A key area of a PE due diligence phase is assessing the current structure of the board, its composition, skillsets of executive & non-executive directors, standards of corporate governance and overall level of effectiveness/performance of the board. Board Excellence, leveraging key components of its independent external board review programme, provide a comprehensive due diligence framework to assess critical areas of a board from a PE investor perspective consisting of
- Board information model, Process & Procedures
- Quality of board supervision & decision-making
- Strategy
- Skillsets of chairman & suitability to lead the board post-investment
- Skillsets of current non-executive directors & potential gaps in non-executive director skillsets in key technical or market areas
- Current partnership model between CEO/Executive team with Chairman/non-exec directors
- Oversight of financial reporting & internal controls
- Risk management ( including cyber-security )
The results of this board due diligence exercise not only provide highly valuable insights that will support the overall due diligence process but will also highlight the key areas that will need to be addressed to ensure that the board will make a strong fast start post investment. Many CEOs, executive teams and company boards can be quite surprised by the huge focus PE firms place on the quality of the board information model & reporting, the increased level of engagement between the PE board directors and executive team as well as ensuring the chairman has the required skillsets & approach to leading a PE portfolio company. Depending on the level of PE investment, mix of shareholders moving forward, the deal parameters and the current board’s level of maturity & effectiveness, addressing potential board issues prior to and at deal completion is a critical foundation step in ensuring a highly effective board that embraces the value being brought by the new PE board members & the deeper level of engagement with the executive team.