I am seeing an increasing trend of Associates being on MM portfolio company Boards of Directors. In some cases it is specifically because of a board diversity need, but it other cases there are non-diverse 25-26 years on boards. With only 2-3 years work experience (2 in banking and maybe a year in PE) I don't see how much value they can bring the company. I have only noticed this in my firm in the last year. Just trying to get the sense if this is a growing trend or if it was already this way in many other PE firms
Trending Content - Private Equity Forum
Career Resources
As board observer I imagine or actual board member?
Yes, I am referring to associates being actual board members....crazy isn't?
Echoing above, I've never seen an associate-level board member. Board observer (AKA can attend meetings / take notes but non-voting) is far more common.
I’ve only seen this in super LMM companies (sub $5M EBITDA) and even then it’s rare.
They’re not really adding value to the board, but it doesn’t really matter because they’ll always vote in unison with the senior personnel on the team - you wouldn’t send an associate to be your sole representative on the board in a consortium deal, but if you gave management two seats and you’re a small fund that only has two senior team members on the deal, you might give the remainder to the associate just to allocate the final majority seat
Literally do it because they need to fill board seats. PE firms aren’t going to put another partner on a portco just to fill seats and aren’t going to put an outside member that they may need to pay and can’t always trust to vote their way.
I'd say relatively common in LMM/MM, at least in Europe.
The reasons are generally simple: (i) need to keep the shareholding proportions in the Board but management and minorities require 2/3 seats, meaning lots of Board Members from the PE are needed, (ii) because Partners always want someone to take notes, remember the details of the figures, etc., (iii) it's a "zero cost" perk for juniors, which helps them build a CV and make them feel important in the Fund, and exposes them to dynamics that will be an important skillset in the future (where step by step they will be more active in the boards), (iv) it looks good towards LPs in future fundraising, and (v) you have absolute certainty that they will not go rogue or act erratically in the Boards (which happens more often that expected when you bring "big" personalities from outside).
FInally, whether they are simply observers or actual board members is mostly related to the simple math of seats available to the PE while respecting the pre-agreed governance.
Est alias expedita est aut optio eveniet rerum. Sed ratione assumenda sunt. Repudiandae qui eius qui voluptas. Enim itaque velit et rerum cupiditate.
Consectetur qui et aut eos et sed provident autem. Libero numquam molestiae repudiandae quia ea itaque.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...