When a private equity investor makes an investment it is essentially backing a management team, investing in human capital. But research by our human capital consultancy, Kiddy & Partners, identifies a range of issues preventing firms from maximising this important aspect of their investments, resulting in a surprising 58% of CEOs being replaced within two years of a deal.
Sunk costs fallacy, personal liking bias and attribution errors are all factors which Kiddy’s research found to be undermining decisions around leadership performance. Deal teams are encouraged to form strong relationships with management teams but does this affect their judgment, meaning they’re unable to be objective in evaluating performance?
For further information read about the results of Kiddy’s research – ‘Falling in love’ with management can send investments off track research reveals