Spotlight: Strong Resurgence in Search Activity in the Private Equity Sector

May 18, 2022 – With a focus on helping PE & VC backed healthcare organizations, Tim Russell, managing partner of The Tolan Group, oversees the business development and recruitment activities for private equity and venture capital clients. Using market demographic data, Mr. Russell consults clients on candidate dynamics, compensation arrangement, and hiring probability. Using data driven analysis, Mr. Russell is able to provide real time intel as to what is needed for completing a search assignment expeditiously with candidate retention as a byproduct.

Mr. Russell recently shared his views on the current state of recruiting at PE firms and their portfolio companies with Hunt Scanlon Media.

Tim, can you provide an overview of the current state of recruiting within the PE sector?
The current state of recruiting within the PE sector remains strong. The search firms that recruit in certain sectors that PE firms invest in are doing very well. GPs are shifting their focus back to growth and scale in preparation for exit, as opposed to crisis management focusing on liquidity and cash flow concerns and strategy adjustment, which is what most of the focus was on in 2020. Hiring across the sector started to heat up in October of last year. The pace picked up considerably as 2021 rolled on and a familiar velocity of deal activity resumed. At the end of 2020, it seemed, everyone was busy. As stated by one of my PE clients during a late-night email exchange, 10 p.m. has become my new five o’clock. Towards the end of 2021, as dry powder deployment deadlines loomed, PE deal flow created extended hours for all involved in PE activity, recruiters included.

What are some of the reasons for the uptick in recruitment activity?
There are many reasons for the uptick in recruitment activity, but suffice it to say that certain sectors are red hot right now. Investment dollars are pouring into the healthcare ecosystem, for example, which is a primary area of focus of our search firm’s recruiting efforts. The firm supports private equity-backed healthcare organizations in securing executive level talent in the healthcare services, healthcare tech, and behavioral health sectors. The Tolan Group works at the C-suite level and can be found most days hunting for CEOs, VPs and directors. The lion’s share of work recently has been for our clients, notably PE firms, focused in the healthcare services sector. This is where management services organizations are formed to help manage the business side of provider organizations. Common specialties that are invested in include: gastroenterology, ophthalmology, orthopedics, rehab, dental, urology, and dermatology.

How has The Tolan Group fared during this time?
We are grateful for our involvement in the healthcare environment. Due to our focus on recruiting in that space, we remained stable throughout last year. In fact, three of our C-level hires actually started at the very beginning of the COVID shutdown. I reached out as a 90-day check-in call with a CFO that we placed just as the lockdown went into effect. When I inquired as to how things were going, he responded that things were great even though he had yet to walk the halls of his new employer’s office and hadn’t yet shaken the hands of any of his new direct reports. That was three months into his tenure.

Are there any nuances for recruiting senior leaders for healthcare portfolio companies?
When recruiting into healthcare portfolio companies, a fair number of executive roles are needed to round out existing teams. This includes operations, IT, HR, finance, business development, sales, and revenue cycle leaders to name a few. But a growing need of late is for clinical help. Everything from physicians to advanced practice professionals to nursing staff and even medical assistants are in demand at many healthcare companies. When growing clinically oriented investments, private equity firms must consider both executive staff and clinical staff in their hiring plans. There were some recruiting firms that didn’t enjoy the same level of stability in their activities. Certain sectors like hospitality, entertainment, and travel were severely affected. Not unlike some manufacturing organizations which retooled and renovated their production facilities to help create PPE during the pandemic, some search firms revised their focus and took their recruiting process into new sectors. sectors such as life sciences, healthcare services, and healthcare tech that all remained active during the shutdown. Some search firms pivoted into the healthcare ecosystem as a means of survival. The healthcare sector is robust right now but there is a learning curve to effectively recruit in the space. Though a recruiting process may exist, applying it in a different sector may present a challenge for the recruiters who need to adapt to the nuances of an unfamiliar sector as healthcare. Those search firms who pivoted into the healthcare space as a means of survival are now glad they did.

What roles are in high-demand?
CFOs top the list of the most requested role The Tolan Group is asked to help clients’ hire these days. To date, CFO search requests are up almost 300 percent from pre-COVID levels at the firm. As GPs continue to plan for post-COVID recovery and exit timelines, the skill-set of the CFO is paramount. Controller requests are also on the rise. Over the last six months we’ve seen a 120 percent increase in controller search requests from our clients when compared to the same time period in 2019. Revenue cycle search assignments are up 80 percent from pre-COVID levels and show no sign of slowing down for the balance of this year. Lastly, M&A roles have been requested at a 200 percent increase from 2019. Suffice it to say, top level finance talent is in high demand. Not only is a specific type of role in high demand at the executive level, but there is a specific type of skill set requested.

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