PE Playbook 2025: Navigating Challenges And Capturing Opportunities

Being the CEO of a PE-backed company has never been easy, but 2024 stands out as one of the most challenging years in recent history. With significant headwinds—including high interest rates, recession concerns, valuation gaps on assets acquired during the pandemic boom, election-year uncertainty, and geopolitical volatility—exits have slowed to a crawl. This has led to the lowest deal activity in three years, as investors continue to wait for more favorable conditions.

But as industry leaders at Chief Executive’s 5th Annual PE-backed Leadership Summit in New York City this week said, the outlook for deal activity is optimistic, with many predicting a rebound in early 2025. They shared best practices for everything from starting partnerships on the right foot to aligning with sponsors, finding the real levers for driving value, and—most important—the keys to a successful exit. Some of the biggest takeaways:

1. Align with the investor’s vision for value creation.

One of the most critical pieces of advice came from Mark Fields, former CEO of Ford Motor and current senior advisor for TPG Capital: “Be very clear and upfront with your investor” about the levers for value creation, whether through operational improvements, digital transformation, ESG initiatives, etc., as well as how that investor expects to make money. “It’s really important to have a clear understanding of, ‘what is my mandate?’”

Mark Williams, CEO of Magna Legal Services, echoed the idea that, whether you’re building infrastructure in the early stages of an investment or preparing for an exit, maintaining strategic alignment with your PE sponsor is paramount. “Without that alignment, you risk constant internal friction,” he said. 

2. Speed, transparency and leadership matter.

Fields noted that the first 18 months of leadership in a PE-backed company set the tone for the entire investment period. Acting quickly to implement the value creation plan and communicating openly with investors will build the early credibility and trust needed to maintain a positive partnership.

Paul Aversano, managing director with Alvarez & Marsal, emphasized the importance of leadership vigilance, noting that CEOs must act decisively, especially when management performance falters. “When you talk to our PE clients, their greatest mistake or regret if the deal goes sideways is that they didn’t change out management quickly enough,” he said, adding, “I force myself and my team to be extra vigilant when times are good. Be prepared for the unexpected.”

Bob Nardelli, former CEO of Home Depot and Chrysler, and founder of XLR-8, noted that leadership is the linchpin of success and advised CEOs to rapidly immerse themselves in the business, build strong teams, and drive accountability. “When you walk into a business, you’ve got to absorb as much as you can—like a dry sponge in a bucket of water,” he said. “If my learning curve [as CEO] is flat, the business is going to be flat.”

3. Focus on operational improvements in a shifting market.

Nardelli shared his proven three-part strategy for driving turnarounds and growth: 1) enhance the core by shoring up fundamentals before making any bold moves; 2) extend the business by looking for adjacent opportunities, as he did with Home Depot’s tool rental program; and 3) expand the market by going after new geographies or customer segments. During his various tenures as CEO, Nardelli was also relentless in his drive for technological upgrades, whether it was introducing self-checkout at Home Depot or bringing SAP software into a $40 billion company still using legal pads for recording inventory. “If you’re not innovating, you’re evaporating,” he said.

In a world where AI and tech disruption are reshaping industries, integrating technology into business strategy is no longer optional—it’s essential, Williams noted. “I feel like if you’re not thinking about technology and how AI impacts your business and how you can utilize it to do better for your clients and employees, then you’re kind of not doing your job.”

4. Get ready to deal

As the PE industry braces for a potential uptick in M&A activity in 2025, preparation is key. Elizabeth Broomfield, managing partner for middle market PE firm Aquitaine Capital, and Georgeta Precup, operating partner with Albaron Partners, both offered optimism about the exit market, but also cautioned CEOs to remain prepared for alternative outcomes. “What if rates don’t get cut as expected? Let’s be prepared just in case,” said Precup.

Broomfield noted the narrowing valuation gap between buyers and sellers, offering a more realistic outlook for future deals. “The gap still exists, but it’s smaller,” she said, pointing to how sellers are beginning to accept lower multiples. For CEOs preparing for exits, the recommendations were clear: use the current lull to get prepared, focus on profitability over growth-at-all-costs, and ensure your company’s governance and technology infrastructure are sound. “Get your numbers tight and make sure the story is clean and defensible,” Broomfield said.

5. People People People

Both PE experts and port-co leaders emphasized that investment in human capital and development of leadership talent are non-negotiables. PE companies have traditional lagged when it comes to developing value creators, said Ted Bililies, Global Leader of Transformative Leadership at AlixPartners, but that is changing, if slowly. “The portcos that actually have job rotational programs and leadership development programs and identifying who will take on those value creating roles, they’re few and far between, but those green shoots are coming up.”

Bililies recommended CEOs have a right-hand leader in human capital unrelated to HR or benefits, “a real CHRO,” he said. “And when you find that person, don’t let them go because they’re worth their weight in gold.” 

6. ‘Don’t B.S. Me’

Whether it’s delivering bad news early or maintaining clear communication throughout the investment cycle, trust will be built on openness and willingness to share tough truth. As Broomfield succinctly put it: “Don’t B.S. me.” Fostering a transparent relationship with sponsors not only allows for better resource allocation, timely problem-solving, and alignment on strategic goals, but if the business hits a pothole, sponsors will be less likely to panic.

In times of uncertainty, in particular, leaders should regularly engage in proactive conversations with investors. “Where CEOs go really wrong is when they hide bad news, because it’s like a snake in the grass,” said Fields. “It rears its head later on when it becomes a much bigger problem for the company to face, and it erodes trust. And when that trust starts eroding, that’s a problem.”