Private equity holding periods lead to hiring push for value-creation roles

As private equity holding periods hit their highest rate in 20 years, firms are funneling more attention to value-creation roles in their portfolio companies. Often, these positions include operating partners, senior financial leaders and, especially in industrial manufacturing organizations, supply chain and procurement.

In this article, we look at why holding periods are getting longer and share key insights on why supply chain and procurement positions are growing even more critical to value creation in private equity and beyond.

Holding periods hit record highs

Private equity firms are extending portfolio holding periods because of high interest rates, economic volatility of the last three years and ongoing market uncertainty. Because of these extended holds, recruiting operational talent is a high priority for value-creation efforts. Compensation packages are increasing, and private equity sponsors are increasingly involved in leadership selection to ensure alignment with value-creation strategies, emphasizing the importance of effective talent management in achieving successful exits.

The role of supply chain and procurement professionals as value-creation drivers

Supply chain and procurement play a critical role in private equity firms’ value-creation push. In 2023, businesses underwent a supply chain reset where leaders began to rethink their approach to this function, either by expanding their supply chain strategy or by creating dedicated procurement roles and separating the two functions into more specialized silos. Companies began doing this not only to recover from pandemic-related shutdowns but also to prepare for future disruption and adapt to changing needs and ethics.

Product sourcing is more important than ever in private equity portfolios, especially for smaller businesses. Middle-market targets might not have ever hired a procurement specialist separate from their supply chain leaders. Longer hold times are now giving hiring managers an opportunity to fill such positions, placing greater emphasis on operational spending and improved analytics to boost their strategic procurement efforts.

Environmental, social and governance (ESG) considerations are also important in private equity. Portfolio companies are often expected to align with ESG goals, which may include sustainable sourcing practices and reducing carbon footprint within the supply chain. Developing sustainable procurement processes, evaluating supplier sustainability credentials and reducing environmental impacts can be complex and time-consuming projects. Private equity firms with extended holding periods are now able to fully implement and showcase these ESG initiatives.

Related: 2024 Engineering, Operations & Supply Chain Compensation Report

Value creation requires more stringent talent acquisition, and hiring managers should be prepared to spend more time finding the right individuals. Operations positions are in high demand for private equity portfolio companies across the board, and the best candidates will likely have other opportunities on the table. Additionally, private equity sponsor involvement means hiring managers can expect a longer, and more selective, process.

The takeaway:

As private equity firms extend their holding periods, operational leadership roles—especially in procurement and supply chain—are increasingly vital for value creation. Hiring managers should brace for longer and more selective recruitment processes, as competition for top talent intensifies. Candidates can expect multiple opportunities, but must navigate a more rigorous hiring landscape, highlighting the need for alignment on value-creation objectives between firms and prospective leaders.

To learn more, contact Greg Harper at (336) 217-9123 or greg.harper@charlesaris.com.