Pre-Deal Risk: Leadership Due Diligence is Often an Afterthought—But Should It Be?
Insights from Mannie Gill. Mannie is a partner and co-founder of Renovata & Company. His practice is focused on conducting board and C-level searches for private equity portfolio companies across internet, eCommerce, SaaS and ad/mar-tech. In addition, he works with public companies on their digital transformation projects.
In private equity deals, financials, market positioning, and operational performance are put under a microscope. Leadership, however, often gets less scrutiny—despite being one of the biggest drivers of value creation post-investment. Many firms rely on surface-level assessments or past track records, assuming that existing leadership can deliver on the investment thesis.
This approach introduces risk. A CEO or executive team that has excelled in a founder-led or high-growth environment may not be the right fit for scaling, operational discipline, or preparing the business for an eventual exit. Private equity firms that fail to conduct rigorous leadership due diligence upfront risk costly executive turnover, stalled value creation, and misalignment on strategic priorities.
Why Leadership Due Diligence Matters in Pre-Deal Risk Assessment
Private equity firms invest in businesses with the expectation of driving growth, operational efficiency, and, ultimately, a high-value exit. Leadership is central to this. A strong executive team accelerates transformation, while the wrong leaders can slow progress or even erode value.
Buyers conduct extensive financial due diligence to validate forecasts, identify risks, and stress-test assumptions. The same level of scrutiny should be applied to leadership. Questions PE firms should ask pre-deal include:
- Does the CEO have the skillset required for the next stage of growth?
- Is there alignment between leadership capabilities and the investment thesis?
- Are key executive hires needed post-deal to deliver on the value creation plan?
The Most Common Leadership Risks in PE Deals
1. Over-Reliance on Founders or Legacy Leadership
In founder-led businesses, decision-making is often highly centralised. While this may have worked in the early stages, scaling a company requires a different approach—one that prioritises structured leadership, delegation, and process-driven execution. If the founder isn’t willing or able to evolve, PE firms will face challenges post-deal.
2. Lack of Experience Managing Institutional Capital
Running a PE-backed company requires a different skill set from managing a bootstrapped or venture-backed business. Leaders must be comfortable with financial discipline, investor reporting, and performance transparency and rigor. CEOs and CFOs who have never worked in a PE-backed environment may struggle with the level of scrutiny and operational efficiency required.
3. Weak C-Suite Bench Beyond the CEO
One recurring theme we see is a business built on the force of personality of the founder /CEO. A business can’t be built around one leader. Buyers should assess the depth of leadership across the executive team, ensuring that critical functions—finance, operations, sales, and technology—are led by experienced professionals. If key executives lack the necessary expertise, this creates operational risk and slows down value creation.
How PE Firms Can Strengthen Leadership Due Diligence
In our experience, the best private equity firms approach leadership assessment with the same rigor as financial due diligence. Pre-deal risk can be reduced by:
- Ensuring the deal team is working with a seasoned ‘Chair’ type individual who has wealth of experience as a former CEO of a private equity portfolio company – These executives should be part of the deal team helping to evaluate the team, strategy and the investment thesis. IMHO conducting diligence without one of these advisors is tantamount to gambling.
- Conducting in-depth leadership assessments – Evaluating not just track records but leadership style, adaptability, and ability to execute the investment strategy.
- Benchmarking against PE-backed executive standards – Comparing leadership capabilities to those of executives who have successfully scaled similar businesses post-investment.
- Identifying leadership gaps early – If new executive hires will be needed post-deal, planning for those transitions in advance minimises disruption.
A Final Thought
Leadership is one of the biggest factors in determining whether a PE investment succeeds or struggles. Firms that conduct thorough leadership due diligence—rather than treating it as an afterthought—position themselves for stronger returns, faster value creation, and fewer post-deal surprises. The right leaders don’t just protect value; they accelerate it
How Renovata Helps PE Firms De-Risk Leadership in Pre-Deal Stages
At Renovata, we assists our private equity clients by connecting them with the appropriate Chair during the pre-deal diligence phase. We leverage our network of industry experts, which we have developed over 20 years, to bring them into the deal process. These advisors help to verify the integrity of the deal and ensure that a robust Value Creation Plan is in place, subsequently aiding in its execution. Our advisor typically assumes a Board position, often as the Chairperson.
To learn more about how Renovata can support your leadership due diligence process, contact Mannie Gill directly: