Direct-to-CEO reporting

by TJ Deal

In 2021, over 75% of our Head of Corporate Development searches had the position reporting directly to the CEO of the portfolio company. This is up from roughly 50% in 2020 and 33% in 2019.

What’s leading to this organizational up-level? Here are several potential drivers we identified:

  • Corporate development as a central strategy: While acquisitions have always been a component of the private equity portfolio landscape, it’s now become a central thesis for many portfolio companies up and down the middle market. CEOs are spending more and more time on the function, and it’s no longer unusual for a CEO to be a driving force in sourcing / pipeline development. Because of that, it’s only natural that this position would gravitate “to the table” and report to the CEO directly.
  • War for talent / candidate expectations: In 2019, when only a third of these searches reported to the CEO, candidates viewed this feature as a luxury. In 2020, when it grew to 50-50, more candidates viewed it as a “nice to have.” But in 2021, it became an expectation, and candidates now consider it a hindrance if a role does not include a direct line to the CEO. This has become especially true as candidates are likely viewing several different opportunities that do include this structure.
  • Future compensation: There’s no better way to get the top tier of corporate development roles (and salaries) than to have previously worked alongside a CEO in transforming a business through M&A. For those searches, direct-to-CEO reporting tends to be a “must have” rather than a “nice to have.” Candidates know that by getting CEO-reporting experience, they can accelerate their path to the top-paying portfolio company M&A jobs.
  • Corpdev as more than just M&A: Given the backgrounds and horsepower associated with these kinds of hires, many sponsors want these roles to be involved in more than just M&A. In the current market, it’s not unusual to see Head of Corporate Development hires spending a portion of their time working alongside the CEO on mission-critical non-M&A projects for the CEO. This is yet another reason candidates have come to expect this reporting structure.