Welcome aboard: PE recruitment amid coronavirus

For an industry in which job descriptions rarely feature "opportunities for regular home working", private equity has had to take a crash course in flexibility over recent weeks. The travel bans and subsequent full lockdowns enforced across Europe initially took their toll on dealmaking and fundraising – with face-to-face due diligence and site visits eschewed in favour of video conferencing, in order to keep processes alive as much as possible.

But as PE firms aim to bolster their current portfolio companies and position themselves to come back strong once the crisis subsides, recruitment is another area where necessity will have to be the mother of invention.

The consensus among specialist recruiters contacted by Unquote is that the market is not dead, although it has admittedly lost some momentum. "There are a lot of questions and inevitable delays in the processes," says Rupert Bell from PER. "But in the main, people are carrying on, and willing to adopt tools like video conferencing to make it work. We are still picking up new mandates for investment professionals, because in any case there is always a long lead time with these, as well as long notice periods to navigate, so we are talking months anyway."

"The market is a mixed picture," Georgia Rankin, a PE partner at Russell Reynolds Associates, told Unquote. "Most of our private equity assignments are ongoing, but at a slower rate. However, it can turn in the blink of an eye. We are also still pitching."

This sentiment was echoed by Finatal in a recent blog post, with director Nick Hague arguing that any drop-off should hopefully be temporary: "The consensus [among PE firms we have spoken to] is that, after the initial shock of how quickly the situation has developed, there's the realisation that it's business as usual, with crucial hires still needing to occur."

Indeed, a handful of hires by European GPs were announced in March. Among these, German private equity firm Hannover Finanz appointed Robert Pauli as a partner in Germany; UK-based ECI Partners hired William Ip in its commercial team and Fiona Evans to head its marketing efforts; Caledonia Private Capital, the private equity investment arm of Caledonia Investments, hired Lazard's Giles Corner as a director; Tenzing Private Equity hired Glenn Elliott as a member of the firm's portfolio growth team (although Elliott had already been leading the firm's Entrepreneurs Panel since inception in 2017); and TPA Capital appointed Jonny Williams as an investment associate. Click here for a full listing of people moves covered by Unquote in recent weeks

It is hard to see a client pulling the trigger on a senior appointment until they have met the candidate in person" – Georgia Rankin, Russell Reynolds Associates

Of course, a number of these processes progressed to the final stages before the crisis truly hit western Europe in March. The extent of the effects on existing processes will depend on two main factors, namely the critical nature of the hire and how advanced the process is.

Meanwhile, recruiters highlight that one of the early obstacles for processes initiated post-lockdown – especially for senior hires – will be cultural: private equity is still a people's business and GPs will only rely on technology to a point. "Most people have switched to video platforms," says Bell, "and you can certainly make great progress there. It is fine for earlier rounds, but I don't see many firms making final decisions based on that alone."

Rankin concurs: "For a few of our searches, all of the key meetings had already taken place in person, and that is really important: it is hard to see a client pulling the trigger on a senior appointment until they have met the candidate in person."

Rethinking priorities
Recruiters also remain realistic when it comes to the inescapable fact that many GPs have had to drastically reassess their priorities in the wake of the pandemic. "Any process will be elongated in the current environment," says Rankin. "No one has the bandwidth to deal with all of the competing business priorities at the moment and hiring is not as high up their list of priorities. Even if you can sidestep some issues (by using video in early rounds for example), GPs will often not have the time to think strategically about the next steps."

Glenn Elliott, who recently joined Tenzing's portfolio growth team, says the firm is looking to recruit a team to support the portfolio, with plans to hire one person each quarter for an initial team of four people. But he also highlights how time-constrained GPs can be in the current environment: "Currently, the only obstacle to hiring at the firm is finding the time to do so. Everyone's working hard on helping the portfolio deal with the coronavirus, so it's just a question of carving out the time to look for hires."

It is not just GPs that could be led into rethinking their plans, too. Even when a start date has been agreed, the question is: do both parties still want to go ahead? "While the candidate may have accepted an offer, their circumstances will have changed and that could influence their thinking," Bell says, although he notes that PER has not seen anybody change their minds as yet.

Rankin agrees that candidates could also take time to see where the chips may fall: "Many PE professionals will be watching portfolio company valuations drop and inevitably contemplate what it means for their carry. This could trigger a case of "better the devil you know", and some people will not want to crystallise losses. Having said that, career planning doesn't necessarily stall in a crisis."

As for processes that did go through in March – or will cross the finish line in the coming weeks – PE houses are still left with the task of onboarding new joiners in very strange times. "Onboarding William Ip was a bit of a challenge in terms of logistics, but we managed to get all the relevant technology and equipment over to him before the full lockdown," says ECI partner Lewis Bantin, who heads the firm's commercial team, when discussing their most recent hire. "We have therefore managed to run a number of training workshops and team calls via Skype and Zoom, and he was also able to access training resources online."

It is not just the practicalities of enabling new joiners to do their job effectively that need considering, either. Welcoming new talent and maintaining this sense of connection when the entire team is working remotely will also need some adaptation, especially for small and medium-sized firms, which often aim to preserve an entrepreneurial culture. Says Bantin: "It will of course require a period of adjustment, but we are maintaining regular contact in the team, via a business-wide call every Monday as well as more regular catch-ups throughout the week within the different teams. And we are gearing up for our first virtual pub quiz too."

If we want to find the right people to put the business on the front foot for the future, we have to keep these efforts going" – Lewis Bantin, ECI Partners

Future-proofing
Looking further ahead, one of the trends that give recruiters cause for optimism is that PE firms will by and large have to resume deploying their vast amounts of dry powder at some point – and thus keep building their teams accordingly. "The challenge is really around timing, because the underlying drivers are still there," says Bell. "Dealmaking is tougher, it needs more bodies, and that hasn't changed. We haven't got any indication that sponsors are rethinking the fact that PE investing is more labour intensive than it used to be. We are also seeing a number of multi-strategy firms pivoting towards more distressed credit (as opposed to growth capital for instance), which is a pretty smart move, and some long-term funds are still bullish on both recruitment and investment."

"We are still actively looking to build the team in strategic areas," says ECI's Bantin. "If we want to find the right people to put the business on the front foot for the future, we have to keep these efforts going. So we are working with recruiters to find the right people and trying to get as far as we can in the current circumstances – although of course you would prefer to have more face-to-face interactions when restrictions are eased."

Meanwhile, Finatal noted that GPs could be on the hunt for cash-focused CFOs and finance directors, particularly those with experience in distressed situations, to bolster their portfolio businesses."Clients are looking for talent who can come into a business swiftly with the skills for building cash flow, cash planning and scenario forecasting," executive consultant Dominic Mellett wrote in a recent insights piece. And Russell Reynolds' Rankin says that her firm is currently exploring the availability of high-calibre CEOs, CFOs and other execs that have experienced prior crises first-hand, in order to help GPs with crisis management.

But once again, given the fact that PE houses will be laser-focused on their portfolios in the coming months and likely to prioritise business-critical hires, one could be concerned for the more junior-level hires in the industry. Terra Firma notably cancelled its 2020 graduate intake, according to media reports, foregoing its usual raft of new analysts that end up accounting for a large part of the junior ranks in its investment team. Others are still keen to push through later in the year though, with Andy Gregory from BGF telling Unquote that the firm would aim to continue growing its network and recruiting talent during this period: "This week, we are conducting a virtual assessment centre for our internship programme, which will take place later this year."

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