The Four Horsemen Of Private Equity Apocalypse

We’ve all heard the aphorism, “a private equity investment is like a marriage.” And, it’s even more true once you realize the dependence that private equiteers and managers have on one another. The success of an investment firmly rests on the shoulders of senior management (they operate the business after all), while senior managers are often at the mercy of the various legal controls that private equiteers have over the business (they provided much of the capital).

It is with this thought that I’m relating John Gottman’s marital communication research to private equity. It may sound like an opportunistic and somewhat tenuous connection, but I’ve come to realize how heavily private equity success depends on human factors. What’s more, people are irrational; poor relations could see parties working against each other even if it means working against themselves. And in private equity, the last scenario we want is managers working against the interests of the business.

Gottman suggested four communication styles that predict the destruction of a relationship (he refers to them as the Four Horsemen of Marital Apocalypse).


The destruction starts with defensiveness; it shows a loss of respect for your wisdom. Symptoms may include investee managers disregarding your advice, arguing excessively, changing opinions to counter yours, or simply using excuses to answer general inquiries. A heart-to-heart, face-to-face, honest and open discussion is all that may be needed to steer the relationship back on course.


This is about making non-constructive critical remarks about others. In private equity, this starts with managers attacking the credibility, integrity, usefulness etc. of their private equity investors. You should see this as a positive, because it means you’ve caught issues early enough to resolve them. Don’t become too defensive; see it as a sign that you’re not managing your relationships properly. The key is to be open and friendly and show some humility—the latter is something private equiteers tend to lack.


This is a visceral feeling of distate or disdain. And unfortunately, it’s difficult to turn back from a truly contemptuous relationship. Once the sight of you makes your manager’s skin crawl, it’s usually too late. Signs of contempt include lack of contact, cold communications and a general feeling that the manager wants nothing to do with you. It is resolvable but it involves taking large risks and breaking through the cold armor of the contemptuous manager.


According to Gottman, stonewalling is the most dangerous stage of all. It reflects complete apathy, detachment and separation. It’s the point where the manager has already made plans to remove themselves from the situation (even if years away) and now feels an odd contentment that better times are on the horizon. Private equiteers can mistakenly view stonewalling as resolved contempt because the manager seems happier, but this is rarely the case. A potential resolution (from the perspective of the firm) is to bring in another partner into the investee and cut all ties. Hopefully, the slate will be wiped clean and the new partner will create a fresh new relationship.

The purpose of talking about these factors is to keep them in mind when making critical decisions that affect investees. Remember there’s much more to success than numbers and contracts; the introduction of a small fee has the potential to change the dynamic of your investee relationship forever and ultimately lead to investment failure. Identifying the four horsemen and having the humility to admit fault is critical to avoiding irreversible damage between your firm and investees.

We people are complex and it’s worth keeping aware of human factors to ensure investment success.


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