You're Assessing the Wrong Thing in Diligence

Most PE firms assess management the same way they always have. A few reference calls. A leadership presentation. A gut feel that's built up over deal meetings.

How PE Firms Currently Assess Management

It's familiar. It's fast. And it produces the same blind spot, every single time: the team that performs well in a deal process is not always the team capable of executing the value creation plan that follows.

I've seen this play out enough times to say it plainly: past performance in a different context is a poor guide to what someone will do in yours.

The sharper question isn't "is this a strong team?" It's "does this team have what it takes to execute the specific thesis we are underwriting?" Those are different questions, and they need different answers.

What Human Capital Diligence Should Actually Cover

The firms who are pulling ahead on this have built real rigour into their process. Vista Equity uses cognitive and personality testing across all portfolio companies. Apollo specifically looks for leaders who can drive change — because that's what most PE-backed businesses need — and they know that quality doesn't show up in a P&L. KKR made a significant minority investment in ghSMART in 2025, backing one of the most respected leadership advisory firms in the industry. That's not a casual move. It's a clear statement about where they believe the edge lies.

And the numbers back it up. Research across roughly 180 portfolio companies found that 80% of businesses that moved quickly to get the right talent into key roles hit their first-year targets — and those companies went on to generate 2.5x or greater returns. The ones that delayed did not recover the time they lost.

Speed of talent decision is itself a value creation lever. By the time your quarterly board meeting tells you there's a leadership problem, the damage is already done.

How to Build This Into Your Pre-Deal Process

The usual pushback on deeper talent diligence is time. Deal processes are compressed. But that logic gets the trade-off backwards. A leadership gap found before close can be planned for, resourced, or factored into price. The same gap found six months after close has already consumed momentum — and in many cases prompted your best people to start taking calls.

Treat human capital diligence as a core part of underwriting, not a post-close problem. The sponsors who already do this know exactly what it's worth. For everyone else: it's worth asking what the current approach has already cost you.