UK PE firms struggle to find new recruits amid thriving market

The UK private equity market is enjoying improved market conditions, with UK-based managers closing funds worth an aggregate £36.4bn over the last 12 months alone, according to unquote" data. Furthermore, deal activity has also been strong, with a combined £31.1bn put to work in 2015 across all strategies (venture, expansion and buyout) in the UK – up from £25.5bn in 2014 and £22.7bn in 2013.

While on the surface this all appears positive, it means GPs need to put that freshly raised cash to work. However, deal sourcing is proving to be more challenging as asset prices continue to rise due to increasing levels of competition. For many, this means building up teams in order to tackle the current environment.

According to several mid-market GPs, finding suitable candidates, in particular those with deal experience, has become more difficult. One source believes this has been caused by events in 2008, when the industry paused and put recruitment on hold.

The magic number
Along these same lines, another industry practitioner points to changes at 3i, which was once dubbed the "venture capital university" because of its former strategy of running large regional teams, often hiring junior members and training them up through hands-on deal doing. Indeed, vast numbers of individuals currently working throughout the UK private equity market are part of 3i's prestigious alumni. Having undertaken a major strategy reform, which began in mid-2012, the once seemingly omnipresent GP has dramatically reduced its staff numbers and altered its investment strategy to focus on larger deals.

"Recruitment is never easy, especially if you want experienced people, you've just got to know where to look."

Charlie Hunt, Private Equity Recruitment

While these potential causes provide some explanation as to why private equity recruitment in today's market seems more difficult than before, Charlie Hunt of Private Equity Recruitment (PER) doesn't buy into these ideas: "I agree that recruitment is now more difficult than it used to be but I don't think this is down to changes at 3i – that gap has been filled by others. It's just more dispersed now – there are fewer large training grounds."

Indeed, with Business Growth Fund now boasting a team of 87 investment professionals and department heads, based in offices throughout the country, arguably the bank-funded entity established in 2011 is picking up where 3i left off. Furthermore, the number of private equity firms operating in the UK has risen dramatically in the last 10 years. According to unquote" data, between 2003-2005, 462 GPs did deals in the UK (including venture, expansion and buyouts). By 2013-2015, 645 private equity firms carried out transactions in the UK, marking an increase of 39.6%. Looking at UK-based GPs alone, there were 251 firms doing at least one deal in 2003-05 and 314 in 2013-15, representing an uptick of 14.3%.

Given the larger number of potential poaching grounds, why is it then that UK firms are finding the recruitment market so challenging? For Hunt, hiring new people is always a challenge: "Recruitment is never easy, especially if you want experienced people, you've just got to know where to look."

Holding down a job
Hunt also points to the market's buoyancy as a further hindrance to recruitment. "There's lots of money around at the moment; lots of funds being raised and deals being done, which means juniors are not moving around as much," he says.

Hunt noticed an increased demand for private equity recruitment in early 2014, coinciding with the improved fundraising market. He believes recruitment will continue to be busy this year as portfolio company growth and fundraising continue to progress.

For those firms looking to hire new team members, one solution could be to look further afield; Hunt suggests family offices as a good place to start. Another solution could be to hire from MBA programmes – something the industry did in the past, and a practice that is more common in the US. Another way around the recruitment conundrum is to think more creatively about new hires – is it paramount for new joiners to have the traditional private equity CV?

But it would seem the ultimate fix to today's recruitment challenge is to hire at a junior level and train new joiners in-house. By doing this, GPs are able to mould team members into their culture and way of doing things, and are more likely to retain employees by cultivating in them a sense of loyalty.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• GPs
• UK / Ireland
• Recruitment
• Top story