Starting with 3i in January, Philip Yea resigned from the UK-based private equity firm following the revelation that the firm’s top 50 investments had lost £682m (21%) of their value in its third quarter of 2008. Terra Firma followed suit and replaced Guy Hands with Tim Pryce, although Hands stayed on as chairman. SVG Advisors, the UK private equity and fund management business of SVG Capital also replaced CEO Andrew Williams with Tony Dalwood in a move that many believe was attributed to the abysmal performance of the private equity business. And most recently Cinven, following the loss of most of its £175m investment in USP Hospitales, copied Terra Firma’s strategy by moving chief executive Robin Hall into the position of chairman, replacing him with Hugh Langmuir.
The sheer pace at which four prominent chief executives have been replaced seems to indicate that larger private equity firms were getting a push from investors to respond to the well documented problems they were all experiencing. “Investors are always looking at succession issues. Age and performance are the main issues that will lead to resignations but now is the time that firms are looking internally to see how they can grow,” says John Gripton, managing director of Capital Dynamics.
Age seems to be one of the main factors in some of the more high profile resignations. Rumours have been circulating for some time that investors were concerned over Robin Hall’s age (60) and wanted a succession plan from Cinven. “The smart private equity firms that have a more mature chief executive will already have a succession plan in place. These are the firms that investors want to work with. No one wants a one man show,” says Gripton.
For the future, the newly appointed chief executives will face an uphill battle to stabilise their businesses and prevent further right downs. It seems likely that the trend of replacing leaders of ailing private equity houses will continue. “If ever there was a right time to ensure you have the right management structure in place to take on current challenges this is it,” says Roger Kelly, chief economist, BVCA.