Should you work for a company acquired by a private equity firm?

should you go to work for that company that just get acquired by a PE firm we'll get to that question in a moment welcome back to interview at where our goal is to help you land your dream job and there's two ways that I want to accomplish that first it's by providing you post game analysis on the interviews that I conduct with my clients as they are preparing for their loops for their next big role where else are you going to get a window into as real as it gets interview situations questions and answers from a variety of roles and levels but also get the feedback from somebody who's been an executive at Amazon Microsoft Oracle and a variety of startups but the other way is by answering the interesting questions that I'm getting from my clients that I think might be useful for you and quite frankly there's some that I see a lot and some that are just unique and maybe people are afraid to ask for the question today I'm gonna be leveraging my years of experience working in private equity both as a principal at a private equity fund a multibillion-dollar private equity fund as well as running Kom partners my advisory firm for the last four years where I service exclusively private equity funds I had a client with whom I was working who asked me a great question that I would imagine many of you would also like the answer on the topic of questions about funded companies whether it be venture capital or private equity what questions do you have about going to work for a funded company but we're either afraid to ask or didn't know how to ask in an interview leave a comment below and I'll be sure he gets them the specific question I was asked that was about whether or not it was common for PE firms to reinvest in a company that they had already sold once so what happened here was a PE firm bought a company held on to it for a little while sold it to another P firm and then three or five years later came back in and bought that asset back and this client of mine was going to go work at the company that was now being required by the PE firm was concerned that the same private equity investor was coming back into the deal ah there's many reasons for the sale of a business by private equity firm first just a standard liquidity event this could be going public it could be selling to another buyer it could be a third party initiating the process someone comes in and says hey that's a nice business you've got there I'd like to take it off your hands or it could be a self initiated process where the company just feels like it's time to kind of bring new blood in and get me whatever it could be but the private equity fund is winding itself down private equity firms invest from pools of capital those pools of capital tend to have time horizons on them and if the fund is now long in the tooth investors who originally gave to fund the money they typically want the money back and so the funds will start to wind down the fun and sort of liquidating positions and so it might have been a sale that they just need to do instantiate to get the asset move and get the funds back to their investors and finally they might be trying to raise a new fund whenever you're going out to raise capital from people it's very helpful to have wins on the board and having those wins comes in the form of sales and so at some point in the past this might have been a high-flying asset that the the private equity firm is holding on to they have the opportunity to sell on this if yeah let's take it let's take some money off the board so with those reasons in mind it may make sense to revisit an asset after a period of time and three to five years but why would they do this that's really kind of the question you should be asking yourselves why why on earth would they want to come back to it well that could come from a variety of things but one for sure comfort with a management team when they sold the asset it didn't mean they thought it was a bad asset to hold on to and that they might have loved the management team but it it was so in this case when they're coming back around the assets still available or it becomes available again and the management team is still there private equity firm might be thinking to them so so we already know these guys and you know they're sharp they do what we ask them to do they're how great operators they've grown the business they're very responsible stewards of capital so we'd like to you know be a part of this again to the state of the company now might be more in alignment with a fund mandate that's a different fund within the larger private equity firm so now you get these smaller private equity firms and they're kind of dealing with one fund at a time but they're really big boys they'll have many funds that invest across multiple types of asset classes whether it's you know growth equity or bankruptcy or mezzanine debt or any number of things that they might do it so this company might have been sold out of one fund operated and done some things and now the state that it's in it becomes a viable candidate for some other fund within the larger private equity firm the firm might be just comfortable with the space comfort with the industry they know the players they know what's going on here and they say yeah there's an asset that we were interested in once we sold it for whatever reason it's come back around maybe it had some troubles in the intervening years and now it's on the upswing you need some fresh capital because it has some capital constraints and we'd like to participate and finally it might just be an acquisition target for another come within the portfolio so in this case you you know as a private equity firm you're managing your portfolio of companies and you might be investing for growth and this company that you once owned three four or five six years ago has now grown to a point where it becomes an interesting or shrank to a point quite frankly where it becomes an interesting target for one of your other other companies within your portfolio because most firms tend to invest by vertical industries and so they're gonna know all of the players you're gonna know all the companies and they know how to grow their businesses and quickly how to divest those assets so what does a p/e from buying a company mean relative to the impact on the culture and the company well it depends there's multiple types of PE firms and how they think about an asset post acquisition will vary based on their fund strategy if you think about a VC investor they always want growth right that's generally why they're investing in a business they put in a small amount of money and they like that company to grow to be a big company they get growth and that more aligns with what we'll call growth equity private equity investors most of the stories that you hear about private equity the ones that are in the in the news most the time tend to be about the firm's that are well not growth minded they load companies up with debt they squeeze the workforce down as far as they can they pay themselves we'll call them large bonuses and ultimately are using financial engineering and other imaginations to kind of get a financial return that may not necessarily be in the best interest of the company or the employees those can absolutely be very difficult situations to walk into as an employee growth equity investors tend to want to uplevel the talent pool whenever they make an investment in a new company not always sometimes the management teams are excellent and the private equity investors are backing that management team alone and they're given them growth capital to expand their team but they're not necessarily looking to swap out the management team but in a lot of cases they do they do to want to want to tend to want to uplevel their management teams and those are somewhat friendlier situations in which to walk but it's important caveat to understand that with many growth equity investments when they're swapping out their senior leadership this can sometimes create resentment amongst the workforce right so think about it you're walking into a situation where you're gonna get hired in the new management team has come in and they've said well for a variety of reasons these people are no longer needed maybe they're not as talented as we need them to be they're not as productive as we need them to be maybe they're overpaid for what it is they're delivering but in smaller companies which you know private equity firms they invest across the gamut of businesses but anything kind of less than you know I'll call it yeah 50 million maybe of a big 20 million or less those companies tend to be a bit smaller tight-knit communities and when someone gets let go that can hit home pretty hard and people can be pretty upset about that kind of thing so you might be walking into a situation where you're you're tighter than your management team that just fired Joe and Joseph's over there and now you're interviewing me and I liked Joe and Joe and I had barbecues together my kids play baseball with Joe and who are you you're coming in for Joe's job and so that's just something you gotta keep keeping back your mind your step in your new situation like that so with the case of one financial firm selling to another the management team might be left completely intact you know we talked earlier about the suitability for an investment for fun lifecycle and one fun might just say hey it's time for us to exit this investment this is a great management team they're growing the business they're killing it we want our return on investment cuz we put in ten million dollars we're gonna make thirty million dollars you're gonna pay us the amount of money to buy the business you know have love have good look next PE firm owner of this with the business we think the management team absolutely kicks ass so thank you very much and so that's a good situation in which to walk by but with any new owner there's always transitions and transitions you know new money there's always gonna be that contingent of people who they don't like change people just don't like change things are different I like it blah blah and so that's always going to be a situation where in an interview situation of course you might hear some complaining which it's unfortunate but you just gotta remember to take it with a grain of salt in it and here at the right ear so the question you're asking yourself is well I'm considering going into one of these businesses and I'd really like to know how to ask questions about what's been going on since the acquisition to really understand what kind of an investor this is and so one way to think about this is is one frame up how recent that acquisition is call it in the last 18 months that would be a recent acquisition here's some things you might want to ask your interviewer that will give you a good insight on what's going on inside the business since the acquisition has occurred that will help you understand how the budgeting is being done what kind of investor you've got how supportive they've been whether or not there's been a lot of turnover and management there's a lot of a lot of really good information that you can clean out from just a few simple questions so the first question you might ask might be as follows so in my research about this company it looks like the previous investor repurchased the business which I I guess I just I've never really seen that happen that often I've only been in kind of vc-backed companies and it doesn't really happen so how is that change in the equity ownership kind of going from the previous owner to a new owner and then back to the owner how does it how's it affected how you operate it you know you might want to ask have you been able to maintain whatever levels of Independence post the sale to now or you find them with the new private equity firms firm or firms because there might be more than one player in there in that position are able to add value right so in this question you're demonstrating one that you've done your homework so so good for you but you're also asking a very reasonable question which is not framed in a way that makes the person that you're asking get defensive right they don't feel like they're tattling on their previous owners which is actually a good thing um but in asking the question is a value-add statement your positioning this is a positive predisposition right that you've got a growth mindset and that's good for you as a candidate while giving the person answering the question a viable kind of out if things were changed they're not happy with them it gives them a way to kind of talk about it without really feeling like they're kind of digging into the weeds or airing any of the dirty laundry right so they don't have to say it's been terrible because they're never gonna swell they might say that but they shouldn't say that ah but they can effectively say the same thing by saying something like yeah and they've made a lot of changes and we've been really working really hard to live up to their expectations that's a pretty good tell that things are not where they were or maybe the investor's not kind of in line with a growth mindset or what you might want to be stepping into when looking for a growth company this is really code for they're squeezing us so here's another question that you might try that'll help you better understand this sort of thing and how things have been with the new owner so with the new investors have you found that you've had the budget and the equity exonic add to your team or grow the team as needed to hit your aggressive targets alright and so again this question is getting at whether or not the firm that bought this company has a growth mindset or if they're a squeeze partner someone who wants to come in and really grind it down and get as much out of the business as they can without necessarily investing in the assets and and the nice side benefit of course again is framing you as a growth mindset individual right so when I was thinking about growth here anything about working there you want to hit aggressive targets but you're trying to understand what you're stepping into in the case of a quit a transaction that's happened in the last 6 to 18 months this is a clever way at getting it a similar piece of data but it really only works if the companies had minimum of two quarters to operate since they require here's the question so how much does the team grown since May of 2018 until now you see what I did there the May of 2018 was the date of the acquisition don't just say move May 2018 that's the date when the the new private equity partner came in by using that date you're demonstrating once again you've done your homework so good for you that's awesome but by framing it as from the time of the acquisition until now you're asking how much the team is grown you're gonna get pretty good lens on well are they being asked to do too much too little is it seem grown or shrunk or people leaving or not there's any number of things that the the interview might say in response to that they might even offer up a lot of information you didn't ask for because they might offer up well yeah I know gosh it's been roughly to fire a bunch of people we were completely over staffed it turns out I guess right so that's gonna tell you two things one how does he feel about it or she feel about it really and two what kind of investor you have so these are just easy questions that you can ask that give you a really good lens on what's going on with the business because remember when you're asking these questions what you're really trying to do is frame yourself as a member of the team or future member of the team who has a growth mindset but what you're going to learn is whether or not the team that you're gonna join has the capital to grow and if the transaction has been really recent you know some kind of in that six months to now right and let's say you're interviewing and then the ink is barely drying on the contract it was done in last month but you could ask a variant of the question as follows um so how's your budgeting process changes result of having this new owner did you guys have a complete overhaul or is it kind of the same right so again you're positioning yourself as someone who's been through budgeting which is good that's you know good thing to have from a leadership skills standpoint but also you're recognizing that when new ownership or new leadership comes in things change and so you're trying to understand what may or may not have occurred as a result of the new the new people coming in and you know that if the transaction has occurred in the last two quarters I promise you the private equity firm is put in a new board book that they expect to see and a new set of metrics and reporting and a whole bunch of other things that they need to see is their managing their portfolio broadly that they expect from this company in this management team and so that will have been put in place and you'll have a pretty good lens or not that's a massive change or just a small change from what the management team was already doing so if you want to go ahead and ask a question without necessarily talking about the private equity firm but you still want to get a sense for how things been a clever way to doing this is by asking you'd ask the hiring manager whoever to interview me or you can ask the recruiter you can ask how long have they been on the team and what about their boss there's a couple of key things that you'll learn from asking that question one where did this person come from did they come as part of the management team that came in were they hired and after the fact where they part of the old guard how are they feeling about the transaction - it's gonna be a lens on whether or not their manager came in with the new guard was already there or not was someone who was hired after the fact at it is a layer maybe this person got passed over for motion and they're upset about it they don't like how things are being done from a staffing point of view so that's great it's also going to help you understand turnover it's a clever way of getting that turnover information right because if your boss or this person you're giving with whose attention your boss and their boss the boss they're both new or appear that you're interviewing with they are new but you're gonna have a sense of people leaving and they might then at that point offer up reasons why people lay up left especially if they're you know kind of not happy about it they want to complain Oh sometimes people will complain in these interviews and that's always a good way to learn more about what's going on with business what's going on the new new management team but and the new owners but it's this is a journalism skill that I learned from a movie or something but when you ask these questions this one specifically don't say anything just let them answer and then they're gonna say something still don't say anything you got to let that pause be just uncomfortable enough that they want to fill it and then you're gonna fill it with information that's super useful or not but give them that opportunity don't just jump in and start asking your next question because you might miss out on a really really really valuable piece of information that might follow from what they initially answered with that would really help you in making your decision about whether or not this is a firm you want to go work for but if you're insistent on asking a question in that pregnant pause or maybe as a follow-on and you're feeling particularly bold one thing you might ask is or say if they if they talk about someone who's left wow I'm really sorry was was so-and-so a friend of yours where do they go why'd they leave they may ask the question they may not but again it's an empathetic or empathic way for you to connect with your interviewer but also potentially get information about well one why the person left and what was the cause of their leaving but to where did they go I have person left you know Joey bag had Donuts window shop to go to google person was probably pretty talented well why did they leave here to go to Google as part of this new transaction you know do they see the writing on the wall do they feel like their opportunity was better elsewhere who knows but again more useful information from very simple questions that you can ask them interview so now let's give you the questions you could ask to appear right because oftentimes you're looping you'll interview with your hiring manager but you'll likely be interviewing with people that are peers to you whether in your specific group or elsewhere and so a really easy and clever way to introduce a question about what's been going on post transaction while still framing yourself as a high quality candidate is in a very upbeat way go WOW the exciting times the new investor is it gone right or if you've been a part of a transaction in the past and then maybe you want to let on and say you know I've been through one of these before how's it going for you again leave that pregnant pause let them answer but really it should be asked again in a peer level because what you want is that that feeling of kinship with personal they feel fit more comfortable answering your boss is not or your potential boss it's not gonna answer the question the same way someone you might be working with on a more regular basis and certainly someone down the chain you can ask but then you're gonna have to weigh the answer against you know how does that measure up based on kind of what it needs the organization on it's it's you know that tends to be one of those peer level questions it's more effective so another question might ask a peer to ascertain what's been going on post transaction is really simply so were you here when the PE firm came in or did you come in after are things same-same with the sale or do you have more resources or kind of thing what's changed big fund came in right and so again because you're asking a peer it feels very much like you're you know you're already kind of working together you feel comfortable you want to have that conversation it feels a lot less of a kind of defensive or even a selling question right so if I'm your potential hiring manager and I don't want to be thinking well why is why are they asking this question were they worried about you know it's the wrong mindset but when you're asking a peer and you're saying well did you come in and you know have you had sources you're kind of indicating hey I want to go someplace that's growing I've got a growth mindset and I'd like to hear what you're thinking and if they're of a similar mindset they're going to share that with you and so if they have less resources you're definitely gonna hear about it and the person might even complain which generally when people complain you got to stop that nip it in the bud real quickly you don't want to catch the stink of complaint as they come out in the interview they already have a negative mindset so just chop that wherever you can just say come up with something interesting but things that I've said is hey well what's the most exciting thing that's happened right it's kind of stopped it short so what advice or guidance do I have for someone coming from a tech background into a non tech company that's recently required by a PE firm well it's really going to depend sometimes you can step into a really great situation where the new management team and the new investors are trying to grow the business they're investing for growth they want to bring in some of that I call it Silicon Valley pixie dust and sprinkled on their company and really ramp things up and that's awesome but just understand that you might be stepping into a recruiting challenge getting people to come to a non tech company so some people might feel like it's a step off the the merry-go-round that they're kind of on in Silicon Valley where they're kind of up leveling as they go they might not see this as a stepping stone and as an advancement in their career today I would say mostly the opportunities you're gonna get more work and more role diversity than you probably would get in some of the other companies in Silicon Valley because you're gonna be able to do so much and bring so much new to the table that the turn of the management teams gonna let you kind of go if again they have to go with mindset in their investing for growth and so it could be a great opportunity to slingshot yourself into a much more advanced role with far more experience and more exposure within the organization and potentially even to the industry then you might have had if you stayed where you're at but but it's an important but sometimes a change can be slow you might be stepping into a situation where they want to invest for growth but invest for growth for them is not really what you've become accustomed to and so things are gonna take a little bit longer and things are going a little bit slower and maybe they move at a different pace and they're not used to the fire in your belly moving within fidus kind of pace that relentless pace it sometimes some of these tech firms can move at and that can be a bit off-putting for people when you step into that organization and they've just been operating at one pace and you're just at a different faster pace and so you're gonna have to adjust as you go and learn how to kind of get along before you go along but once you figure that out there really is nothing but upside right because if you think about all those skills that you're bringing to the table we're starting to see more people now willing to look outside of that the typical tech strongholds because of work from home and you know to work them out they're gonna move to locations where you know what it doesn't matter where I work so I can work at any number of companies now and maybe get a higher quality of life work on some really cool projects have the the budgeting and the back room behind me maybe work with a smaller company where politics or less of an issue and really have a lot of impact and so that's really just a great opportunity for you if you find the right one and typically when there's a private equity growth equity investor involved there's gonna be a lot of upside a lot of opportunity to really do some great work and it really could be valuable from your career so hopefully that answers your questions about whether or not it makes sense for you to go to work for a company that's recently been acquired by a private equity firm and hopefully I've given you some questions that you can ask during your interview to suss out what kind of private equity firm it is whether they operate with a growth mindset or they're definitely trying to squeeze the company and maybe it's not such a great place for you to go after all if you like this kind of content please let me know by subscribing below but certainly ask your questions in the comments below I'm gonna try to use my Thursday posts for answering these types of questions and less focus on the interviews themselves so that you can have questions that you can ask in your interview post your audition for whatever it is you're asking so you can learn smart things about the company learn from their employees learn the things you need to know but asking the way that positions you very very well and stand out from the other candidates looking for the same job

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Id: 1H5C5fSYeNE

Length: 21min 20sec (1280 seconds)

Published: Thu Jul 02 2020