Two very different camps
The PE-backed energy market currently feels split in two.
On one side are investors who have been in assets for eight, nine, sometimes 10 years. Management teams were hired to grow EBITDA, expand internationally and deliver a clean exit. That exit hasn’t arrived.
I’ve spoken to CEOs and CFOs who admit, privately, that the fatigue is real. They signed up for a defined sprint. Instead, they are running a race with no fixed finishing line. Incentive structures built around a liquidity event lose their force when the horizon keeps shifting.
On the other side, new capital is entering the sector. Lower entry multiples have attracted investors who see opportunity where others see blockage. They want growth. They want momentum.
Both camps face leadership constraints but for different reasons.
Growth leader or survival leader?
In buoyant markets, PE firms hire for growth. They look for commercially aggressive leaders who can execute acquisitions and expand quickly.
In tougher markets, the brief changes. It becomes about optimisation, cash discipline and, in some cases, divestment. That requires a different temperament.
Yet boards still too often hire as if the original investment story will hold.
My colleagues and I have seen leadership teams brought in to execute ambitious expansion plans only to find themselves, a few years later, preparing carve-outs and restructuring programmes. Their performance wasn’t the issue; it was simply that the context had changed. Leadership churn in these situations often reflects a revised investment narrative rather than any individual failure.
Data from AlixPartners shows that more than 80% of PE leaders believe unplanned CEO turnover extends hold periods by up to 80% while nearly 50% consider that it erodes returns (IRR). That is consistent with what we see in practice - replacing a leader is rarely neutral. It unsettles the wider team and resets momentum at precisely the wrong moment.
The fatigue factor
Longer holds create a subtler risk: management fatigue.
Executives in PE-backed businesses trade guaranteed income for the prospect of meaningful upside. That bargain works when the timeline is credible. When it drifts, their motivation inevitably weakens.
We are currently advising a candidate who is pushing back on performance targets they believe are disconnected from recent trading reality. The candidate isn’t being cautious; but is protecting their reputation. That level of scrutiny from candidates is becoming more common.
At the same time, there is a shortage of executives who have successfully led businesses through PE exits. Many seasoned operators have moved into portfolio or non-executive careers. As a result, the pool of proven exit leaders is thinner than many assume.
Incentives, alignment and realism
Extended hold periods complicate incentives. Equity structures designed around a five-year horizon often need reworking when year eight arrives without a transaction. If boards fail to refresh incentives or provide clarity for management teams, retention risk rises quickly.
I also see reluctance in some quarters to commit additional capital to diversification or international expansion that could reignite growth. Everyone waits for someone else to move first. That stalemate does not create value.
The hiring mistakes that persist
Against this backdrop, four common mistakes recur:
- Hiring to the original deal thesis rather than today’s reality
- Assuming adaptability instead of testing for it
- Failing to align clearly on what success looks like in the first six months
- Treating leadership change as a simple solution when pressure builds
The stronger PE-backed energy businesses take a more deliberate approach. They assess beyond the CV. They examine how leaders behave under pressure. They understand both the investor’s culture and the portfolio company’s dynamics. And they are willing to challenge lazy assumptions — including the idea that prior PE experience automatically guarantees success.
A more demanding era
Private equity in energy is not broken. But it has become more demanding and less forgiving.
Longer holding periods, compressed multiples and tougher exits leave less room for leadership mismatch. Fatigued teams, new entrants and a limited pool of proven exit operators add further complexity.
The old playbook assumed predictability. Today’s market rewards adaptability, alignment and clear-eyed judgement.
In this environment, leadership is not just one lever among many. It is the lever.
