Is Private Equity a Team Sport or an Individual Pursuit?

Is private equity a collaborative team sport, reminiscent of a well-coordinated ballet, or is it more akin to an individual endeavor where success depends on star performers hitting home runs?

Is Private Equity a Team Sport or an Individual Pursuit?

Is private equity a collaborative team sport, reminiscent of a well-coordinated ballet, or is it more akin to an individual endeavor where success depends on star performers hitting home runs?

While the mental image of deal teams performing synchronized moves on Park Avenue is quite amusing, it’s a question worth pondering.

At one extreme, if private equity were an individual sport:

• It might foster a competitive 'eat what you kill' culture, with deal teams vying to lead and close high-value transactions.
• Collaboration between deal teams and centralized functions might be limited, with an emphasis on individual accomplishments during year-end reviews.
• Teams could find themselves competing for fund equity allocations, with the primary goal of securing investment committee approvals.
• LPs conducting due diligence might prioritize supporting individual deal teams over the entire organization, potentially leading to increased prevalence of Key Man clauses.

It's a high-stakes game where one person or team’s decisions and actions can significantly impact the outcome.

On the other hand, if private equity is treated as a team sport:

• On the other hand, if private equity is treated as a team sport:
• Decision-making power extends beyond deal teams, involving leaders in various domains such as legal, risk, tax, and portfolio management.
• Clear decision-making frameworks define roles and responsibilities, promoting transparency.
• Collaboration thrives, with deal teams and external advisors providing real-time insights and facilitating collective decision-making.

Most seasoned fund managers say that finding the right balance between these two approaches is essential—it's a bit of both.

This distinction matters because it influences hiring choices, how carry is allocated to team members, firm culture, and the adoption of digital tools and practices.

Would love to hear your perspective on this matter. Is private equity a team sport, an individual pursuit, or perhaps a unique blend of both?