Delivering leadership assessment & hiring (from home)
Feeling assured of future investment performance
How leadership assessment set a PE deal on the right track
No PE house wants to complete a deal with nagging doubts over the leadership team at their newly-acquired business. A rigorous leadership assessment during due diligence can confirm the PE team’s suspicions or give them welcome reassurance. Moreover, an assessment gives PE houses insight they can act on to mitigate risk and maximize the deal’s chance of success.
Assessing the people behind the deal
PE partners usually have good memories, especially when it comes to investments that performed poorly. So, when a new deal is in the offing, PE houses will have concerns if the target company’s owners display similar traits of leaders involved in a previous disappointing deal.
This was the situation our client faced when exploring the acquisition of an innovative SME specialising in internet data and security. To inform their decision making, the PE house wanted an independent, objective analysis of the company’s owner/founders. We were engaged to provide a rigorous leadership assessment as a central part of early-stage due diligence.
Understanding the issues
The target company was a high potential business led by three driven, highly entrepreneurial founders who had a clear vision for its future. As is common in SMEs, the leaders had very hands-on roles and the business had few formal structures in place. Our task was to assess whether these leaders were equipped to scale the company – and to identify if their personalities were a ‘fit’ for the PE house and its goals.
Executing the methodology
A due diligence assessment is very different to those used in recruitment. In this case, the leaders completed a detailed personality questionnaire in advance of meeting our assessors. Then, we talked to each leader/participant/individual in turn over the course of two to three hours.
The sessions began with a discussion of the psychometrics, then expanded into fluid two-way conversations, rather than a series of questions and answers. The skill, tone and manner of the assessor are key to getting leaders to fully open up. We were able to dig deep into their motivations, their ambitions and the dynamic in their relationships.
Providing the insight
Following these conversations, we compiled our data, analysis and recommendations into a full report, then discussed its findings in detail with the PE house.
Our analysis suggested that the leadership team did indeed possess the ability to scale, providing they were given the right timeframes and targets. By identifying the pace at which change should best occur, we gave the PE house invaluable extra insight to act on.
In addition, the report provided recommendations on the ‘human factors’ that would improve the performance of the investment. This included guidance on creating a more balanced dynamic in the top team, and on how the PE could engage productively with the three different personalities involved.
Looking to the future, we also identified the skillsets and types of people who should be brought in to complement the founder’s talents in line with business growth.
Seeing the returns
The data and recommendations in the report gave reassurance to the PE house and confidence in their decision making. The deal was done. What happened next? To date, the company has hit all its performance targets in the value creation phase. Its future looks very bright indeed. The PE house is very satisfied with the decisions it has made.
How great conversations help predict the future
A skilled assessor is different to a skilled interviewer. An assessment is an open, two-way exchange, rather than a structured question and answer session. The secret is to engage in a conversation that stimulates the leader on their level.
You want the individuals to talk openly about the past, the future and themselves. They will do this when there is genuine interest in what they have achieved and when the questions asked provide different perspectives and generate insight. This type of discussion provides a strong sense of where an individual has come from, what drives them and how they think, putting the flesh on the bones of the psychometric profiles. Armed with this type of data, realistic hypotheses can be made about how a leader might act as well as perform in the future.
“We partner with NSCG on human capital due diligence and find them to be credible, insightful, value-adding and totally professional.”