Today, inconsistent leadership remains a key execution risk in Canadian PE deals. While most firms assess CEO fit pre-close, many still rely on instinct or inconsistent evaluation models, especially in co-sponsored transactions.

One Canadian PE firm shared that they initially approached leadership assessments on an ad-hoc basis. Some deals involved external consultancies; others relied on gut feel. They’ve since introduced a leadership scorecard to better align CEO potential with the value creation plan (VCP). It’s a step forward, though gaps in consistency and depth remain.

One key criterion for leadership assessments is empathy — a leadership trait that has been proven to promote healthier work cultures and improve financial performance. ²

Firms investing early in leadership clarity are better positioned to:

• Coach and support new CEOs
• Align teams through founder-to-institutional transitions
• Reduce cultural friction from legacy norms, identity shifts, and misaligned expectations

Firms that conduct pre-close CEO readiness assessments are 2.4x more likely to meet value creation targets in the first 18 months.

Tips to standardize leadership assessments:

• Track success of past leadership hires with data.
• Customize criteria against the value creation plan, not just generic competencies.
• Use structured tools (e.g., psychometric testing, behavioral interviews, referencing).
• Conduct assessments at multiple stages (from diligence to onboarding to execution).

By embedding leadership data into their deal thesis, firms can reduce post-close drag, accelerate execution, and build leadership stories that defend premium multiples at exit.

Leadership sets the tone, but culture drives performance. It shapes how decisions are made, how people collaborate, and how quickly portfolio companies and deal teams can align post-close.

Yet most firms treat culture as intangible. One Canadian PE firm acknowledged that while leadership and incentives often dominate the conversation, culture tends to be deprioritized, even when its impact is visible.

Cultural friction can delay the realization of early value creation levers by up to 30%, particularly when teams struggle to align with new leadership. Oftentimes in a merger or acquisition, there isn’t an immediate new leadership team right away, or at all.³

Here are a few cultural indicators to pressure-test ahead of investing in a target company:

• Decision-making dynamics: Is there clarity, transparency, and speed?
• Psychological safety: Can people speak up, challenge, and learn?
• Engagement and alignment: Are teams connected with the strategy?

Canadian firms that proactively evaluate and shape culture early are better positioned to accelerate execution and align teams under new ownership.

Talent availability is a growing pressure point in Canadian portfolio companies (portcos), but few firms are capturing its full impact. While firms often track voluntary turnover, they rarely model broader workforce metrics like ramp tie, internal mobility, and team productivity as part of EBITDA performance.

Some Canadian firms are beginning to integrate people data directly into value creation models, not only to reduce risk but also to identify upside (e.g., faster time to productivity, stronger leadership bench strength, and improved span-of-control economics).

Actions for forward-looking PE firms:

• Forecast regrettable attrition and turnover hotspots
• Quantify both risk and opportunity across ramp time, morale, and backfill impacts
• Use people analytics to link workforce trends to EBITDA drag or synergy realization