McLean Partnership

The changing role of Non-Executives in Private Equity

October 6, 2020

Within McLean’s Private Equity practice, we have witnessed the growing demand for Non-Executives who can additionally operate as a more hands on adviser, or ‘second CEO’ within portfolio businesses. The pandemic has further accelerated this trend and shown how critical these Non-Executive hybrids are as the board role has evolved.

 

The changing role of a NED in private equity owned companies:

The traditional dividing line between a CEO running the company and a board providing fiduciary oversight has become increasingly blurred. While for some that model still exists, for many businesses the modern-day Non-Executive has evolved and is very different. They may be an executive themselves, and yet be increasingly required to be more active and hands on. For private equity portfolio companies, this model has always been popular and given the pandemic McLean has seen how these hybrid board members can be imperative to business resilience and valuable to shareholders.

 

Dynamic change:

Even in buoyant market conditions, some of our private equity clients acquire businesses that are either stressed or challenged in some way. Add turbulent trading conditions, political uncertainty and a global pandemic and the current environment is volatile to say the least. It is during these challenging times that businesses require a board who can not only advise quarterly, but can also work closely with the executive management, providing regular independent strategic input and in some cases work with senior management within the business. For our clients with portfolio companies in frontier markets, this usually requires boots on the ground (or in the current climate, eyes on the screen), helping executives deal with material issues from supply chain to employee safety.

Ed Williams, Head of Value Creation, Actis, commented. “Covid-19 has impacted every business in every functional area. Business leaders have been stretched well beyond their normal comfort zones, expected to take tough decisions on every aspect of their business in real time. NEDs who have led through previous crises and recessions have provided invaluable support, bringing calm problem-solving skills and reassurance to the entire leadership team”.

 

Recent example:

A private equity client of McLean acquired a market-leading Food & Beverage business. The business was profitable and expanding but lagged behind other rivals on digitalisation. The Non-Executive appointed to advise the business had spent his career in transformational European casual dining companies and was instrumental in advising pioneering digital ordering rollouts. In conjunction with the management team, he advised on systems across the business, which will see improved customer experience and increased speed of service. Not only was his insight invaluable, but actual; oversight of the project provided a smooth transition and allowed the executive team to focus on day-to-day management. Throughout Covid-19 we have received consistent positive feedback from the shareholders regarding the placement of this Non-Executive.

It comes as no surprise that since the beginning of the Covid-19 crisis we have had growing interest in these new-wave Non-Executives, that have the ability to provide more hands-on and dynamic support.

 

The McLean Partnership have an extensive track record hiring for Private Equity firms and their portfolio companies. For a confidential discussion around hiring or advice in general, please contact: edwardking@mcleanpartnership.com.

 

Authors: Edward King and Henry Agnew