Many buyouts and growth equity firms added staff this year, taking advantage of a buoyant fundraising market to bulk up their operations, fundraising and credit teams.
The overall pace of industry hiring seems “modestly robust,” said Heather Hammond, managing director-financial services at executive recruiter Russell Reynolds Associates, as firms add mainly to their junior ranks.
According to a survey of buyout and growth equity firms conducted this spring and summer for the 2017-2018 Holt-MM&K-Buyouts Insider PE/VC Compensation Report, 31 percent of respondents planned to add junior investment professionals in 2017; those that did planned to increase the size of their junior ranks by a median of 17 percent.
Another 28 percent said they planned to reduce the size of their junior staffs, while 42 percent said they planned no change.
At the partner level, just 8 percent of survey respondents said they planned to hire investment professionals in 2017, and those that did planned to expand their partner ranks by 16 percent. Another 21 percent said they planned to cut back at the partner level. More than two-thirds, 71 percent, said they planned no change in partner-level staff.
On the administrative side, 29 percent of survey respondents said they planned to add junior staff this year, 31 percent said they planned to cut back, and 40 percent said they planned to hold steady. At the same time, every respondent to the survey said they planned to hold their administrative payrolls steady at the partner level.
And where are buyout and growth equity firms adding positions?
Hammond said that “helping firm after firm build out their portfolio operations team” has been a big hiring theme this year. The firm’s private equity clients range in size from growth equity and middle-market firms to megashops. It tends to take assignments to hire investment professionals at the vice president level and higher. It also hires conducts searches for CFOs, CTOs and other administrative professionals.
In some cases, Hammond said, firms are hiring operating partners: typically former C-suite executives that pitch in on deal sourcing, due diligence and advising portfolio companies. Their time commitment ranges from serving as full-time partners to working as part-time contractors.
In other cases, firms are hiring executives that have expertise in a particular area of operations, such as supply-chain management, information technology or sales and marketing. Examples of their titles, according to Hammond, include VP of portfolio operations, VP of valuation creation or VP of the resources group.
Over time such executives may cycle into operational roles at the portfolio companies, or perhaps get promoted to operating partners. “They’re pretty dynamic roles,” said Hammond.
Among recent examples of operations-oriented hiring, Norwest Equity Partners this summer hired Michael Gerend and Mark Thom as operating partners. Gerend previously was CEO of Edge Fitness, while Thom had been chief operating officer at NEP portfolio company Movati Athletic.
This spring, meantime, Blackstone Group said it was seeking a PE portfolio operations analyst for its New York City office. The analyst was to pitch in on the group purchasing program, financial reporting and IT projects, among other responsibilities.
Solveigh Marcks, founder and managing director at executive recruitment firm Denali Group, pointed to at least three trends generating assignments for her firm this year.
One has been international secondary firms expanding in the United States. A second has been a continuing move by private equity firms to raise money for senior debt, mezzanine debt and other credit strategies. A third has been firms bulking up in their fundraising and investor-relations departments to handle the job of raising money from institutional investors and ongoing LP communications.
Russell Reynolds and Denali Group agreed that PE firms want to see a more diverse range of candidates for open positions, especially women and minorities, than they would have five years ago.
Hammond said pressure from public pensions and other institutional investors may have something to do with the trend. The private equity professionals that she’s asked why, however, point instead to the benefits of hiring people that bring different experiences, perspectives and connections to the task of finding and doing deals.
Said Hammond: “Every search we did [this year], including portfolio operations searches, had a component of diversity, and of stretching outside of private equity into other areas to look for talent we might bring in.”
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