When you should underwrite the team not just the asset

Leadership underwriting should continue throughout the hold period because leadership capability is integral to protecting and realizing the investment return. As the investment case evolves, firms need to reassess whether the team can deliver the work that remains and withstand scrutiny at exit.

An early assessment gives the board time to develop talent, strengthen succession, change responsibilities or add capability. Waiting until performance slips or a sale process begins narrows those options. By then, a leadership issue can become a transaction issue, putting exit readiness, value and ultimately returns at risk.

The leadership team assessed at acquisition may face a very different job several years later. The strategy may have changed, the business may have doubled in size, acquisitions may have altered the operating model and the route to exit may have shifted.

Global Private Equity Report 2026 estimates that around 32,000 companies worth $3.8 trillion remain unsold in private equity portfolios, while the average holding period at exit has reached around seven years. Its analysis also suggests IRR begins to stagnate around year seven.

Seven years is ample time for a relatively simple executive job to take on integrations, international expansion and professionalized reporting, and for the leadership assumptions made at entry to lose relevance.

Past performance remains relevant, but it does not answer the most important question: can this team deliver the next phase of the investment case?

Scale changes leadership jobs. A CEO who built the original business may now need to lead through a much larger team and delegate decisions once made personally. A CFO who thrived in an entrepreneurial environment may be expected to build an institutional finance function and steer a demanding diligence process.

The board therefore needs to reassess leadership against the next stage of the investment case early enough to act.

The 2026 AlixPartners Private Equity Leadership Survey found that 65% of PE firms experience CEO turnover during the holding period, with turnover beginning to rise around the end of year two as expectations meet delivery. AlixPartners argues that earlier alignment, assessment and executive support can prevent some unplanned changes.

This makes leadership assessment a portfolio management discipline, not an intervention reserved for underperformance.

PE firms already revisit the assumptions behind an investment as markets, performance and exit options change. Leadership should form part of the same review.

McKinsey’s work on adaptive re-underwriting argues that diligence should be revisited through milestones, portfolio reviews or specific triggers as the investment case evolves. Applying that discipline to leadership means assessing three things.

Individuals. Does the CEO have the range required for the next phase? Can the CFO meet the financing, reporting and diligence demands ahead?

The executive team. Can the group make decisions at the required pace, resolve disagreement and translate the investment plan into coordinated action?

The succession bench. Which critical roles have credible successors, and where would the business be exposed by an unexpected departure?

The answers should be tested against the future requirements of the business, with clear criteria and external benchmarks where appropriate.

Capability is shaped by the environment around the executives too. Overlapping mandates, decision rights designed for a smaller company, or a board cadence that no longer suits the business can slow an otherwise capable team.

A leadership review should therefore look at structure and governance alongside the people themselves. The answer may be clearer responsibilities, a different operating model or stronger support around an existing executive.

The earlier a board understands the gap, the more room it has to respond.

The current team may need sharper objectives, development or complementary expertise. A temporary capability gap may be better addressed by Interim leadership, particularly when speed matters. The Institute of Interim Management’s 2026 survey found that change or transformation remained the most common type of Interim assignment, accounting for 37% of respondents’ most recent mandates, with turnaround and restructuring accounting for a further 13%.

A permanent search becomes the stronger answer when a material capability gap cannot be closed within the existing team or the time available. The brief should come directly from the remaining value-creation plan.

Succession needs runway. Internal candidates require time to be tested beyond their current responsibilities; external leaders need time to understand the business, establish credibility and build a record before buyers begin asking difficult questions.

The EY Global Private Equity Exit Readiness Study 2026 found that 86% of GPs said exit preparation improved valuations, with the strongest outcomes among firms that began 12 to 24 months before sale. Portfolio-company management teams also identified better management preparation as the leading area they would improve in a future exit.

Discovering six months before launch that the CFO cannot lead diligence, the CEO intends to leave or there is no credible successor beneath a founder leaves very little room to manoeuvre. By then, a leadership issue has become a transaction issue.

Buyers will test whether the CEO can articulate the next phase of growth, whether the CFO can support the equity story with reliable information and whether the wider team can answer detailed questions without leaning heavily on one individual.

They will also look for depth. Dependence on a founder, CEO or another executive for critical relationships, decisions or knowledge creates concentration risk; credible succession shows that capability sits more broadly across the organization.

Leadership re-underwriting should begin with the value-creation plan and the work still to be done.

Essenta works with investors, chairs and portfolio-company leaders to assess the individuals, executive team and succession bench against those future requirements. Leadership Advisory identifies where capability or structural gaps sit; Leadership Interim can provide experience where the need is immediate; and Search can add permanent capability against a mandate shaped by the next phase of the investment.

The current team may still be exactly the right one to complete the journey. Re-underwriting gives the board evidence for that judgement and, where the requirements have changed, enough time to act before performance or exit timing narrows the choices.