The private equity deal market is off to one of the hottest starts ever in 2018 and could be on pace to set a record for both deal count and deal value. As deal teams are pushed to put mounds of dry powder to work, the industry has seen deal competition heat up, lifting valuation multiples and putting more pressure on firms to create value through operational improvements.

Operational performance is in the crosshairs of private equity investment theses, so it’s crucial for executives of acquired companies to prepare for and embrace changes. Here are five tips for executives of newly acquired companies to make the transition to a private equity portfolio company smoother.

Understand the investment thesis

An investment thesis is the plan by which a private equity firm plans to achieve its intended returns over its time of owning the company. It usually consists of four or five main pillars that will become the strategic initiatives the board wants to implement. Having a complete understanding of the investment thesis enables you, as an executive, to align the company’s operations to keep your new private equity owners happy. Remember that private equity firms typically only hold companies for four to six years, so acting on this thesis early is important.

Transform board and investor reporting

Now that the majority of your board of directors are the private equity owners, board reporting will need to adapt to their needs. Private equity firms typically like to have consistency in how their portfolio companies report financial and operating results, so collaborating with representatives from the private equity firm to develop an adequate board package and investor reporting deck will be critical to your success in the new environment.

Set up a budget process that promotes responsibility and accountability

The board relies on a sound budget that it can use to make capital allocation decisions and plan for its capital calls to its limited partners. They will look to the company’s executive management to produce a budget and will hold the team accountable for variances. As such, the budget should be built bottom-up, integrate tightly with operations, and drive accountability from business unit and department heads. Monitoring of actuals against the budget is critical—nothing frustrates a private equity board more than missing a plan.

Exercise transparency with the board

I have seen numerous executives get shown the door by their private equity owners for lack of trust. Private equity owners value executives who are direct, transparent, and prove to the board that they are bought into the investment thesis. More frequent, less-formal communication to private equity owners makes for better relationships and a sustainable structure that benefits both executives running the day-to-day and private equity owners.

Don’t underestimate the importance of human capital

Private equity ownership is a large-scale change that transforms all aspects of a business, including human capital. Depending on the private equity firm’s investment thesis and style, there will be expected and unexpected turnover in the organization and a heightened level of expectations. Embrace change as a full transformation, including taking inventory of your human capital needs and aligning them to the private equity firm’s investment thesis. Failure to transform your team will begin to show in your financial outcomes and might result in board changes to the executive team.

Being an executive at a private equity–owned company can be a challenge, especially at a time when returns in private equity funds are driven more and more by operational improvements. Understanding and adjusting to the ways private equity owners think, act, and achieve returns can help company leaders position themselves for success.