audit before, you
know, you may
squadcaster-j7bi_1_02-11-202 (27:00):
Oh yeah.
rory-randall-liebhart_1_02- (27:01):
you know, and then you start to get
into that, that level of, uh,requirement from not only PD
group, of course, but likemember requirements and things
like that, borrowing bases, allof these things.
And that's where I think thepremium in the prior generation
of a business is all aboutbookkeeping and, you know, some,
some, some, some very high levelfinancial analysis, probably,
but in this iteration, it's muchmore about, as I said, FPA, and
(27:24):
analysis.
uh, governance, uh, compliance,all of these things that maybe
the, homegrown person thatyou've had in the role, you
know, that's, I don't know,whatever title it may be, but
the head of and accounting mayjust just be over their head,
you
squadcaster-j7bi_1_02-11- (27:42):
Yeah, I got, I got one, I got one last
one, which is, uh, as I wasthinking through it, which is,
as the chief executive probablydealt with, you know, I'll do my
own contracts or I've got, youknow, my, my brother in law Stu
will do the contracts and, youknow, my insurance.
I've got, you know, my buddyJohn does my insurance.
When you get into this, intothis environment, expect your
(28:04):
legal bills and your insuranceto go way up because the, the
private equity guys are lookingat this going, how do I mitigate
uncontrollable risks?
Or how do I control risks thatwould otherwise be, uh,
existential and outside mycontrol?
And so you will end up withprobably about two thirds of the
time, we've had new insurance,brokers who had completely new
(28:27):
policies and the policy, theamount of the premium went up to
three X because they wanted toget higher, higher limits or
additional coverage.
And then the second was, youknow, I've been in situations
and again, I'm a, I'm apracticing attorney.
Where I've been told, nope,you're, I, that's nice, I, I, I
like your, I like your JD, Ilike your license, you're
(28:48):
sending this off to 700 an hourlaw firm to review, and you
know, and just because we're notgoing to take that risk, and you
know, it could be simple stufflike a lease, and they're going,
nope, we're not going to takethat risk, send it off and get
it done, and don't take that,don't take that personal and
recognize that that's a change,it's a risk management approach
that the private equity guys useto take their risk premium down.
(29:11):
Okay.
And, you know, Stu and John aregreat guys, and I'm sure you've
enjoyed working with them overthe years, but it ain't your
company anymore, and you'reprobably going to have to work
with some new professionals inthat risk management area.
emily-sander_1_02-11-2025 (29:24):
Okay.
And the last one I'll throw outthere is, um, as you're kind of
like shuffling the deck chairs,there's often hidden talent in
your organization that mighthave an opportunity to pop out
into a different role, like apromoted role.
And so if you have talent onyour team, this can be a
catalyst for like putting themin positions to, to go on and do
(29:46):
good things.
I mean, I've had this happen tome, Rory, you've had that
experience.
And, um, I, all three of ushave.
paid this forward to otherpeople as well.
So that's just something to keepan eye out for, like who on my
team is like, Oh my gosh, okay,you know, Sandra over here or
Damien over there, like, yes,let's move them into, into this
new role.
rory-randall-liebhart_1_0 (30:06):
Yeah.
I think, um, well first off, Ithink, you know, talent, talent,
recognition, talent management,all that stuff is like, you
know, that should be happeningwhether or not you're owned by
private equity.
Let's just say
emily-sander_1_02-11-2025_1 (30:16):
For sure.
There just might be big moveshappening right now where you'd
be like, okay,
rory-randall-liebhart_1_02-1 (30:21):
is moving pieces around to
accommodate the new needs of abusiness.
And what, what I've observed andexperienced and, you know, led
is this change that reallyunlocks, you know, more
capability for people.
It gives them a shot where maybein a, another environment that
just, that the, the, the playingfield was just, Small, right?
(30:43):
So people
squadcaster-j7bi_1_02-11-2 (30:44):
Yep.
rory-randall-liebhart_1_0 (30:44):
lanes and now there's just more to do.
The last thing anyone wants todo is go spend a bunch of money
buying something new.
You know, and we all know thatthere's so much value in what
incumbent you know, folks haveas far as knowledge of the
business, knowledge of thecustomers in particular.
So yeah, you, you just, youexpand, you look inward first.
I think that that's, that'salways the best thing.
(31:06):
And I think in private equityI've seen it the most because,
you know, You know, it seemslike the most logical step, um,
having to go completely outsidethe business, incur more costs,
probably, and, and, uh, youknow, have a longer ramp to
somebody up and running.
And that's what I would say,too, is, you know, time seems to
move very quickly under PE.
emily-sander_1_02-11-2025 (31:26):
yeah.
rory-randall-liebhart_1_ (31:27):
You're under strict timelines, and, you
know, results are required fast.
So you, you really want to put apremium on the talent.
You already have that already.
And it's a super.
by product if they, you know,flourish in that role and, you
know, get more opportunity,that's, that's
squadcaster-j7bi_1_02-11-20 (31:43):
And if you're the, if you're the new
guy that gets inserted by thePE, do one on ones with
everybody.
If you can get away with it.
I've, I've done that pretty muchevery time I've walked into an
organization and found hiddentalent that had gotten
pigeonholed because they'd beenthere so long and they blah,
blah, blah, blah, blah.
And they didn't.
And you, if you're the new guy.
(32:05):
Talk to everybody.
Do one on ones.
Get it all out on a table.
You're going to find someamazing people that probably
have not gotten recognizedbecause they were hired as the
receptionist and that's allthey've done for 15 years, but
they're capable of doing a hellof a lot more.
rory-randall-liebhart_1_0 (32:19):
Yeah.
I,
emily-sander_1_02-11-2025_ (32:20):
Yes.
rory-randall-liebhar (32:21):
completely with that.
emily-sander_1_02-11-2025_1 (32:22):
I'm going to leave it on that.
That's a good note to leave iton.
rory-randall-liebhart_1_0 (32:24):
Yeah.
emily-sander_1_02-11 (32:25):
Beautiful.
Now, all right listeners, nowyou know a little bit more about
what happens after the deal goesdown and we will catch you next
time on the Private EquityExperience podcast.
rory-randall-liebhart_1_0 (32:34):
Catch you later.
So we are chatting about deal has
closed.
So, PE partners have come in,due diligence has happened,
decision has been made, whathappens to the leadership team?
What happens to the founder'srole?
How does this all work?
So, we've each been through thisa few times.
We've got some, some fun.
(00:57):
Adventurous stories with somebattle scars.
So
rory-randall-liebhart_1_02 (01:00):
many
emily-sander_1_02-11-2025 (01:00):
where do you, where do you guys want
to start with this one?
rory-randall-liebhart_1_0 (01:04):
well, it could go any number of ways.
I think you touched on a coupleof specific roles, but, you
know, as far as just generallykind of high level, what can one
expect change wise?
Because change is a constanthere in these scenarios.
maybe we can talk about that,and just what, what, uh, what
may feel different, what may,may not feel different, but, uh,
(01:24):
in general, you know, you'reunder a new ownership group, so
that, that basicallynecessitates a lot of change.
emily-sander_1_02-11-2025 (01:32):
Yeah.
Well, I mean, it's like, let'sstart with the CEO.
Right.
And then I think CFO is alsolike the second one who's most
impacted, but like the CEO, andif that's the original founder,
that's a much differentstructure and outlook and
ballgame for, for thatindividual.
So,
rory-randall-liebhart_1_02-11 (01:46):
a new CEO when there wasn't one
aside from the founder, perhaps.
Maybe we can start there.
emily-sander_1_02-11-2025 (01:52):
Yeah.
Okay.
All right.
Take us through thathypothetical scenario that we
may or may not have seen acouple different times here.
rory-randall-liebhart_1_0 (02:00):
I'll, I'll give the baton to Ed on
this one.
He's got a little moreexperience than I do in this
particular role.
Yeah.
squadcaster-j7bi_1_02-11- (02:05):
Yeah, I was gonna say in a lot of, in
a lot of cases, um, certainlywhere my experience has been is
the private equity team.
So deal closes and they may havesome question as to whether the
CEOs got the right, got theright chops to be able to
operate in that environment.
Um, and their normal approach isnot, we're going to forklift you
(02:27):
out day one and put someone in.
Although, you know, I've seenthat happen, but normally they
give it some time rather theygo, okay, we're going to give
you some help.
that help might be in general, anew chief financial officer
going to, who's going to come inand help set the stage for, so
(02:47):
I'm kind of shifting us back tothe chief financial officer.
Because almost every one of myexperiences with one exception
have been, I've been hired as achief financial officer and
ended up as a chief executiveofficer after the deal.
And it was, they wanted somebodyin who, who they felt
comfortable was going to be ableto give them visibility in the
(03:08):
language that they understood,which was generally gonna be
numbers and KPIs and, andprogress against plan
rory-randall-liebhart_1_02-1 (03:13):
Mm hmm.
squadcaster-j7bi_1_02-11-202 (03:14):
to allow them to be able to
evaluate the performance of thechief executive officer and
management team.
in the last couple of cases, itwas, you've done this before, so
you can help try and coach theCEO through, and if you can't,
then the, you've built thatlevel of trust as a chief
financial officer with theprivate equity firm, and they
(03:35):
tend to go, okay, you're eitherin the interim seat or you're in
the permanent seat, I've had acouple of both, um, to be able
to run this, to run thisbusiness.
Now, the, the.
chief executive as, as you'rekind of going through that, that
cycle, the chief executive, aswe've talked about numerous
times, this is a significantchange in how they do business
(03:56):
and, and how they operate andhow they think.
And, you know, if the privateequity folks encourage you to
hire a somebody to help with thetransition, that somebody is
probably got two missions.
One is to get to know thebusiness well, just in case.
(04:17):
two, is truly to get you set upfor success.
So listen to, listen to kind ofthe advice you're getting and
don't just dismiss becausethat's a generally going to end
up in a bad spot.
rory-randall-liebhart_1_02- (04:30):
you
emily-sander_1_02-11-2025_15 (04:31):
Do you want to talk through
rory-randall-liebhart_1_ (04:32):
really quick there and touched on
something really importantthere, which is this concept and
notion of professionals thathave been there and been through
this and done that before.
And I think that is somethingthat is consistent that I've
observed in private equitytransactions either, you know,
into or out of is, You know,having a team of people that
(04:54):
know the playbook, because thereis a fairly, you know, at a high
level there's a lot, there's apretty defined playbook of how
this all works.
And so when Ed talked aboutbrought in as the CFO, you know,
or to, to evaluate, as somebodythat's been there and done that,
to evaluate, you know, in a lotof ways the rest of the team
(05:14):
capabilities that we have.
I think that, that happens alot.
Um, you know, I, I was part of aprocess, you know, not too long
ago, like this in 2024 orlooking at a role that was, you
know, going into a PE backedcompany at the time of close,
because no one else on that teamhad ever been through something
(05:36):
like that and they need somebodyto do that connective tissue.
Now, I wasn't going to be a CEOcandidate, but sometimes what
it's describing is like.
You go in, there's a CFO, hiscase, and you're recognized as,
oh, this person's actually themost capable of actually leading
this from the chief executiveseat.
And then, and then you kind oftake it from there and reshuffle
(05:58):
the deck.
That's actually how I first kindof got my first CFO role, is I
actually came in and worked forEd, because I had previously
been the CEO, or excuse me, CFO.
Became the CEO, needed a CFO,because he wasn't going to wear
two hats.
Uh, so that, that was kind ofhow these things happened.
Right.
You know, and then you findyourself in these scenarios
where, because you've done itonce, that means you'll then go
(06:20):
through it again, and then youkind of get in a situation where
that becomes your career, andthat's like the whole, the whole
thing is, you know, you're sortof singled out because of just
having been through it and doneit, so, super important.
Yeah.
Yeah.
emily-sander_1_02-11-2025 (06:33):
Well, I've seen something similar with
the chief of staff role where alot of VC or PE firms will bring
in a chief of staff Who has beenthere done that?
Pair them or partner them with afounder who's like this is their
first rodeo like everything'sbrand new they're like what the
heck is happening It's excitingand fun and challenging but like
what it what is happening And sohaving someone ride sidecar with
(06:53):
them can be really beneficialand like you said Like you
mentioned Ed chief of staff Uh,CFO, sometimes COO, who can
translate into the language thecapital partner is used to
speaking in, it can beinvaluable.
Because if someone's like, Idon't like, I don't like, you
want a flash report, you want tolike KPIs, like, what are you
looking for?
And then someone who's a littlebit closer.
(07:15):
And embedded into the companywho can then translate the other
way and say, here's like, what'sgoing on.
Here's the puts and takes,here's all the different levers
you can, you can pull.
But I think the commonalitybetween those, those roles that
I just mentioned, chief ofstaff, CFO and COO is, is they
have a holistic view
squadcaster-j7bi_1_02-11 (07:35):
Right.
emily-sander_1_02-11-2025_15 (07:35):
of the business.
rory-randall-liebhart_1_02-1 (07:36):
Mm
emily-sander_1_02-11-2025_1 (07:36):
not just like specific function.
And I think that is, is a bigpiece of what they're looking
for.
rory-randall-liebhart_1_02 (07:41):
hmm.
Super true, and, you know, you,you, you get touched on
something really important, too,this, this.
This is one of those places andtimes where, you know, there's,
there can be some stuff lost intranslation and that's
unacceptable when they doactually, I've seen more
instances of founders not beingable to speak the language and
then having a really tough timepost, in this operate phase as
(08:03):
we call it in our book.
Because you just can't get withthe program.
If you're just a trueentrepreneur and you're used to
running everything yourself inyour own exact way, um, and
because the company is you, youare the company in some ways
changes incredibly, um, intothis phase.
And so kind of either sink orswim in a lot of cases.
(08:27):
Sometimes it works well when youbring in a operating CEO to sort
of compliment the founder andtheir vision and their ideas.
As much as, you know, 50 50, andmaybe more times than not, it
actually doesn't work out verywell.
And so, changes end up gettingmade, really.
So,
emily-sander_1_02-11-2025_ (08:44):
What would we, what would you say?
What would we all say?
Like, given our different.
experiences and perspectiveswith this, of like how well that
works.
Like if someone's like, ohgreat, someone who's like kind
of from the board, but like kindof independent from them,
they're just here to help meversus like who the heck are
you?
Like I'm not trusting you as faras I can throw you.
squadcaster-j7bi_1_02-11-20 (09:02):
the best private equity firms get
buy in from the chief executive.
on that process before the dealcloses,
rory-randall-liebhart_1_ (09:11):
Right.
squadcaster-j7bi_1_02-11-2 (09:11):
they kind of say, Hey, this is what
we're going to be doing.
They get the seat, the chiefexecutive involved in the hiring
process.
They, it becomes a collaborativehire and the understanding.
And again, I I've been part ofthose of my most recent, most
recent plant was, was thatstructure where it was, you
know, here's, here's, it shouldbe collaborative and here's the
(09:33):
approach we're going to use.
And here's what we're trying toaccomplish.
Um, And then, know, I think ifyou do it that way, you've got a
fighting chance, 50 50.
If you don't, and again, I'll goback to, you know, the last one
that, uh, that Emily and I wereat together.
That one was like, we're sendingthis person in, they fired the
(09:55):
prior president, the chiefoperating officer and chief
financial officer.
They had me show up on a Mondayand said, you know, you've got
these roles.
A chief executive officer, didnot buy into this process and
didn't last, you know, 90 dayspast my arrival.
rory-randall-liebhart_1_0 (10:11):
Yeah.
emily-sander_1_02-11-2025_1 (10:12):
and further to that, we had someone
Um, like we had, I'm going to becareful here.
An executive come on our teamwho like, we spoke to them
before they officially started,but it was like, you're getting
this person.
Um, so I've been on, we've beenon like the receiving end, uh,
of that as well, which can havemixed, can have mixed outcomes.
(10:32):
Um,
rory-randall-liebhart_1 (10:33):
matter, again, my observation has been
It, it takes at least, there'sat least like kind of a three
month coming in period whereeverything is great, you know,
these founders and othersinvolved on the early ends,
their bank accounts are ratherflush, things are great, but
then when it comes to actually,um, you know, hitting plan
numbers that you set forth infront of, know, potential
(10:57):
suitors, ultimately kind ofputting yourself out there as
this is my operating plan andI'm going to hit it.
when that doesn't come so easy,then things get a little bit
strained, and then within, youknow, a certain amount of time,
it really, I see it a lot where,you know, there's loggerheads
between founder, uh, and, and PEgroup, and sometimes CEO in the
middle, trying to do damagecontrol both ways.
(11:18):
Um, and yeah, it gets, it getscontentious, but the best thing
I've seen is when you deal withthose things early on, rather
than let them linger.
emily-sander_1_02-11-202 (11:27):
that's the key though.
Right.
Cause you come up with thisbusiness plan and like, there
has to be agreement anddiscussions on that in, in the
upfront process.
And then like your job as aleadership team is to execute.
On that business plan.
And if you are doing that, theneveryone's going to be fine.
rory-randall-liebhart_1_02-1 (11:43):
by the way, by now you have much
less wiggle room with yourbusiness and your operating plan
because you've probably put on asignificant
squadcaster-j7bi_1_02-11-2 (11:48):
Yep.
rory-randall-liebhart_1_02-1 (11:49):
on your books.
squadcaster-j7bi_1_02-11-2 (11:50):
Yep.
rory-randall-liebh (11:50):
restrictive, um, negative covenants, you
know, you name it.
There's not one, you know, one,and, and lenders are typically,
you know, they're, they're,they're, um, they're issuing
debt based on your history, butalso, you know, the credibility
of your plan, backstop, IPVfund, and something else
guaranteed.
Um, but that being said, youknow, start missing numbers, it
(12:14):
creates a whole lot of havoc.
And, you know, people tend toend up doing human things, which
is getting out of each other'sthroats a lot of time,
especially if you've
squadcaster-j7bi_1_02-11-2 (12:20):
and, and,
rory-randall-liebhar (12:21):
investment and ego tied up in the business,
squadcaster-j7bi_1_02-11-20 (12:24):
and those covenants normally do not
have a ton of wiggle room.
I mean, they're normally,they're normally fairly, fairly
tight.
Yeah.
And they're fairly tight.
Um, so, you know, if you startdeviating from plan more than 10
percent or so, you're going totrip covenants and
rory-randall-liebhart_1_0 (12:37):
Yeah.
squadcaster-j7bi_1_02-11-20 (12:38):
my, my Where I've seen this go bad,
um, a couple times has basicallybeen this, the, we start getting
off numbers the CEO comes upwith a new idea.
So they
emily-sander_1_02-11-2025 (12:51):
Yeah.
Danger.
rory-randall-liebhart_1_0 (12:52):
There you
squadcaster-j7bi_1_02-11- (12:53):
type, okay, we're
emily-sander_1_02-11-2025_1 (12:54):
no, no.
squadcaster-j7bi_1_02-11- (12:54):
Mary.
Now, and I've even been guiltyof some of these Hail Mary type
ideas because, you know, we're,we're missing numbers.
And I'm like, okay, you know,we're going to invent a new, um,
a new product that, you know,reads websites to blind people.
So I mean, you know, it's, no,it,
emily-sander_1_02-11-2025_1 (13:09):
But you know, those like
deliberately and likethoughtfully, like you do them
quickly on the fly, but it's,I've seen people just like flail
and it's like, no, no, no, no.
Stop panicking.
Stop panicking.
Just like go back to thefundamentals.
Like hit your, hit your mark.
Like,
squadcaster-j7bi_1_02-11-2 (13:23):
they go the other direction.
And, and I've, I've recentlytalked to a founder where they
basically were like, yeah, we'remissing numbers, but that's not
my problem.
Cause it's not my money anymore.
I got my, I got a bunch of mymoney out, so I'm not worried
about it.
And, you know, I, I used to stayup at night worried about
worrying about whether we couldmake payroll.
That's not my problem now.
And I'm like,
rory-randall-liebhart_1_02-1 (13:41):
if you
squadcaster-j7bi_1_02-11 (13:42):
that's not gonna,
rory-randall-liebhart_1_02-1 (13:43):
of your money involved, but you
know,
squadcaster-j7bi_1_02-11- (13:44):
That, that's not going to last.
You're not going to last toolong in the, in the king seat.
If, if you're not payingattention to the, to the, uh,
the capital.
And that's, you know, that,that, well, what me worry is not
really going to be a success.
So I've tended to see, you know,those two extremes where it's
like they start to flail becausethey freak.
And they're not logically movingthrough, okay, how do I get back
(14:07):
on track or, or is somethingfundamentally changed?
They don't want to have thedifficult conversation with
their private equity sponsor.
They don't want to go, you know,hey, we're, we made a premise
here in our business plan thatis no longer holding and trying
to understand why.
they go, well, I got a new greatidea, you know, we're gonna,
we're gonna go make a chopsticksrocket launch holder thing, or
(14:30):
You go to the other or they gothe other direction where
they're like, you know, screw itI can't do it.
No, you know, is their problem.
Not
emily-sander_1_02-11-2025 (14:37):
which on one end is like, why are you
doing that on the other end?
It's like, that's what they didto be successful before.
Like if something goes wrong,they have to do something.
They have to come up withsomething.
And so I think.
Like what we're highlightinghere is there's like a mind
shift and like approach change.
And there's also like, you're ina different financial position.
Like you just might not have,like when you're at a founder
(14:58):
led company and you're like oneof you're the original founder,
if you want to move moneyaround, you can.
And in this scenario, you've gota plan and the wiggle room is,
squadcaster-j7bi_1_02-11-202 (15:07):
of cases, you don't have those, you
don't have those tight covenantseither.
those tight
rory-randall-liebhart_1_02-11 (15:12):
I
emily-sander_1_02-11-2025 (15:12):
yeah,
squadcaster-j7bi_1_02-11-2 (15:12):
ones that are really going to, and
you
emily-sander_1_02-11-2025 (15:14):
yeah.
squadcaster-j7bi_1_02-1 (15:15):
someone else to answer to.
You, you might have your, yourfamily to
emily-sander_1_02-11-202 (15:18):
That's a big one.
squadcaster-j7bi_1_02-11-2 (15:19):
you, you know, you might not take a
paycheck.
You might, you might struggleyourself, but in this particular
case, it's the, you've gotupstream folks to answer to, and
you've got covenants to meet.
And if you're going to fail onthose, you, you're, you know,
that's going to be a bad answer.
rory-randall-liebhart_1_02-11 (15:34):
I mean just to put a finer point
of that if you're not used tohaving a a you know an active
like an actual board to answerto You know, it's it can be it
can be culture shock, you knowin a lot of ways for a founder
that may have a board But it'smore like friends of many
(15:56):
investors and
squadcaster-j7bi_1_02-11-2 (15:56):
Yep, and
emily-sander_1_02-11-2025 (15:58):
think there's like a nuance in there.
I want to call out that, thatthere are times within the, the
premise of we have a businessplan execute, execute to the
plan where like, Hey, we hadthis plan and now it needs to
change for like valid,legitimate reasons.
So let's talk about that.
Like, let me not just do that onmy own, but Hey, like COVID
happened or an industry shifthappened or just like, this
(16:19):
isn't working like we expect itto.
And here are some of my ideasabout.
You know, moving to an adjacentapproach and like those
conversations can and shouldhappen.
And a founder and CEO can bringthose ideas to the table knowing
that they might get told no, butsometimes it is like, what's the
creative process and what ideas,what new ideas can you bring to
(16:40):
the table?
squadcaster-j7bi_1_02-11-202 (16:41):
is going to know that market and
that business's capabilitiesbetter than anybody.
Same with that management teamthat that when you start going
on and we're getting a littleoff topic, but when you get a
little bit off course on yourbusiness, engage the management
team and then engage the privateequity folks.
And this becomes a group, agroup, collaborative, uh, group.
(17:02):
solution session rather than,you know, it's all on your
shoulders or it's not yourproblem.
It's, it's, it's in the middle.
It's actually everybody'schallenge, everybody's problem,
and everybody can contribute.
And your job as a chiefexecutive is to manage that
process.
emily-sander_1_02-11-2025_1 (17:18):
and I think like one of the things
there is everyone's first optionis for this to work like with
the management team intact.
I mean, like, because they doknow so much about the company,
the industry, et cetera, likeeveryone's option A is to make
this work.
They will have, like, there willbe contingency plans for option
B, C, D, E, F.
But like, it's in everyone'sbest interest, interest to get
(17:39):
this thing to work.
to work.
rory-randall-liebhart_1_02-1 (17:42):
On paper.
Anyway.
Yeah.
Yeah.
emily-sander_1_02-11-2025_1 (17:44):
And the, and the next thing is, you
know, from the investorsperspective, they've just
invested a whole bunch of moneyin this thing and they want
results.
So basically like when we'retalking about prove that you're
executing to the business planis like prove that you are
tracking and making progress tothe results that the PE firm
wants.
(18:04):
Is that like a simplifiedversion
rory-randall-liebhart_1_02- (18:06):
Oh, I mean,
emily-sander_1_02-11-2025_15 (18:06):
of
rory-randall-liebhart_1_02- (18:07):
You know, it's, that's spot on.
I mean, again, I keep comingback to this concept of debt.
It's such a big part of this,this operative phase of a
private equity.
There's a lot of it and it'spretty much always there.
Um, and so hitting your businessplan means you're able to
generate through cash overservice.
New debt.
It's, it's, it's, So that's amajor deviations from that are
(18:29):
just problematic.
It's, you know, you know, afounder led business pre pre
transaction.
You might be bootstrapping,might be on your own money.
It might be equity from friends,family, seed investors, angels,
et cetera.
And you don't really actuallyhave a, a payback period or, you
know, anything reallyspecifically defined, but now
you're in a more structured, itjust, there's more structure,
like from top down, it's justmore structure in this world,
(18:51):
governance wise.
Financing wise all of the above.
So yeah, hitting numbers isprobably more way more important
than
squadcaster-j7bi_1_02-11- (18:58):
Yeah.
The, the,
rory-randall-liebhart_1 (18:59):
getting to
squadcaster-j7bi_1_02-11-20 (18:59):
key that, the key that we used Emily
and the companies that I've runor been chief financial officer
in, have been has been theconcept of a flash report a
weekly flash report where weidentified based upon our
business based upon our businessrequirements and a business plan
what are the four to six not 600not two what are the four to six
(19:23):
key drivers to ensure that we'reeither on track or off track and
can be early warnings to be ontrack off track or ahead of plan
behind plan we would report thatout internally Every week, we
would report that out to theprivate equity team every week.
And you know, I, I wouldgenerally voice over on my
weekly calls when I was a chiefexecutive.
(19:43):
I would use that as the briefingsheet, and we would, you know, I
would voice over a, a narrativearound it.
I would generally ask my, my,uh, C-level folks and department
heads to get me inputs, but youcan't allow.
It's that classic, like, thefurther you get off track, it's
that, you know, one degree, onedegree off, off, you know, on an
(20:07):
airliner.
you decide to go from Seattleand you're headed to London, you
may, you may very well end up inParis.
And that's, that's a problem.
The further you go withoutmaking the course correction,
the harder it is to coursecorrect.
And so we use the flash report,and it was a weekly, like, it's
a weekly cadence.
And with the clients I've gottoday, they have flash reports
and it's a weekly cadence.
(20:27):
And you know, at least then, youknow where you're at and you can
start making, um, start makingadjustments accordingly to, to
get yourself on track or toreset expectations.
emily-sander_1_02-11-2025 (20:38):
Yeah, we should do a whole episode on
flash report.
We'll take a note of that.
Okay, so we talked about likeCEO founder changes CFO changes
which might be a brand new CFObrought in by the PE firm What
are some other like call outchanges to the leadership team
that people should be aware of?
squadcaster-j7bi_1_02-11-2 (20:57):
The, the biggest one that I, and I,
and I'm going to, I'm going togo right into your wheelhouse,
Sander.
Um, the biggest one is I havefound, and it didn't matter
whether it was at Beeline withKarina, whether it was, Um, at
G2 Web Services with Karina, orwhether it was at Fusion Zone
Automotive with Emily.
(21:18):
Anytime I've been in a chiefexecutive role where you've had
a private equity sponsor, is achange in how you have to manage
those, disparate departments,those dis, you kind of
internally manage.
And I have relied on either inname or in function, a chief of
staff, where a lot of timesfolks don't have such a such a
(21:40):
function in their organizationprior to private equity you're
generally going to need it afterbecause there's so much
additional reporting there's somuch additional intelligence
that's needed you're moving thatmuch faster that the
coordination becomes very veryvery difficult to have the ceo
or cfo trying to do all that atonce and it's Beyond it's a
(22:02):
broader scope than even a chiefoperating officer is going to
have.
And so that's that, that changeis one that I, you know, I will
pound on the table.
I think when I did yourleveraging leadership podcast,
um, a year or so ago, I kind ofsaid, look, this is something
you need to consider if you'rein that position.
And I'd say it again here.
emily-sander_1_02-11-2025 (22:21):
Yeah, no, I mean I see like lots of
Capital partners pretty muchdemanding like you will have a
chief of staff.
You can go find one or will wehave one, um, in our team that
we can deploy into, into thisportco.
And I also see a lot offounders, like five to 10 people
in.
rory-randall-liebhart_1_0 (22:37):
Yeah,
emily-sander_1_02-11-2025_1 (22:37):
One of their first hires is a chief
of staff now.
And it's like, they're doingfunctional roles and then they
hand off as they recruit andhire people.
But it's, it's becoming more ofa thing because they are that
like Jack or Jill of all trades.
And they can be a sweeper andkind of porpoise in and out of
like the tactical and practicalstrategic back down again.
And, you know, altitude ofinvolvement is high.
And then they kind of dive deepdown into the organization.
(23:00):
So, um, yeah, it's a.
rory-randall-liebhart_1_0 (23:02):
other stakeholders in this new world,
you know, um, coordinatingvertically and horizontally, you
know, whether whether it's liketo line up the requirements of
lenders with the operations ofthe business, line up the
governance of a board with themanagement of the business,
coordinating all of those thingsand making sure that all these
things are running.
(23:22):
Oh, and by the way, executing acore business plan.
I mean, there's just so muchinvolved that you do need that a
conductor in a lot of ways.
Even if you have very capable Clevel executives individually.
All right.
emily-sander_1_02-11-2025_1 (23:36):
And sometimes, I mean, I remember
talking to people further downthe org, VP directors,
management level, who like theirworld, like maybe not had been
as, uh, changed as much by PEinvestors coming on, but they
knew things were different andthey knew things were at a
different pace and differentthings were happening around
them.
And, you know, if, if the CEO.
(23:59):
And a C suite team, like this istheir first rodeo.
How are they going tocommunicate that down to their
people?
So just helping at all levels ofthe organization, like it's
going to be fine.
Here's what's happening.
Here's what we need to do.
Everyone go this way.
I'm like, good job going thisway.
And now we're just going torinse and repeat and keep making
progress.
So I think even someone just inand out of the organization like
that can be, can be helpful.
(24:21):
Um, what else I'm trying tothink in our last few minutes
here for this one.
Big transition has happened.
new board structure, maybe somenew leadership members.
squadcaster-j7bi_1_02-11- (24:35):
other piece, and this is going more on
a CFO side as well, um, I knowwe put it in the book, um, but
there's a lot of new reportingthat's going to, that's going to
happen.
And one of the, one of thepositions that I have tended to
be late in hiring to my owndetriment has been someone who
is, uh, financial planning andanalysis specialist, um, whether
(24:57):
that's at mid tier, senior, oreven junior.
Um, and we've had some, I mean,between Rory and I, we've had
some really talented folks,
rory-randall-liebhart_1_0 (25:06):
have,
squadcaster-j7bi_1_02-11-20 (25:06):
um, have, that have been, that have
been in that FP& A role.
Um, but that is, that is,
rory-randall-liebhart_1_02- (25:13):
you know, C level officers
themselves.
Like, it's been
squadcaster-j7bi_1_0 (25:15):
Liebhardt.
So, I mean, those are,
rory-randall-liebhart_1_02- (25:18):
and then, I mean, others, others
that have kind of, um, you know,worked for me over time as well.
squadcaster-j7bi_1_02-11-2 (25:23):
Yep.
Yeah.
It's, it's a,
rory-randall-liebhart_1_0 (25:24):
role.
You can
squadcaster-j7bi_1_02-11-2 (25:25):
it's a cri.
It is an absolutely criticalrole and a lot of times what I,
what I see is, is CFOs and CEOs,especially those that have gone
through the transition andthey're kind of riding through,
so they were there before, theydon't realize kinda what the
tsunami of reporting is gonna beand the level of detail that
they're gonna need.
And I, I would put high on mylist of like, here's something
(25:49):
that needs to change.
The reporting is going to beforced on you.
The, the data gathering, thedata driven decisions and all
this other, you know, kind of,kind of wonky stuff is going to
come down on you.
You should be pretty quicklyprepared to bring on an FP& A,
uh, analyst or at least, uh, Ifnot, bring someone on.
(26:09):
Talk to the private equity folksabout can they provide you with
some help initially to get youset up with reporting packages
and, and because they should bereasonably familiar given that
they did the underwriting, whatthey're looking for for KPIs and
other things.
So ask them to help at thebeginning and, and they may see
the need and authorize you tohire, uh, even if it's not in
(26:30):
your budget, but that's going tobe something that is, that's a
big change and that's going tobe something
emily-sander_1_02-11-2025 (26:34):
Yeah.
squadcaster-j7bi_1_02-11- (26:35):
needs to embrace quickly.
emily-sander_1_02-11-2025_1 (26:37):
And they often, the PE firm also
often has a associate because weuse, you know, we use basically
their associate level on afractional basis for a number of
our companies we've been at.
So that's a good call out.
Yeah.
rory-randall-liebhart_1_ (26:51):
Again, when you take on additional
stakeholders at an institutionallevel, that sort of thing.
Yeah.
You may never have gone throughfinancial audit before, you
know, you may
squadcaster-j7bi_1_02-11-202 (27:00):
Oh yeah.
rory-randall-liebhart_1_02- (27:01):
you know, and then you start to get
into that, that level of, uh,requirement from not only PD
group, of course, but likemember requirements and things
like that, borrowing bases, allof these things.
And that's where I think thepremium in the prior generation
of a business is all aboutbookkeeping and, you know, some,
some, some, some very high levelfinancial analysis, probably,
but in this iteration, it's muchmore about, as I said, FPA, and
(27:24):
analysis.
uh, governance, uh, compliance,all of these things that maybe
the, homegrown person thatyou've had in the role, you
know, that's, I don't know,whatever title it may be, but
the head of and accounting mayjust just be over their head,
you
squadcaster-j7bi_1_02-11- (27:42):
Yeah, I got, I got one, I got one last
one, which is, uh, as I wasthinking through it, which is,
as the chief executive probablydealt with, you know, I'll do my
own contracts or I've got, youknow, my, my brother in law Stu
will do the contracts and, youknow, my insurance.
I've got, you know, my buddyJohn does my insurance.
When you get into this, intothis environment, expect your
(28:04):
legal bills and your insuranceto go way up because the, the
private equity guys are lookingat this going, how do I mitigate
uncontrollable risks?
Or how do I control risks thatwould otherwise be, uh,
existential and outside mycontrol?
And so you will end up withprobably about two thirds of the
time, we've had new insurance,brokers who had completely new
(28:27):
policies and the policy, theamount of the premium went up to
three X because they wanted toget higher, higher limits or
additional coverage.
And then the second was, youknow, I've been in situations
and again, I'm a, I'm apracticing attorney.
Where I've been told, nope,you're, I, that's nice, I, I, I
like your, I like your JD, Ilike your license, you're
(28:48):
sending this off to 700 an hourlaw firm to review, and you
know, and just because we're notgoing to take that risk, and you
know, it could be simple stufflike a lease, and they're going,
nope, we're not going to takethat risk, send it off and get
it done, and don't take that,don't take that personal and
recognize that that's a change,it's a risk management approach
that the private equity guys useto take their risk premium down.
(29:11):
Okay.
And, you know, Stu and John aregreat guys, and I'm sure you've
enjoyed working with them overthe years, but it ain't your
company anymore, and you'reprobably going to have to work
with some new professionals inthat risk management area.
emily-sander_1_02-11-2025 (29:24):
Okay.
And the last one I'll throw outthere is, um, as you're kind of
like shuffling the deck chairs,there's often hidden talent in
your organization that mighthave an opportunity to pop out
into a different role, like apromoted role.
And so if you have talent onyour team, this can be a
catalyst for like putting themin positions to, to go on and do
(29:46):
good things.
I mean, I've had this happen tome, Rory, you've had that
experience.
And, um, I, all three of ushave.
paid this forward to otherpeople as well.
So that's just something to keepan eye out for, like who on my
team is like, Oh my gosh, okay,you know, Sandra over here or
Damien over there, like, yes,let's move them into, into this
new role.
rory-randall-liebhart_1_0 (30:06):
Yeah.
I think, um, well first off, Ithink, you know, talent, talent,
recognition, talent management,all that stuff is like, you
know, that should be happeningwhether or not you're owned by
private equity.
Let's just say
emily-sander_1_02-11-2025_1 (30:16):
For sure.
There just might be big moveshappening right now where you'd
be like, okay,
rory-randall-liebhart_1_02-1 (30:21):
is moving pieces around to
accommodate the new needs of abusiness.
And what, what I've observed andexperienced and, you know, led
is this change that reallyunlocks, you know, more
capability for people.
It gives them a shot where maybein a, another environment that
just, that the, the, the playingfield was just, Small, right?
(30:43):
So people
squadcaster-j7bi_1_02-11-2 (30:44):
Yep.
rory-randall-liebhart_1_0 (30:44):
lanes and now there's just more to do.
The last thing anyone wants todo is go spend a bunch of money
buying something new.
You know, and we all know thatthere's so much value in what
incumbent you know, folks haveas far as knowledge of the
business, knowledge of thecustomers in particular.
So yeah, you, you just, youexpand, you look inward first.
I think that that's, that'salways the best thing.
(31:06):
And I think in private equityI've seen it the most because,
you know, You know, it seemslike the most logical step, um,
having to go completely outsidethe business, incur more costs,
probably, and, and, uh, youknow, have a longer ramp to
somebody up and running.
And that's what I would say,too, is, you know, time seems to
move very quickly under PE.
emily-sander_1_02-11-2025 (31:26):
yeah.
rory-randall-liebhart_1_ (31:27):
You're under strict timelines, and, you
know, results are required fast.
So you, you really want to put apremium on the talent.
You already have that already.
And it's a super.
by product if they, you know,flourish in that role and, you
know, get more opportunity,that's, that's
squadcaster-j7bi_1_02-11-20 (31:43):
And if you're the, if you're the new
guy that gets inserted by thePE, do one on ones with
everybody.
If you can get away with it.
I've, I've done that pretty muchevery time I've walked into an
organization and found hiddentalent that had gotten
pigeonholed because they'd beenthere so long and they blah,
blah, blah, blah, blah.
And they didn't.
And you, if you're the new guy.
(32:05):
Talk to everybody.
Do one on ones.
Get it all out on a table.
You're going to find someamazing people that probably
have not gotten recognizedbecause they were hired as the
receptionist and that's allthey've done for 15 years, but
they're capable of doing a hellof a lot more.
rory-randall-liebhart_1_0 (32:19):
Yeah.
I,
emily-sander_1_02-11-2025_ (32:20):
Yes.
rory-randall-liebhar (32:21):
completely with that.
emily-sander_1_02-11-2025_1 (32:22):
I'm going to leave it on that.
That's a good note to leave iton.
rory-randall-liebhart_1_0 (32:24):
Yeah.
emily-sander_1_02-11 (32:25):
Beautiful.
Now, all right listeners, nowyou know a little bit more about
what happens after the deal goesdown and we will catch you next
time on the Private EquityExperience podcast.
rory-randall-liebhart_1_0 (32:34):
Catch you later.
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