Private equity pros are busy fretting over disappearing returns, but there may soon be something far more frightful for them to consider: Disappearing jobs.
I’ve begun asking senior industry sources about the prospect of private equity firm layoffs, and most of the replies have been in the range of probably to definitely. I’ve even heard that a few brand-name firms have begun holding internal discussions about across-the-board personnel cuts, but the talks are too formative (and perhaps speculative) for me to feel comfortable naming names. Once I can nail something down – perhaps with your help, dear readers – then I will certainly do so.
The basic gist, however, is as follows: Many firms have large analyst rosters, but no longer have enough due diligence work to justify the expense. They also have some senior folks whose lousy track records don’t justify their high salaries. It’s one thing to have a fat staff when carried interest is rolling in, but quite another when you need to make those management fees stretch. The result will be that certain firms will soon experience the type of pain that they have heretofore reserved for their portfolio companies.
Update: It begins.