Leadership Crisis Unfolding at Private Equity Firms
November 29, 2018 – According to a coming research report from Hunt Scanlon Media, the private equity sector can expect to see an expanding bidding war for top talent. Driving the trend: persistent global talent shortages across the C-suite. Nearly every industry and function is affected, including finance, healthcare and biotech, digital and technology, among others.
“Leadership is the new bottom line for private equity operating executives seeking top talent for their portfolio businesses,” said Scott A. Scanlon, the firm’s founding chairman and CEO. “The PE sector is in the crosshairs of a widening war for leadership.”
To help find solutions to the growing talent problem, Hunt Scanlon is convening 300 private equity leaders, chief talent officers and executive recruiters next spring to further explore the topic of ‘Private Equity Recruiting: Linking Talent to Value.’ PE experts will present from General Atlantic, Bain Capital, Korn Ferry, TPG, McKinsey & Company, The Carlyle Group, Caldwell, Apollo Global Management, Egon Zehnder, Hellman & Friedman, Cerberus and JM Search among others.
Building Value with Talent
“Private equity firms are becoming much more attuned to the role that exceptional talent plays in value creation,” said Alan Guarino, vice chairman of Korn Ferry. Increasingly, he said, private equity firms are seeking out Korn Ferry for a myriad of talent solutions capabilities “in an effort to raise the bar on talent strategy,” from the use of psychometrics to other solutions across the talent supply chain.
Related: Private Equity Recruiting: Finding Leaders Who Make Impact
Mr. Guarino is presenting at the conference alongside Louis Eccleston, CEO of client TMX Group Ltd. They will outline in a joint keynote case study, ‘Building Value with a Talent Partner,’ how the two organizations worked together to build a value chain centered on people. The result: $2 billion in market cap was added to TMX in just 36 months.
“Value creation for private equity firms is no longer beholden to financial engineering,” said Mr. Scanlon. “Instead, what TMX illustrates is that returns are best maximized by building top flight management teams to accelerate revenue growth, find operating efficiencies and transform culture. This is one of the best examples I have seen of how it gets done.”
Building World Class Teams
For most private equity leaders and their chief talent partners, “talent itself is now seen as the ultimate value generation lever,” said Glenn Stevens, a talent expert with Apollo Global Management. “Designing, building and enabling management teams capable of achieving their value-generation initiatives are critical to a successful outcome,” he noted.
Related: The Clark Partnership Teams Up With SoftBank On C-Suite Searches
If anyone has done this right it is Apollo. The firm’s private equity business has approximately $72 billion in assets under management – its largest PE fund, Fund IX, closed last year with a record $24.7 billion in commitments. Since it was established 28 years ago, Apollo’s PE funds under management have owned more than 150 companies across a wide range of sectors – from financial, business and consumer services to chemicals, natural resources, retail & leisure, industrial, as well as media, telecom and technology. In every case, a focus on building world class management teams has been at the core of Apollo’s investment and growth strategy.
Booming Private Equity Sector Feeds TritonExec’s Expansion to the U.S.
Aside from the big-branded executive recruiters, all of whom devote significant time and manpower to talent acquisition initiatives throughout the PE space, a number boutique search firms are working alongside these investment brands to provide talent up and down the functional scale.
Following that demand, London-headquartered executive search firm TritonExec has expanded its private equity practice into the U.S. by opening new offices in Atlanta and New York. The U.S. expansion is being led by partner Abe Doctor. Not surprisingly, the firm noted that its private equity practice has been the fastest growing segment of TritonExec’s business.
“For PE firms, nothing is more important than the leaders they place into the companies they oversee,” said Mercedes Chatfield-Taylor, private equity leader at Caldwell. Hiring the right people, she said, can bring great returns. “We’ve helped our PE partners to evaluate opportunities by connecting them to highly relevant domain experts, in ‘real time,’ as they consider any number of highly time sensitive deals.”
Post deal, she noted, Caldwell’s long haul work is often just beginning. “We’ve put in place experienced CEOs and other operators who have helped steward these companies to multibillion dollar exits through IPO and/or acquisition across sectors,” she said.
Related: Private Equity Firms Turn to Headhunters to Grow Portfolio Companies
Human Capital Lens
Of course, the skill sets these leaders possess must have enormous range – and identifying the right mix in one leader is where the well-honed skills of an executive search expert come into play. “The best leaders must have executive presence and the ability to immediately command respect, internally and externally,” said John Marshall, CEO of JM Search.
After hunting down executives for nearly four decades, Mr. Marshall has devised his own cheat sheet for reference. “I look for leaders with strong core leadership skills, who are willing to manage with a hands-on approach, and who can multi-task on a regular basis.” He said leaders with a positive approach to problem solving and who encourage a ‘can-do’ solutions-based approach are an ideal fit for private equity-backed businesses.
“Transformational change more often than not today occurs through the lens of human capital,” said Annmarie Neal, chief talent officer at Hellman & Friedman. H&F, a 34-year old private equity firm with offices in San Francisco, New York and London, prides itself on partnering with, and empowering, management teams. For the firm’s partners, among the most important assets they manage are people and intellectual capital.
In her role, Dr. Neal helps drive the value of portfolio companies by focusing on, and improving, their organizational and leadership effectiveness. “Value creation begins and ends with a well-rounded approach to talent management,” she noted.
Related: Recruiters See Heightened Demand for Private Equity Portfolio Leaders
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media