Founders optimizing for personal profit by avoiding hires create significant key-person risk, making their business less valuable and harder to sell. An acquirer will pay more for a de-risked company with a team in place, even if it's less profitable, because the asset is more likely to survive the transition.

When evaluating talent in a portfolio company, it's crucial to assess executives based on the organization's immediate, foundational needs. Focusing on aspirational, future-state capabilities can lead to neglecting critical basics, creating significant operational and financial risks.

Many founders honestly commit to staying after an acquisition but underestimate the psychological shift from owner to employee. The loss of ultimate control often leads to their departure, despite their best intentions and contractual obligations. Diligence must assess this psychological readiness.

To make a hire "weird if they didn't work," don't hire for potential or vibe. Instead, find candidates who have already succeeded in a nearly identical role—selling a similar product to a similar audience at a similar company stage. This drastically reduces performance variables.

During due diligence, firms identify "single points of failure"—employees who are the only ones that understand a critical system. They'll even ask about dangerous hobbies like skydiving or swimming with sharks to quantify this "key person risk" and understand potential vulnerabilities.

Due diligence cannot quantify a team's crucial soft skills. When an acquirer forces change aggressively post-close, they risk an exodus of these skills and key talent, maximizing the chance of the investment failing. A partnership approach that preserves talent for at least the first year is a much safer strategy.

Despite extensive online and third-party checks, Jacobs considers multi-day, in-person interviews with the target's senior management to be the most crucial part of due diligence. This direct interaction is essential for uncovering hidden risks, opportunities, and the intangible "skeletons" that don't appear in financial statements.

A buyer can mitigate the risk of losing critical talent by making a deal's closure contingent on securing the commitment of a few essential employees. This shifts the responsibility to the seller to ensure those key individuals are motivated and aligned with the acquisition.

PE firms often focus on the value creation plan during underwriting but neglect talent assessment. Evaluating the existing team and planning for development or replacement *before* the deal closes leads to better outcomes and avoids later surprises.