Home Private Equity The Three Characteristics PE Looks for in a CEO or Management Team

The Three Characteristics PE Looks for in a CEO or Management Team


As the private equity industry matures, an undeniable trend is the shift from a focus on financial engineering to operating strategy. To that end, finding a great CEO or management team is critical. Montage Partners, a Scottsdale, Ariz.-based lower middle market firm, says it has three non-negotiable characteristics it looks for when deciding on an investment.

Founded in 2004, Montage Partners has completed 19 successful investments across business services, consumer, healthcare, industrial and technology industries. The eight-person team prides itself on being a people-first private equity firm investing in established companies that share a goal of growing their business.

Jordan Tate, a managing partner with Montage Partners, says his firm has three characteristics they look for in a portfolio company CEO or management team:

1. a sense of urgency

2. a fact-based speaker

3. an understanding on how to grow equity value

A sense of urgency is not just talking about working long hours, weekends or nights, Tate explains.

“What we’re talking about is somebody who is able to focus on a limited number of high-impact initiatives and move those balls forward at a fast pace,” he says. “That may sound simple, but it’s more difficult in practice. What we want to do is find CEOs who can block out that noise, focus on a limited number of very specific initiatives and not waste any time.”

Being a fact-based speaker means means not shying away from specifics, Tate says. Managers that tend to speak in generalities, are vague, have a reluctance to speak on specifics, or don’t articulate specific goals can all make the partnership a more difficult road to navigate.

“In our experience working with such managers, things tend to change over time and that lends itself towards surprises, and surprises are not good in our business for anybody,” he says. “We don’t want to surprise people and we don’t want to be surprised. So what we found is that people who speak in specific facts are less likely to move the goalposts over time.”

In explaining how Montage thinks about growing equity value, Tate starts by explaining what he doesn’t mean. It’s not having a maniacal focus on financials, he emphasizes. In fact, Tate adds that this often ends up backfiring. Tate and his partners are not looking for a professional financial engineer, banker or “excel jockey.” Instead, a CEO who understands how to grow equity value is a leader who understands how all of the puzzle pieces of a firm fit together.

“We’re looking for somebody who has an understanding of how everything ties together,” he says. “So they can speak in terms of Ebitda, margin profile, and customer retention; there’s a common language. We can have an efficient conversation there, but they also understand things like how culture, the energy and engagement of the people on the team, the infrastructure building, and investments in technology all can influence the enterprise value of the company typically through the multiple that the company will ultimately be valued at.”

Beyond these characteristics, Montage Partners has six core values that the firm expects its CEOs to adhere to: valuing people, transparency, integrity, excellence, accountability and mutual respect.

“We’re super transparent about what our motives are,” he says. “We want the management teams that we’re partnering with to be very clear about their motives, whatever they are. Whether they view us as just a stepping stone to do some kind of recap transaction and they’re going to take us out in the future or whether they are looking for a partner for 20 years or five years.”

Contact Tate at [email protected].

What do you look for in a CEO or management team? Let me know at [email protected].

Cole Lipsky

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