Nearly one third of middle market companies experienced a major change and almost half of those changes were a new CEO

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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.