…. Investors in private equity are constantly seeking to understand the elusive qualities that distinguish a high-performing CEO from the rest. Identifying these characteristics early can significantly impact investment outcomes.

…. Our recent report "Comforting delusion or expensive blind spot? The importance of management teams in mid-market private equity transactions", drawing on data from 94 investors across 50 UK private equity houses, highlights that investors attribute two-thirds (67%) of investment returns to management quality, which is not only very high but also represents a substantial rise from 58% in 2004.

…. In today's private equity landscape, investors seem to be doing less management due diligence using third parties than previously. This retreat from formal MDD often stems from fast-moving deal processes or concerns about affecting the investor-CEO relationship at a sensitive time. When diligence is done, it frequently focuses narrowly on referencing and individual assessment.

…. It’s a common scenario: a board meeting where financial targets are dissected, market trends are debated, and strategic initiatives are mapped out. Yet, often, the very engine driving these ambitions – the team and organisation – remains a shadowy figure, its inner workings unexplored. Why do boards mostly operate in the dark regarding team and organisational effectiveness, and why does it matter?

…. A well-established predictor of team effectiveness has some similarity with a predictor of good partnerships or even marriages: moderate diversity of cognitive style but strong alignment around goals and values.

…. There is a striking takeaway from the latest Catalysis research on mid-market investor approaches to handling people issues is that when asked for their gut feel on the relative importance of management quality compared to other factors (including market, technology etc) in determining investment outcomes.

…. Growth company boards spend lots of time thinking about how to get the best performance from existing executives and which new roles may be needed to cope with expansion. Bandwidth and skill constraints are weighed up against budgets, and the trade-offs between those factors are debated.

…. There have been various research reports in the UK and US suggesting that private equity generates higher returns than public markets, even when adjusted for risk and fees. However, those returns seem to have declined over time due to increased competition, higher entry multiples, changes in debt markets and the greater instability of major economies.

…. Plenty of the mid-market growth companies we work with create group structures. That may be because of expansion into new territories, the separation of, say, services activities from a technology product, or through acquisitions.

…. We all know - by all the main metrics - that deal volumes and value have decreased significantly over the last, say, 18 months. Buyers and sellers both appear more reluctant to transact due to uncertain valuations, costly debt and economic sluggishness.

…. How do we get important things done in growth companies? Take the examples of Sales and Operations which are at the core of most businesses. For starters, we create dedicated functions and populate them with people who have relevant skills and manage them through senior managers with relevant experience.

…. Managers in growth companies expect to work hard and it is desirable that things run reasonably ‘hot’ because that forces teams to ignore trivial issues. But frequently that can tip over into unhelpful over-loading where we see the following phenomena:

…. Pretty much all the companies Catalysis gets to work with are going through a transition - or several transitions at once.

…. Imagine the following scenario. A year ago, the board decided to make a senior appointment to add capacity and capability to the senior team. Head-hunters were appointed, candidates screened, references taken, and an appointment made.

…. Some months ago, I argued that formal value creation methodologies – created to address the problems of a less favourable investing environment – could be self-defeating unless balanced by greater attention to how teams and organisations build value in practice (which Catalysis refers to as value enablement.

…. You’ve heard of shrinkflation in consumer products like chocolate bars, drinks and even toilet paper: smaller portions at the same or higher cost. Have you ever considered that the same might be happening with companies being backed by private equity, albeit for different reasons?

…. I suggested recently that private equity investors are involved in building ‘value machines’ built from four components: partnership; governance; expectations; team & organisation strategy.

…. It is often helpful to give labels to new concepts which otherwise stay fuzzy. The problem with fuzzy concepts is that they are hard to visualise, communicate and work on.

…. To have the highest probability of success in enabling value, the investor or Chair probably need to check whether all five contributions are likely to be provided by the people involved in post-deal planning and strategy setting. If there is a gap, it needs to be filled somehow.

Armed with more empowering assumptions; the insight, focus, and acceleration questions; and a desire to seek out low cost (in money but especially time) but high impact solutions, how might activities across the investment lifecycle become more value-adding?