Building a Foundation for Growth: Governance in Investor-Owned Private Companies

Private equity, venture capital, and other forms of third-party investing in private companies have evolved considerably since the late eighties, following the events memorialized in Barbarians at the Gate. Yet, as practiced today, the operational and governance models that these investors employ for their portfolio companies are still evolving, including how functional and industry expertise is brought to bear, and how governance and board oversight is carried out.  

From growth-capital investing and support for mature, entrepreneur-led businesses to turnarounds, carve-outs, and management buyouts, private equity, venture capital, and other private investors vary significantly in governance style and board oversight for their portfolio companies, yet their pain points are the same.  

Informed by interviews with executives, board members, and investors of investor-owned private companies, this handbook, developed in collaboration with the KPMG Board Leadership Center, examines the governance styles and board-oversight practices employed by these investors for their portfolio companies. It focuses on five key areas of responsibility for board members: 

1. Understanding the roles and expectations of investors, directors, and the CEO 
2. Clarifying governance protocols and board-operating processes 
3. Navigating boardroom dynamics 
4. Creatinge incentives and mitigating risk 
5. Positioning for an eventual exit or capital transaction