PE HUB Wire Highlights, 2.19.19


Photo of Luisa Beltran, PE HUB Senior Editor, courtesy of Buyouts Insider.

Why portfolio CEOs need to fire people quickly; Ohio teachers’ pension eyes sale of $1 bln-plus worth of PE stakes; Family offices hit cannabis obstacles

So much news this morning, Hubsters. Sen. Bernie Sanders is launching his second presidential bid, Karl Lagerfeld has died at 85 and 16 states have filed lawsuits against the Trump administration. More importantly, Netflix has cancelled “Jessica Jones.” Now I know this isn’t the biggest news, but it just made me so sad. Finally, we have a female superhero, who is multilayered while being awesome, and she’s gone.

We have an interesting column today from JP Flaum of Green Peak and Jeff Warrenof Russell Reynoldswho write about the need for CEOs to fire people. That’s right, newly installed CEOs of portfolio companies should oust people as soon as possible to get the best executive team. According to Flaum and Warren, deciding “who stays and who goes within just three months” produces the best results.

I found this very interesting, considering data we’ve reported on before. PE firms typically fire their portfolio CEOs within two years of an acquisition, Buyouts reported in 2017, citing data from AlixPartners. CEOs will also likely be sent packing during the fund’s investment cycle, Buyouts said. Failure to deliver results in line with expectations was a big reason PE firms oust CEOs.

This, of course, leads me to wonder who is actually at fault when a portfolio company doesn’t hit its expected results. Is it the CEO or the management team? Combined? How can you know before the 100-day deadline? Hubsters, what are your thoughts? Email them to me at [email protected].

How much? Every year around this time reports emerge about how much PE executives make, according to SEC filings. David RubensteinWilliam Conway and Daniel D’Aniello, founders of Carlyle Groupreceived a combined $183 million in compensation and dividends in 2018, Bloomberg is reporting. This compares to KKRco-founders Henry Kravis and George Roberts, who received a combined $203 million in 2018, Bloomberg said in a separate story.

Cannabis: Our hardworking Iris Dorbian has a story on how family offices have been pioneers in cannabis investing but are facing obstacles as they try to put their money to work. Check out Iris’s smokin’ story here.

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