HUNT SCANLON MEDIA:
Governance for PE funded companies is quite different than for public companies since they are owned by the PE firm as investors to produce a return for themselves, LPs and the employees of their portcos (usually a three to seven year hold period), according to Keith Giarman, managing partner, global PE practice at DHR Global. “The ultimate determinant on value is the price and therefore IRR they can command when the asset is sold to a strategic or another financial buyer versus quarterly results tied to earnings and increased stock price,” he said. “They utilize a collective governance approach driven by the firm to deal with changing issues inside their portcos that support individual boards and the management teams of the portco.”
“This distinction needs to be understood before delving into how adaptive governance plays in their environment versus public firms,” Mr. Giarman explained. “PE-owned companies, being privately held, face little scrutiny. Governance happens through private board meetings, lender covenants, and LP reporting rather than public filings. On the other hand, they fundamentally need to deal with the same rapidly changing environments in very different ways.”