Study: One in Four CEOs Lose Job Post-Buyout

CEOs and finance directors have a one in four chance of losing their jobs following a private equity buyout, according to research released today. A study produced by advisory firm Grant Thornton and board recruiter Directorbank also shows the emergence of a group of private equity “serialists”, directors who have completed three of more buyout deals.

The survey of 283 executive and non-executive directors that have completed at least one private equity deal, found financial directors have a 28% chance of being replaced should they become involved in a private equity backed business, while CEOs have a 24% chance of being replaced.

“The high rate of attrition for finance directors stood out,” said David Ascott, head of private equity at Grant Thornton. “The finance director tends to be in the firing line after a buyout. The FD role changes completely from being a steady custodian of a business to being in the spotlight, dealing with leverage, banking relationships and financial investors scrutinising their work,” he explains.

In spite of the one in four churn rate, Ascott says that his firm still sees strong interest from management buy-in teams. Buyouts can be incredibly lucrative for management teams – 70% of respondents had their financial expectations either met or exceeded.

A key finding was that the UK has now followed the trend of the US in creating private equity “serialists.” 41% of those surveyed fell into the category of having completed three or more private equity deals. If a buyout firm has worked with a director successfully before, they are often more comfortable backing them for a second time.

“It's surprising to see that some directors in the UK have been round the block six or seven times,” said Ascott, “It shows management get a taste for it, get to understand the dynamics of it and then look to get involved again.”

Source: Thomson Merger News