Key Takeaways   
  • Value-Add, a private equity sponsor’s ability to bring more to the table to drive value creation than just strategic oversight, is one of PE-CXO’s Nine Dimensions of Governance Fit® that enables executive success.  
 
  • Acquisition know-how and expertise, effective portfolio company management, and alignment-focused integration of operating partners into portfolio companies are all ways sponsors drive value.  
 
  • Executives can facilitate more transparent, objective-focused communication with sponsors to maximize the efficacy of their full array of resources and achieve higher returns.  

A sponsor’s ability to add value is a hallmark of a successful sponsor-executive partnership. PE-CXO’s recent report, The Top 50 Private Equity Firms for Executives of 2024, revealed that Value-Add ranked #2 among all attributes when executives were asked to rank the Nine Dimensions of Governance Fit®. Nearly 82% of executives who felt their sponsor’s operating team failed to add significant value, strategic insights, and effective resources would not return to work for that sponsor again. 

From strategic guidance to operational prowess, sponsors leverage a diverse arsenal of assets to propel growth. However, adding maximum value depends not only on the quantity of resources, but in their strategic deployment and alignment with the investment thesis. PE-backed executives must both carefully vet this quality during diligence and do their part to optimize these resources when collaborating with their sponsor to drive returns.  

Understanding the Spectrum of Sponsor Resources  

“I value my sponsor’s market insight and broader perspective across multiple portfolio companies. Better informed decisions based on experiences or lessons learned from similar situations across their portfolio are invaluable.”

— Anonymous CFO, PE-CXO Top 50 Survey

Value-adding sponsors serve as partners in filling management team gaps, a capability that is often crucial for lower to middle-market PE-backed companies. The array of resources a sponsor can offer varies widely from fund to fund, encompassing both the nature and deployment of these resources. 

Understanding which resources are most beneficial depends...