Private equity management grows increasingly cut throat

Ten days later, Megret and his handpicked successor were forced out in what they described as a "coup d'etat" as PAI's partners named Zinsou the new CEO. Zinsou hasn't led any private-equity investments before, which is a cause for concern for some investors, such as JPMorgan Chase & Co. (NYSE: JPM) and Canada Pension Plan Investment Board.

Megret's departure follows that of Jon Moulton from Alchemy Partners, a London-based firm he founded, after a dispute over investment strategy, as well as that of Colin Buffin, a senior managing partner Candover Investments.

Megret's exit also triggered a so-called key-man clause, which allows investors to opt out of PAI's latest fund. Zinsou halted new investments for six months and offered the firm's investors the chance to reduce the size of the fund by about 40% to win support for the new team. If investors agree to the proposed reduction, PAI will be following London-based rival Permira Advisers LLP and Fort Worth, Tex.-based TPG Inc. in decreasing the size of funds as buyouts dry up.

"These management shakeups reflect how private-equity firms are trying to figure out a way forward in a difficult environment," Mike Wright, a professor specializing in private equity at the Nottingham University Business School, told Bloomberg. "Firms need to recalibrate their model. One has not seen the end of the troubles yet."