The human ingredient in investment capital

Nowadays. Consequently, the inconsistency within the management teams remains a risk of key execution in the context of investment capital transactions in Canada. In addition, Although most companies evaluate before the closing the ability of the CEO to fulfill his role. For example, many of them are still based on an instinctive approach or on disparate evaluation models, especially in the case of transactions in which several investors participate. In addition,

A Canadian capital-investment company indicated that initially, it managed on a case-by-case basis the evaluations of management members. Similarly, Sometimes she called on external advisers; Other times, the instinct prevailed. Since then. a pointing card has been introduced to better assess the ability of the CEO to implement the value creation plan (PCV). It is an advance, even if gaps persist as for the uniformity and the extent of the evaluation. human ingredient investment capital

Empathy is one of the main criteria for assessing leadership. Indeed, it has been proven that empathy promotes a healthier working culture and improves financial performance2.

Companies that invest early to have a clear portrait of management members are better positioned for:

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• supervise and support the new heads of management;
• Mobilizing the teams when the founder of a company is replaced as chief executive;
• Reduce cultural friction linked to inherited standards, identity changes and divergent expectations.

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Legendary box: Companies which carry out an assessment of the preparation of the chief executive before the closing of a transaction are 2.4 times more likely to reach their targets in terms of value creation within the first 18 months.

Advice for the standardization of evaluations of management members:

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• Follow up on the results obtained by managers hired in the past using data.
• Adjust the criteria human ingredient investment capital according to the value creation plan and not be limited to generic skills.
• Use structured tools (eg, psychometric tests, behavioral interviews, references).
• Perform assessments at different stages (control diligent to integration and execution).

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By integrating data on the management team into the thesis on which a transaction is based, companies can reduce obstacles after the closure, accelerate execution and build leadership stories that make it possible to support high exit multiple.