When should private equity portfolio companies hire corporate development leaders?

The target for when to hire a corporate development leader is always shifting for private equity portfolio companies, particularly those relying on an ambitious M&A strategy for growth.

Some leaders prefer making this hire prior to acquiring the business they will be embedded in, while others would rather wait until they’re in the early stages of preparing for the exit. The decision hinges on the specific needs of the company, private equity firm and the level of corporate development expertise needed to achieve inorganic growth objectives.

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In this article, we explore the advantages and disadvantages of hiring a corporate development leader at three critical milestones during a private equity portfolio’s lifecycle: at the onset of the purchase, at the midpoint of the holding period and before exiting the investment.

Hiring a corporate development leader at “ground zero”

Bringing a corporate development leader on board at the outset of a new acquisition can be particularly beneficial for smaller businesses. Typically, these companies seek candidates with 7-10 years of experience, looking for individuals who can grow alongside the portfolio company. This approach is often more affordable and tends to attract candidates who are excited about being part of a burgeoning operation and securing equity early into the hold.

Waiting to make your hire until the midpoint of the holding period

For companies that wait 1-2 years into the holding period to make this hire, the ideal candidate often falls into the category of a “rising star” or a “proven commodity.” These individuals usually possess private equity experience, having led M&A initiatives or established corporate development functions. They can manage the full lifecycle of corporate development and often work well independently, although they may express a desire for a team as the function grows. For larger businesses within the portfolio, hiring a more senior leader may become necessary to support strategic initiatives.

Hiring before you make an exit

Bringing in a corporate development leader as you begin preparing for an exit typically requires a higher compensation package and candidates with more extensive experience. These leaders will play a crucial role in facilitating integration and making a final push for critical acquisitions. More junior hires will see this as a risky timeline because their positions could be cut once their business is put up for sale, but leaving the company after an acquisition isn’t always make or break.

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In fact, we’ve seen more senior hires join organizations with no qualms about exiting after the acquisition. Many are content with the idea of moving on after 1-2 years and are excited to get more deals under their belt without the prospect of a long-term career path in one company. Still, the most successful corporate development leaders are often retained after an acquisition.

In conclusion, the timing of hiring a corporate development leader should be strategically aligned with the specific growth objectives of the private equity portfolio. Each milestone presents unique opportunities and challenges, requiring careful consideration of the business’s current phase and future goals. By thoughtfully evaluating these factors, private equity firms and portfolios can make informed hiring decisions that enhance their capacity for successful inorganic growth.

To learn more, contact Derek Gracey at (336) 217-9152 or derek.gracey@charlesaris.com.