June 28, 2022 – Private equity deal activity, both in terms of value and volume, is expected to continue to grow from records in 2021, according to a recent PitchBook analyst note. With more than $1 trillion of capital to deploy—and to support existing portfolio investments—activity will remain strong despite growing financing costs for dealmaking. While it may be too early to predict with certainty, deal-making and exits are easily on pace for a record-setting year, while fundraising is tracking close to 2019’s elevated levels.
ON Partners consultants recently offered observations and insights on the executive jobs in demand, the types of leaders that can help PE-backed companies win, and a look ahead. “The current climate is unprecedented,” said Baillie Parker, partner at ON Partners. “There is so much acquisition activity despite the high valuations.” With growth and PE firms deploying capital at record-setting rates, the need for key executives to lead these companies is vital, according to the ON Partners report. The firm notes that the sharp growth in market demand has made it exceptionally difficult to acquire top talent, and the companies that are successfully bringing on top-tier executives are those moving swiftly and decisively, often exceeding compensation expectations.
“Product and digital leader roles are at the top of the list right now,” said partner Lynda Robey. “Many businesses are broadening the scope of responsibility for these leaders to improve agility and responsiveness in this rapidly changing environment.”
“CEO and CFO are always in demand for PE backed companies, but we are seeing a big increase in chief product officer searches,” said partner Jeff Hocking.
ON Partners points out that the CHRO role continues to remain a critical one, with questions around office space, hybrid workforces, and maintaining company culture all top of mind. “Organizations that did not adequately invest in HR leaders before the pandemic are currently facing challenges in hiring top talent in this area,” the firm said.
While the operating partner (OP) role is typically a step before retirement given the level of experience needed, operating partners are telling ON Partners consultants they’re working harder now than ever before, balancing the role of coach with being deep in the weeds of three or four companies in a hyper-competitive environment. With the pressure to maximize current portfolio companies/valuations, the OP role is even more in demand.
Tindall Sewell Hein, partner at ON Partners said: “It’s not just about your network of CEOs who can step into the OP role, it’s asking, what’s your network as you’re tapping into new industries? Things are moving so fast with PE firms acquiring companies, it’s critical to have people lined up who are highly qualified and can immediately jump in.”
Types of Leaders in Demand
The pandemic has exposed weak leaders across the C-suite and companywide, and many organizations are now focused on replacing those weak links, according to the ON Partners report. “Leaders who are poised for success in the current environment can run toward a fire not away from it and can face ambiguity with energy, optimism, and inspiration,” it said.
Mr. Hocking points out that in the past, financial skills and CEO leadership/advisory experience were sought after. “These are still in demand, but many PE firms are increasingly hiring specialists such as sales leaders, sales ops leaders, and CTOs to one, further differentiate themselves, and two, many PE firms are focusing even more on the operational aspects of running their portfolio companies,” he said.
Ms. Hein says that knowing how to deliver results is also not to be underestimated. “Growth equity PE investments have become more rampant than turnaround firms,” she said. “The PE firm talent must have a fast-paced mindset, understand the Rule of 40 and drive growth in a profitable way.”
“Leaders with a successful track record of leading exponential growth are in high demand now,” said Ms. Robey. “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.”
Mr. Parker notes that he’s “seeing a lot of buy-and-build plays. In those cases, we’re looking for CEOs and CFOs with deep M&A experience.”
Looking ahead, Ms. Robey sees “continued portfolio expansion as competition for deals remains high – potentially stretching some PE firms outside of their knowledge zones or familiar playbooks. This will amplify the importance of building executive leadership teams with the right experience to ensure success.”
“Valuations are higher than ever and the competition for deals is very intense,” said Mr. Hocking. “PE firms will need to balance overbidding on companies and returning investments to LPs.”
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“Private equity firms have dry powder to put to work, but valuations are high,” said Mr. Parker. “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.”
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. Founded in 2006, the firm’s consultants work from offices in Atlanta; Boston; Chicago; Cleveland; Dallas; Menlo Park, CA; Minneapolis. MN; San Francisco; and New York. ON Partners was named one of the 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.
Mr. Parker focuses on board, C-level, and VP-level placements for leading private equity and venture backed companies. His search experience spans over a decade of work across a range of functions and disciplines for both private and multi-billion-dollar public companies. He has completed over 300 searches for C-level, board, and high-level executive leaders across a range of functions.
Ms. Robey conducts board, C-Suite, and SVP/VP-level search assignments with a strong diversity focus in the consumer, services, digital, hospitality and retail industries. She serves private equity, public companies, and growth organizations.
Mr. Hocking identifies board members, chief executive officers and other senior-level talent across functions for technology companies and private equity firms. His clients span the software, hardware, networking, semiconductor, and outsourcing industries.
Ms. Hein builds executive leadership teams at growth equity, private equity, and Fortune 500 companies. She serves a range of positions across CEO, operating partner, and VP-level executive roles with strong focus on diversity placements with a focus on industrial and technology sectors.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media