To deliver superior returns, Private Equity and Venture Capital (PE&VC) investors need to quickly understand the strengths and weaknesses of the management team of the businesses in which they plan to invest, or have invested in, and put together a strategy which will substantially improve their performance, as winning PE&VC strategies rest on fundamental business improvements.
It has been estimated that 40% of a business’ superior ROI and 35% of its income growth stem from the strength of the CEO and the management team, yet they are rarely fully professionally assessed to ensure they are capable of delivering. Indeed, many non-executive directors are still recruited through their network rather than through an impartial selection process. Currently, the number of CEOs removed from businesses for poor performance is around 35% a year.
There is a widely held myth that it is difficult to "prove and measure" the capability of a management team. However, the precision of the psychological measurement of people, organisations and their performance has evolved immensely over the past ten years. This should be good news for corporate financiers and investors who can now use such techniques to significantly enhance the predictability of the performance of management teams.
At Crelos, we have a thorough understanding of the PE&VC markets and as a result we have designed services for firms which have decided that investment in developing their human capital will be a source of competitive advantage. We believe that, in transactions, Human Capital Due Diligence needs to stand alongside, and is every bit as important as, Commercial, Financial and Legal Due Diligence. This is why we have developed our own precision psychology assessment model that has been specifically designed to benchmark executives and their teams against a framework for high performance.
Using our precision psychology assessment model, we provide PE&VC investors with a comprehensive, objective and independent understanding of:
Our reports are impactful and provide clear governance recommendations on key capabilities, areas for development and risks with regards to delivering the strategic objectives for shareholders, stakeholders and regulators. Our proven in-depth Due Diligence methodology on senior team members brings out:
'80% of the 1,000 plus VC-backed firms in the UK are still loss making, and 25% have no revenues. The financial crisis and historic under performance have caused investment in UK VC funds to dry up and the chief contributor to poor performance is, to one degree or another, the failure of the management teams of portfolio businesses.'