TY - JOUR T1 - When to Go and How to Go? Founder and Leader Transition in Private Equity Firms JF - The Journal of Alternative Investments SP - 9 LP - 30 DO - 10.3905/jai.2021.1.144 VL - 24 IS - 2 AU - Josh Lerner AU - Diana Noble Y1 - 2021/09/30 UR - https://pm-research.com/content/24/2/9.abstract N2 - Leadership transition in private equity firms is an understudied field, despite the important, albeit controversial, role such firms play in developed economies. The authors analyzed 260 firms in an empirical study, supplemented by qualitative interviews with a small sample of highly experienced LPs and GP founders and leaders who have experienced such transitions firsthand. Their research shows that private equity transitions manifest very differently from those in better studied public corporations. It appears that a) founders and leaders in GPs stay in their positions considerably longer than other sectors, b) are more likely to move on once they are outperforming, and c) if underperforming, their firms are more likely to see an uplift from a transition. In addition, d) transitions are idiosyncratic, internally driven processes with little accepted best practice or governance, e) some frictions frequently characterize these processes, and f) LPs have observed many suboptimal processes and prefer greater transparency.Key Findings▪ Leadership turnover in private equity is exceptionally low relative to other corporate structures.▪ Transitions have little accepted best practice or governance and are instead driven by the philosophy of the founder and the context the firm finds itself in. They are typically (especially founder transitions) complex multiyear processes with substantial frictions.▪ LPs increasingly recognize the importance of well-executed transitions on the value of their investments but are less than impressed, on the whole, by the performance of the industry. ER -