Strong Resurgence in Search Activity in the Private Equity Sector

December 6, 2021 – 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,” said Tim Russell, managing partner of The Tolan Group. “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,” Mr. Russell said. “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 Mr. Russell’s PE clients during a late-night email exchange, “10:00 p.m. has become my new 5 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.

There are many reasons for the uptick in recruitment activity, but according to Mr. Russell 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 the search firm’s recruiting efforts. The firm supports private equity-backed healthcare organizations in securing executive level talent in the health care services, healthcare tech and behavioral health sectors. The Tolan Group works at the C-suite level and can be found most days hunting for VPs and directors.

“The lion’s share of work in the last two quarters has been for our clients, notably PE firms, focused in the healthcare services sector,” Mr. Russell said. “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, he noted.

“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,” Mr. Russell said. “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 candidate 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.”

What to Consider

When recruiting into healthcare portfolio companies, Mr. Russell said that 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 the need for clinical help,” he said. “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.”

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.

“There were some recruiting firms that didn’t enjoy the same level of stability in their activities,” Mr. Russell said. “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.”

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Mr. Russell pointed to 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,” he said. “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,” he noted.

Big Opportunities Ahead

Another dynamic of the current recruiting climate is the roles being hired. CFOs top the list of the most requested role The Tolan Group is asked to help client’s 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,” Mr. Russell said.

He said 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,” he said.

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, according to Mr. Russell. “No one had a page in their playbook for how to manage through a national pandemic,” he said. “Many executives have described last year as “uncharted waters” in their career. Stories abound of innovative C-suite leaders leading their organizations well during the uncertainty. Others not so much. A growing request from our clients is a desire to know how a prospective candidate led through the events of 2020. We have been screening for core competencies of not just operation and financial management – but for crisis management as well. Clear, consistent communication and agility and displaying a willingness to flex have been characteristics moved to the top of hiring manager’s wish lists of ideal candidate parameters,” he said. Leaders with experience in quickly adapting and making adjustments are in high demand.

“As we look ahead at the coming months, we are bullish on the future,” Mr. Russell said. “Healthcare investments are ongoing and PE deal teams are evaluating new platforms at a feverish pace. Many of these organizations will need additional team members to help scale and accomplish the transaction goal. Recruiters who serve the PE backed healthcare community will remain busy,” he noted.

Related: Larger Funds Bring Increased Competition for Private Equity Talent

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media