Why Private Equity Needs to Invest More in Talent Development

HBR IdeaCast

Harvard Business Review

Leadership, Entrepreneurship, Communication, Marketing, Business, Business/management, Management, Business/marketing, Business/entrepreneurship, Innovation, Hbr, Strategy, Economics, Finance, Teams, Harvard

4.4 • 1.9K Ratings

🗓️ 21 November 2023

⏱️ 23 minutes

🔗️ Recording | iTunes | RSS

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Summary

Traditionally, private equity companies have created value at the companies they own by taking on debt, restructuring, and exploiting underserved opportunities. But surging interest rates and increased competition have made it much harder to deliver strong returns. Ted Bililies, a partner and managing director of AlixPartners, says private equity leaders can no longer count on financial engineering to drive performance. Instead, they need to invest in the human capital at their portfolio companies. Bililies wrote the HBR article “Private Equity Needs a New Talent Strategy.”

Transcript

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0:00.0	Kurt Nick is here from Ideacast. I want to tell you about the Big Take
0:05.1	podcast from Bloomberg News. Each weekday they bring you one important story
0:10.0	from their global newsroom like how AI will upend your life and why China's
0:15.4	targeting the US dollar. Check out the big take from Bloomberg wherever you
0:20.2	listen. Welcome to the HBO Ideacast from Harvard Business Review. I'm Kurt Nickish. It used to be that if you were a
0:51.0	leader at a company getting acquired by a private equity firm, you
0:54.9	had good reason to be scared. That's because PE firms would often cut jobs or bring in their
1:00.6	own leadership teams at the companies they bought.
1:04.0	As a business, private equity firms raise money to buy up struggling or promising companies
1:09.8	the ideas to restructure them or change their business model and then sell them a few years later at a big profit.
1:16.0	But rising inflation and surging interest rates have been hitting the private equity industry hard.
1:22.0	After years of robust growth at low interest rates, these firms now have to create more value just to break even.
1:29.5	Plus, there's a lot more competition now. Our guest on the show today says PE firms can turn things around
1:37.0	by investing in the talent at the companies they manage.
1:40.0	In short, it used to be all about the financials. Now it's about the people.
1:45.0	Ted Bolilis is a partner and managing director of Alex Partners.
1:50.0	He wrote the HBR article, Private Equity needs a new talent strategy.
1:55.2	Ted, thanks for being here.
1:57.0	Thank you so much for having me.
1:58.2	It's a real pleasure.
2:00.4	How bad is it?
2:02.0	Like, how big of a shock is this interest rate climate for the private equity industry?
	...

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