Private equity is still a relatively young industry, with many firms being founded just 30 to 40 years ago. At many of these firms, it's the founders who are still leading day-to-day operations. That's great for continuity, but what about the future? As the industry matures, more founders are focusing on the future and developing strategies to keep their firms thriving long after they retire. Many firms are coaching the next generation of partners through formal processes and programs. (Watch the video at the end of the feature.)

Watermill Group, founded in 1978 by managing partner Steve Karol and his father, is a classic example of a lower middle-market firm that realized it was time to groom the next generation of leaders. With most of the Lexington, Mass. firm's partners reaching the age of 60, Watermill implemented a leadership training program for mid-level professionals. The results have been positive.

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