October 28, 2021 – Lynda Robey, Jeff Hocking and Ballie Parker are partners with ON Partners. With a primary focus on technology, consumer, industrial and the life science sectors, ON Partners recruits C-level and board talent for public and private companies, as well as venture capital and private equity firms. ON Partners was also named of the one fastest growing search firms this year by Hunt Scanlon Media. The firm is now ranked as one of the 20 largest search firms in the nation.
The recruiters recently joined Hunt Scanlon to discuss the private equity sector and what shifts they have seen within the sector in recent months.
What got you three interested in private equity? How has that field changed throughout your careers in search?
Robey: I had my first experience with private equity on the corporate side with Kinko’s. I was part of the early team to join when corporate headquarters were moved to Dallas and fortunate to stay on to lead new store openings after the acquisition by FedEx. I enjoy working with private equity backed companies because of the tremendous untapped value present in the business. It’s energizing to bring the right executive to the team to unlock a brand’s potential and also know that the leaders and team will be rewarded for the value they drive.
Hocking: I like working directly with investors/board members, they have a specific vision for the company vs working with line executives who have their own agenda. PE-backed companies are larger and more stable than VC-backed companies.
Parker: I quickly gravitated towards private equity after a handful of searches in the sector early on in my career. I like that the companies are producing revenue, profitability and have a specific outcome in mind based on a fairly specific investment thesis. The field has become more expansive over time. The current climate is unprecedented. There is so much acquisition activity despite the high valuations.
What are some hot roles you’re seeing PE firms looking to fill right now?
Robey: Product and digital leader roles are at the top of the list right now. Many businesses are broadening the scope of responsibility for these leaders to improve agility and responsiveness in this rapidly changing environment.
Hocking: CEO and CFO are always in demand for PE-backed companies, but we are seeing a big increase in chief product officer searches.
What kind of leaders are PE firms seeking at the moment?
Robey: Leaders with a successful track record of leading exponential growth are in high demand now. PE firms value
the ability to execute day-to-day in what can be frenetic growth environments while also building systems to support future growth.
Hocking: Typically you think of turn-around experience with PE firms, but the big push now is finding leaders with growth experience.
Parker: I’m seeing a lot of buy-and-build plays. In those cases, we’re looking for CEOs and CFOs with deep M&A experience.
Over the past year we have seen a number of private equity firms invest in executive search firms. Can you tell us how PE outfits and search firms make a good match?
Robey: I believe the recent increase in investment in the search firm space is simply linked to the overall momentum we’ve seen with PE deals and a diversification in investments. PE investors may find adding value to a model that is predominantly fueled by human capital more challenging than with other professional services firms where technology/data elements.
Hocking: I actually do not think this is a good idea. It’s a risky investment when your products/IP walk out the door every day. The switching costs to change search firms typically is low, so there are no recurring revenue guarantees.
Parker: PE firms like investing in companies that are highly profitable and have a strong macroeconomic outlook. With a shrinking pool of experienced executives due to retirement, and a demand for more specialization across executive functions, we are in high demand.
What do you see looking ahead for the private equity sector?
Robey: Continued portfolio expansion as competition for deals remains high. Potentially stretching some PE firms outside of their knowledge zones or familiar playbooks; which will amplify the importance of building executive leadership teams with the right experience to ensure success.
Hocking: Valuations are higher than ever and the competition for deals is very intense. PE firms will need to balance overbidding on companies and returning investments to LPs.
Parker: Private equity firms have dry powder to put to work, but valuations are high. It will be interesting to see if their latest funds through this boom are relatively successful compared to others or if we hit a tough market and realize in retrospect they were buying at the peak of the market.