From Public to Private: Lessons in Leadership and Value

Discussion with Tim Rod

The transition from a publicly traded corporation to a privately owned company often marks a significant shift in career trajectory, strategy, and leadership style. This was the case for Tim Rod, former Chief Technology Officer (CTO) and expert in leveraging technology to achieve value, who shared insights into this transition and the unique challenges and opportunities that come with private equity ownership.

Key Takeaways

• Private companies focus on long-term, sustainable growth, unlike public companies that prioritize quarterly results.
• PE ownership shifts priorities to strict value creation within short timelines, requiring detailed planning and accelerated execution.
• Every executive role in a PE-backed company demands financial expertise and close collaboration with CFO and FP&A teams.
• Executive involvement in M&A decisions, supported by tools like scoring systems, ensures alignment with PE goals and fosters impactful outcomes.
• Thriving in PE environments requires resilience, disciplined decision-making, and a deep understanding of the PE firm's perspective and metrics.

Career Transition: Public to Private

For Tim Rod, moving from a publicly traded company with over 100,000 employees to a privately owned organization with 700 employees and US $1 billion in revenue was a pivotal moment. Public companies frequently emphasize quarterly earnings, which can drive short-term behaviors and decision-making. Private companies, by contrast, can focus on long-term, sustainable growth, which enables more strategic and deliberate operational decisions.

“In a private company, the focus shifts to sustainable, long-term growth, which fundamentally changes the decision-making process”, Rod explained.

Rod highlighted that the opportunity for ownership and equity participation was a motivating factor in his decision. “Having the chance to influence the company’s growth trajectory and potentially benefit from a significant financial event is an enticing prospect for senior executives”, he noted. This shift also allowed him to work in a more agile and impactful environment.

The Impact of Private Equity Ownership

Navigating private equity (PE) ownership brings unique challenges and opportunities. Initially, the company operated under a minority investment model, which fostered a partnership focused on recurring returns. This changed dramatically with a buyout by a PE firm, introducing a time-sensitive, cash-driven strategy that required rigorous adherence to value creation plans.

“The transition from a partnership model to a PE ownership model is stark. A partnership encourages long-term growth, while PE ownership demands strict value creation within a tight timeframe”, Rod said.

Key areas of change included:

• Value Creation Planning: Investments require detailed forecasts outlining expected returns and timelines. Rod emphasized the importance of presenting robust documentation to justify any proposed investments, ensuring alignment with PE firm expectations.

• Accelerated Timelines: With typical PE exit strategies targeting five years, investments had to deliver measurable results quickly, often forcing the company to prioritize short-term returns over longer-term initiatives. “In PE-backed firms, there is little room for projects that can’t generate tangible value within the investment window,” Rod explained.

The emphasis on immediate execution reshaped the company’s approach to service development, productization, and mergers and acquisitions (M&A) activity.

Leadership in a PE-Owned Environment

Operating in a PE-owned company demands a sharp focus on financial expertise and adaptability, requiring executives to embed financial considerations into every aspect of decision-making. Beyond financial expertise, success in a PE-driven environment requires resilience, quick decision-making, and the ability to thrive under high-pressure, time-sensitive circumstances. Building strong cross-functional relationships, especially with finance and operations, is critical to aligning strategies with the firm’s goals. 

For Rod, this meant building close partnerships with financial teams and integrating financial considerations into every aspect of his role. “Every decision has financial implications that require careful planning and collaboration with the CFO and FP&A teams”, Rod noted.

One of the key successes in Rod’s leadership was involvement in the M&A process. He highlighted the importance of executive input in shaping the company’s direction, stating that collaboration between the PE firm and the executive team fosters stronger alignment. At his company, a scoring system for M&A opportunities was developed to bring objectivity and streamline decision-making. “The scoring system allowed us to weigh opportunities impartially, creating clarity in discussions and ensuring all perspectives were considered”, he shared.

The first-year post-acquisition, Rod explained, is often the most challenging. “Restructuring, cost-cutting, and cultural adjustments dominate the initial phase. While the broader workforce eventually stabilizes, the executive team remains under constant pressure to drive value creation until the eventual exit”, he added.

Advice for Executives Considering a Move to PE-Backed Firms

Rod strongly encouraged executives to consider transitioning to a PE-backed company at least once in their careers, especially those with entrepreneurial aspirations. Success in this environment requires a deep understanding of PE metrics and alignment with their strategic objectives.

“You must understand the PE firm’s perspective. Their goals and metrics drive decision-making, so aligning your initiatives with their vision is crucial to thriving”, Rod advised.

Executives with prior experience in PE environments often find it easier to navigate these dynamics. Rod observed that familiarity with PE-driven strategies enhances an executive’s ability to contribute effectively and increases their value to future acquirers.

“Having experience with prior PE transactions is invaluable. It equips you to better navigate the complexities and contribute to value creation”, he noted.

Rod also emphasized the importance of being prepared for the financial rigor and commitment required. “Every role in a PE-backed company, no matter the department, has a financial component. Executives must collaborate closely with financial teams to ensure alignment with the firm’s objectives”, he said.

Moving Forward

The transition from public to private companies and the dynamics of private equity (PE) ownership offer invaluable lessons in leadership, financial acumen, and strategic planning. For those willing to embrace these challenges, the experience can significantly enhance their career trajectory. As Tim Rod concluded, “understanding the perspectives of all stakeholders—from PE firms to executive teams—is essential to excelling in this environment”.

Drawing from Rod’s experience, he highlights four critical takeaways for executives navigating a PE-driven environment. The first year post-acquisition is often the most challenging, characterized by restructuring, cost-cutting, and organizational changes. During this time, executives must stay resilient and focused, delivering significant value under tight timelines. Resilience, Rod noted, is key to navigating the pressures and demands of this phase.

Additionally, collaboration with financial teams becomes a cornerstone of success. As Rod observed, “No matter what your job is, it now also includes finance”. Building strong partnerships with the CFO and FP&A teams ensures decisions align with the financial goals of the PE firm, underscoring the importance of integrating financial rigor into every aspect of leadership.

Another essential aspect is the ability to prioritize measurable value creation. PE firms demand disciplined decision-making, where every investment is tied to clear forecasts and measurable returns. “Every investment had to be tied back to documented value generation forecasts”, Rod emphasized, reflecting the heightened accountability required in this environment.

Finally, understanding the PE firm’s perspective is paramount. Thriving in a PE-backed company means aligning with the firm’s goals and decision-making metrics. As Rod noted, “If you don’t understand their perspective, it doesn’t matter how good your ideas are”. This alignment enables executives to contribute effectively and gain the trust and support of the PE firm, paving the way for long-term success.