Governance fit — that is, how a sponsor collaborates with and supports their portfolio company’s management team — is central to value creation in private equity. Achieving governance fit prevents costly misalignment.
Why Sponsor-Executive Governance Fit Matters
The persistence of extended hold periods has led to increased prioritization of top-line growth, making it essential for sponsors and executives to achieve optimal governance fit, particularly as deal values and volume begin to improve.
- Hold periods remain extended. According to Pitchbook data, 40% of all currently held PE assets have been held longer than four years. Firms are focused on operational value-add to maintain strong performance amid longer time frames.
- Top-line growth is now the primary driver for portfolio company performance, per EY’s 2024 report. While previous macroeconomic challenges placed liquidity management and cost reduction at the forefront, revenue growth has become priority number one.
- PE’s share of global deal value climbed back to 41.2%, nearing its five-year average and improving from the 39.5% it held in 2023, per Pitchbook.
- The demand for excellence in commercial leadership roles such as CROs, CMOs, and GTM-focused Operating Partners has risen in response to an increased emphasis on organic growth, as evidenced by the priorities of the private equity firms with whom we work.
This potential rebound in activity requires executive talent capable of managing the full M&A lifecycle while sustaining long-term growth to capitalize on emerging opportunities. Recruiting and retaining top-tier talent remains critical amid these conditions. Sponsors must prioritize alignment with their executives to remain competitive in an improving market and avoid costly turnover that cou...