The Underperforming CEO: Struggling to Meet Private Equity Investment Case Targets

This is my fourth article in a series about the CEO’s role in a private equity (PE) backed company, a career-defining opportunity that offers growth, transformation, and the chance to build lasting value. However, it also involves immense pressure, high stakes, and what is perceived as non-negotiable performance standards.

This article discusses one of the toughest challenges a CEO can face: falling behind on delivering the investment case. I will illustrate through a number of different and unique perspectives.

The Transition: From Seller-Side to Buyer-Side

One of the more complex CEO journeys begins when transitioning from the seller’s side to the buyer’s side.

As the CEO, you might have been deeply involved in selling the company, only to then join the acquiring private equity firm to lead the business toward the very targets you once helped establish. This can create unique challenges:

• The initial excitement of closing the deal quickly shifts into the reality of execution.
• The same numbers once pitched during the sale now become your targets to deliver, with no or limited room for negotiation.
• Relationships shift, as former peers may now be stakeholders or board members with new expectations.

The transition can feel like going from selling the dream to living the deadline.

Adapting to the Private Equity Operating Model

The PE environment is different from most corporate settings. It is fast-paced, highly structured, and data-driven.

Key dynamics include:

• Non-negotiable targets, especially in the first critical years post-acquisition.
• Data and KPIs massively introduced to track performance with precision and transparency.
• A new operating model, often involving significant changes to processes, governance, and reporting.
• Board transformation, with PE representatives and new external directors bringing a different tone and intensity. In some cases, the board might even include the founder/seller of the business.
• A clear exit horizon, typically 5–7 years, requiring a meticulously planned and executed journey to maximize valuation.

For many CEOs, this shift can feel like moving from a traditional corporate marathon to a high-intensity sprint with constant oversight. You will need mental agility, operational discipline, and relentless focus.

Success Factors: High-Performance Leadership and Resilience

To navigate these pressures, you, as the CEO, must embrace the next level of high-performance leadership:

• Resilience: Staying centered and calm, even under immense scrutiny.
• Strategic resource shifting: Rapidly reallocating talent, budget, and focus to align with investment priorities.
• Continuous performance elevation: Both personally and across the leadership team.

In PE-backed environments, there is no middle ground; you either boost performance or risk being replaced, which is one reason why CEOs in PE firms turn over in 60% of cases within two years of acquisition.

Strategy Pivoting: Timing Is Everything

Sometimes, the original investment case no longer aligns with market realities.

Pivoting the strategy may be necessary, but:

• Timing and rationale must be crystal clear.
• The PE fund must fully buy into the pivot, as changing course without alignment can damage trust and slow execution.

A well-communicated, data-supported strategy shift can preserve value, but a poorly timed pivot can damage credibility.

The M&A Temptation

When financial performance declines or deviates from the investment case, mergers and acquisitions (M&A) might seem like a solution to fill performance gaps.

However, this path carries risk:

• M&A is rarely a fast-track solution.
• It introduces integration complexity, cultural clashes, and execution risk.
• It should be well aligned with the strategic roadmap, or you risk not having the necessary resources to make M&A successful post-acquisition.
• The time to realize synergies may exceed the PE fund’s timeline for exit.

While M&A can play a critical role in growth, it must be approached with rigorous diligence and realistic expectations.

Stay Solution-Focused, Not Target-Debating

One of the most common pitfalls for underperforming CEOs is getting stuck debating the original targets:

• Questioning whether they were realistic.
• Revisiting assumptions from the deal phase.

While this discussion may be tempting, it does not create value.

Instead, focus the energy of yourself and your leadership team on how to achieve the targets, not whether they were fair. This forward-looking approach reinforces leadership credibility.

Transparent Communication: The CEO’s Non-Negotiable Best Practice

Trust with the PE fund and board is paramount.

The CEO must:

• Communicate transparently and honestly, especially when performance is not as expected.
• Avoid overly optimistic reporting, which can lead to a damaging cycle of continuously missing forecasts.
• Build credibility by sharing challenges early and proposing clear, actionable solutions.

Transparency does not weaken confidence; it strengthens alignment and collective solution-finding and problem-solving.

Leverage the Entire Ecosystem for Performance

No CEO can deliver an ambitious investment case alone. To accelerate performance:

• Mobilize the executive team, ensuring every leader is accountable and aligned.
• Engage employees, customers, suppliers, and strategic partners as allies in the growth journey.
• Foster a shared sense of urgency and purpose, rallying all stakeholders around the mission.

Coaching Can Help

When performance lags, the personal toll on you, as the CEO, can be immense:

• Limiting beliefs creep in.
• Confidence wavers.
• Burnout becomes a real risk.

This is where executive coaching can make a transformative difference.

I use the 3S framework to help CEOs navigate these moments:

1. State of Mind: Building mental resilience to stay calm, focused, and solution-oriented.
2. Story: Reframing challenges and setbacks to maintain belief, motivation, and vision.
3. Strategy: Crafting actionable plans that align your leadership with the company’s performance targets.

Through my coaching, CEOs can:

• Confront limiting beliefs and rebuild confidence.
• Manage burnout risks by balancing intensity with recovery.
• Reframe situations, shifting from frustration to opportunity.
• Maintain high, positive energy, which is essential for rallying the organization and board.

In short, executive coaching provides a safe and confidential space to help CEOs navigate turbulence while staying energized and effective.

Final Thoughts

Being a CEO in a PE-backed company is a high-stakes journey. When performance falls short, the path forward requires courage, clarity, and relentless focus.

I have been in your chair. If this article aligns with your situation, let us connect. Whether you see performance targets being at risk or you are already in this situation, I am here to share insight, support you, and being the sounding board that you otherwise do not have.