Change at the Top
In the last three years, 30% of middle market companies
experienced some kind of major transition. An almost equal number,
28%, expect a major change in the next three years. Just under half
of those were a change at the top—a new CEO. For the others,
a major transition came in the form of an acquisition big enough to
be transformative or the sale of all or a significant part of the shop.
These data come from a set of business-transition questions
included in this quarter’s Middle Market Indicator survey. Overall,
the data show middle market companies trying to seize the benefits
of change without letting go of the value of continuity. For example:
- Normal transition due to age or retirement is the biggest reason
for a CEO’s departure, ranked #1 by 32%; but a nearly equal
number, 31%, say a CEO change was provoked by a scale-up
(17%) or a “need to change leadership” (14%)
- “Maintaining the continuity of business operations” during a
transition is the top concern of executives, cited by 49%; but the
second-biggest, at 44%, is “taking the company to the next level
of performance.”
Major transitions come most often to publicly traded companies—
41% in the last three years. Within that group, 62% switched CEOs,
which is substantially higher than the percentage for any other type
of company. Private-equity-owned companies come next. Sole
proprietorships, partnerships, and family firms are much less likely
to replace CEOs.
Companies younger than 15 years are only 75% as likely to undergo
a major transition than older ones. Beyond 15 years of age, the rate
of change flattens out.
