When to Go and How to Go? Founder and Leader Transition in Private Equity Firms

30 Pages Posted: 24 Sep 2021

See all articles by Josh Lerner

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Diana Noble

Kirkos Partners

Multiple version iconThere are 2 versions of this paper

Date Written: February 28, 2021

Abstract

Leadership transition in private equity firms is an understudied field, despite the important, albeit controversial, role such firms play in developed economies. We analyzed 260 firms in an empirical study, supplemented by qualitative interviews with a small sample of highly experienced LPs and GP founders and leaders who have experienced such transitions first hand. Our research shows that private equity transitions manifest very differently from those in better studied public corporations. It appears that a) founders and leaders in GPs stay in their positions considerably longer than other sectors, b) are more likely to move on once they are outperforming, and c) if underperforming, their firms are more likely to see an uplift from a transition. In addition, d) transitions are idiosyncratic, internally driven processes with little accepted best practice or governance, e) these processes are frequently characterized by some frictions, and f) LPs have observed many sub-optimal processes and would prefer greater transparency.

Keywords: Buyout, leadership, succession, venture capital

JEL Classification: G24, G34

Suggested Citation

Lerner, Josh and Noble, Diana, When to Go and How to Go? Founder and Leader Transition in Private Equity Firms (February 28, 2021). Harvard Business School Entrepreneurial Management Working Paper No. 22-014, Harvard Business School Finance Working Paper No. 22-014, Available at SSRN: https://ssrn.com/abstract=3929704 or http://dx.doi.org/10.2139/ssrn.3929704

Josh Lerner (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Diana Noble

Kirkos Partners ( email )

London
United Kingdom

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