Private Equity and Change Management

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LONDON  – Can we talk about money and business? In an honest way? Whether it is “activist investors” like Pershing Square, Third Point and the Blue Harbour Group or private equity firms like Blackstone, KKR and the Carlyle Group, our point of view is the same:

It’s a good thing.

The Horace quote in Latin above roughly translates as “you have played enough, eaten and drunk enough; it is time for you to leave”. That this is relevant for two reasons and in two ways.

Outside forces like activist investors demanding specific changes, or pools of equity that purchase businesses out-right and put in their own management, bring new focus and a “return to fundamentals”.

They renew businesses. They shake them up. They challenge accepted thinking and force new ways of working.

All of this is good. Yes, it is often painful, but in the long run it:

  • saves time,
  • forces issues,
  • realigns strategy and
  • makes people change their behaviour.

At a personal and organisational level the arrival of outside forces can be difficult.  However, the intervention of ‘the money’ is generally driven by a significant opportunity and / or perceived need for radical change. It can be shown that the business can be more successful if broken up, or slimmed down, or pursued under a different strategy.

But let’s go back to the ‘personal and organisational level’ mentioned above.

When Private Equity arrives the impact can be overwhelming. People disappear up and down Maslow’s Hierarchy and the business can come to a dead stop. Looking at it another way:

…leaders desert you, your staunchest allies cut and run, opposition comes from places you least expect, and your fiercest opponent can turn out to be your most vital supporter. In other words, when emotions are running high and the stakes are even higher, people act like people.(1)

That’s what organisational change is all about.

Most Private Equity organisations will say that they make allowances for that. These are ‘charges’ to take or deal costs to consider. However, organisational change managers like Able and How see another way.

Similarly when the money leaves, when the business is floated again, or sold to other owners, or to management, there is another wrench in the system. The party seems to have ended another time and the organisation can drift again, or the phase of change can leave the business burning value again as people are uncertain what they are meant to do and how it all affects them.

That is where organisational change management comes in.  To put it simply:

…one of the goals of change management is with regards to the human aspects of overcoming resistance to change in order for employees to buy into change and achieve the organisation’s goal…(2)

Whatever circumstance Horace was describing in the quote at the start of this article, it was a significant change. When Private Equity, Activist Investors, acquisition teams, new owners, or any other forces change the state of play in a business dramatically and suddenly, they need organisational change management.

Otherwise they are losing value. Losing value in any investment should never be an acceptable plan.

Let’s talk about it.

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  1. Fishman, C. (1997) ‘Change: Few can do it. Few can sustain it. Few can survive it’
  2. www.techfaq.com (2009) ‘What is Change Management?’


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