What are the indicators of a good management team?
Hi! I have been doing some networking with different PE firms, both big and small, and have always asked what their specific firm's evaluation of a target company consists of. Most of the time, I am told that management teams are the most important because they ultimately decide the vitality of the company during the period in which the firm will hold the company.
I have wondered, when sifting through the investor's report, what are the signs that signal a stellar/above-average management team? I think the basics hold true here: how long have they been there, their backgrounds, how the portco has done during their time there, their growth strategies, etc.
Are there more specific and pointed criteria to look into when making this judgment?
We just fired the entire executive wing of an Allstar management team. They were amazing on paper and rolled up 8 mfg sites in 6 countries in 3 years. But they didn't understand cashflow and got out over their skis. So goal and personality alignment may be as important as talent and work ethic.
I would say a very long look at their work history and really trying to understand their nature vs. your goals. Adults don't change their nature, a risk taker will always be, a narcissist will always be, a big spending will always be, a weak friend maker will always be. You want a team that works together, has productive tension, etc. But not so chummy that they are colluding for more power or cooking the books to cover up problems.
Good question, tough to answer.
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great answer though
This is a question that is a lot easier to answer if you've met them in person. Like it's impossible to tell if a team has good organization/communication on paper, but just meeting someone and interacting with them over time will give you an idea of whether they have it together or not.
If you know about the industry, it's easier too, since you can get a feel for whether they have good and sound knowledge/views
It might be easier to view this the opposite way - i.e. to screen out companies with bad management teams.
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