HIEC Private Equity Series – Part One: The State of the Market

With so much going on in the Private Equity space, we sat down with HIEC Partner Ed Fanshawe to get his take on the hottest topics in regards to Executive Search in Private Equity. This article will be the first of a three part interview series with Ed.

The current climate

Executive Search in Private Equity is very dynamic, even when markets are somewhat stagnant, with demand for new talent and advisory skills to support the transition of businesses through the different phases of the deal cycle. Private Equity is a vibrant and creative sector where we discuss the application of tech and digital numerous times a day, but it’s the talent that is the real enabler of success – be it finding, buying or exiting a business or making it bigger and more beautiful in between.

Ongoing trends

With the increase in deal flow in the second half of 2020, there has been an associated acceleration of executive hiring across virtually all sectors at the Chair, CEO and wider C-Suite level, as well as operational teams, in portfolio businesses. This reflects a number of wider ongoing trends including:

  • The sheer scale of transaction volumes;
  • An increasingly clinical and insightful focus on value creation through people – to shift culture and deliver growth – where perhaps neither the tech nor the competition in Private Equity allowed or required it previously;
  • A drive to Diversity & Inclusion, governance, ESG and Impact and other considerations previously the concern of publicly listed organisations;
  • New uses for Executive support. Highlighted by increasing requests for advisory panels to guide deal flow and transformation – this is especially obvious with digital, data and SaaS models becoming so relevant in almost all businesses and sectors; and
  • Increasing willingness to swap executives at different stages of a deal cycle.

To a more measured extent, this acceleration has been reflected in the way funds have hired and also with the proliferation of new funds or the expansion of existing funds to new areas such as growth or venture. Finally, it’s worth noting that Professional Services hiring is at an unprecedented scale globally too, so there is clearly an expectation that economic activity will continue at pace.

The impact of 2020

The initial shudder that resonated through the global system was shocking – the time to take stock of business health, investment strategy and to recast plans and actions based on an unknown time and extent of disruption stopped us in our tracks for a number of weeks. Corporate clients also put nearly all non-critical hiring on hold and, for a while, the outlook was pretty grim.

The first response was towards inaction where the businesses were going well, or to find transformation and turnaround executives in case of challenge – especially in non-digital retail and hospitality or leisure where the impact was hardest and, in some cases, devastating. 

After this initial shock, some Investors continued to display a cautious approach and it took a number of months for them to wait out the storm, but a good deal doubled down on digitizing their businesses, conserving cash and exploring new, leaner operating models. In quite a number of cases they also accelerated into new areas, ‘never waste a good crisis’ became a mantra in several global funds.

Unprecedented volumes

Ending the year with unprecedented volumes, it feels that 2020 acted to prove resilience and built confidence.  It drove the acceptance and acceleration of new business models and the adoption of an array of innovative new technologies, operating models and ways of communication which are now paying significant dividends with new customers, transformation and product development and a much more flexible organizational structure.

Debt remains cheap and, whilst specific sector valuations have sky-rocketed, others have plunged, creating buying opportunities and there are a host of new ‘angles’ that can be brought to bear on established businesses such as digitization or new routes to market. On a more pragmatic level, funds who have been holding successful assets are realizing significant returns with demand outstripping supply – we will have to see how buyers do with assets being acquired at up to 40x multiples.

If you would like to discuss any of the points raised in this article, please feel free to contact Ed Fanshawe directly.