Private Equity Tip: It is Important to Build Trust with Management

Trust Between Management Team and Investor 

In private companies, the management team holds the keys to success. It is essential for investors to develop strong relationships and build trust with the management team for the following reasons:

  • Trust Goes Both Ways - While investors need to trust the management team and believe in their abilities, trust is a two-way street. A lack of trust from management in the investor can impact how management reports good and bad news
  • How Trust Affects Reporting - Investors will want the management team to be transparent when issues arise. Sometimes, management teams may withhold bad news in an attempt to turn the company around before informing the investor. Good news may also be withheld to offset the bad news