Our recent breakfast workshop run by Robin Hindle-Fisher and David Cooper from Praesta Partners resulted in a fascinating discussion about the qualities that make private equity professionals successful and how they can also be their biggest weaknesses.

Robin and David brought out some cultural norms and behaviours that we associate with successful private equity investors and showed how they can hamper their personal and professional development. For example, the high degree of intelligence, stamina and resilience that private equity professionals exhibit which enable them to get deals done can manifest themselves in an abrupt and impatient manner which may result in alienating management when working with the portfolio.  Similarly, high levels of confidence and impatience with a strong sense of certainty can cause them to repeat mistakes and not develop as an investor.  

There were also some interesting insights into the level of team working that these behaviours generate. For example, the level of high self-reliance and strong appetite for control is counter to strong team work and can result in poor delegation and a resistance to being managed.  And yet it would seem logical that the best investment decisions would be made as a team and output could be maximised by strong team work.

On the plus side, everyone felt that private equity professionals were open to considering their own personal development and by pointing out the results of some of their behaviours, the investors were happy to adjust their behaviour.  After all, their own self interest would be served by being better at the job they do.  Robin and David had some great suggestions about how to manage these behaviours within private equity firms. For example, by re-framing the poor leadership behaviours as common traits of highly skilled individuals – which normalises the behaviour and enables it to be dealt with in a less personal way.More...

On a recent visit to our offices in Mexico and Colombia I was struck by the mix of excitement and professionalism in both countries regarding the growth and development of their nascent private equity industries.  There is a small handful of established domestic firms – established means on their second fund – most are either fund raising or investing their first fund. 

The knowledge and drive of the people in the funds is evident. And the people are on a par with the most successful mid-market US or European funds. Most investments have growth at the core of the investment thesis and the private equity professionals are using their talents, knowledge and skills to build nationally significant businesses in their countries.  Talent travels around Latin America – whether in the private equity firms or in their investee businesses and the search for management talent is continent wide.   This creates search challenges but also brings breadth to any people search.  And there is real willingness of individuals to relocate for the right opportunity.

Recent legislative changes are freeing up the opportunity for pension funds to invest in private equity and there is an increasing amount of funding becoming available for new private equity funds. Nevertheless, the concepts behind buy-outs, growth capital and venture capital are new to the business community and the private equity industry is playing a role in educating business to the benefits of this type of funding.  Buy and build type opportunities abound and the private equity firms are using platform acquisitions to consolidate sectors and build national brands in everything from healthcare and education to consumer goods and manufacturing. More...

With continued turmoil in the Eurozone and stalling growth throughout western economies, investment banks are once again reducing head counts with further rounds of redundancies.

A common misconception is that it is the worst performers that are made redundant and the best talent is always retained, which we have found isn’t necessarily the case.  And there is also the knock on effect that the uncertainty creates in the minds of the people who are left behind.  These create great opportunity for private equity in the hiring process. 

The uncertainty means that everyone is keen to consider other options and even the best performers are showing increased flexibility in the areas they will consider which can be great for secondaries and fund investing teams where candidates’ focus on direct roles has sometimes deterred them.  There is also a little more flexibility on compensation and location. And the timescale to hire and availability to interview is vastly improved for those actively looking.

Redundancies have been across a number of levels and from what we’ve observed it appears analysts with one/two years experience or associates with five/six years experience, and those at VP level are most likely to be facing possible cuts.

It’s a good time to hunt for talent in the banks whilst there is this window of uncertainty.  We would be pleased to advise you on the situation in specific banks and the likelihood of meeting your hiring targets from these pools.

Gail McManus - PER

Using case studies can be an effective tool to assess candidates during the interview process. In this video, Rupert Bell explains the merits of using case studies as well as the attributes you should look for to make sure you find the best candidates for your business.

If you would like to watch the video and you are reading this through RSS feed or e-mail, please click this link.

In this video Gail discusses best practice for benchmarking salaries for private equity funds and how to make sure you get your compensation plan and pay grades as accurate as possible.

If you would like to watch the video and you are reading this through RSS feed or e-mail, please click this link.

On the face of it, recruitment of a senior private equity professional follows a similar pattern to a junior hire: choose a search firm; set the criteria; draw up a shortlist; select your preferred candidate; negotiate a package and fix a start date.  If only it was that simple.

Firstly, let’s consider why the need exists. At junior levels, the recruitment is often triggered by the need for more execution resource. In the case of senior hires, the need is usually to add something new: a sector capability; geographic coverage; greater exposure to strategic relationships or enhance the team ahead of a fundraising.  And it can’t be filled by the preferred route of promotion from within which rewards performance, builds loyalty and re-enforces the firm’s culture or DNA.

The perceived risks of bringing someone in at senior level are high.  Senior appointments come in over the heads of mid level colleagues, risking frustration and resentment. The harshest judges of your new partner will often be those below them in the hierarchy. Making clear what the deliverables are for the new hire can help – but don’t set them up to fail.   

What can you do in the search process to get it as right as possible?

Finding the person with the right experience who will fit in is a subtle and complicated process.  It is worth investing time with your search partner to identify the core need that you are aiming to meet. Ask yourself the question - what should our new partner have delivered in their first twelve months and then in the first two years for us to know we made the right choice?  This will identify the skills and experiences you want to bring into your business.

Then overlay the key cultural criteria that will give the best chance of fit into the team. This will force you to think through and articulate your own culture and values and your search partner can help you with the best tools to test for these intangible qualities. 

Timing and package come next on the list of considerations. Many experienced candidates are established in funds, locked in with contracts and incentives and not actively looking for a new position. What cost are you prepared to bear and how long are you prepared to wait for your new partner to come on board?   More...

Despite the economic conditions, we saw a relatively stable recruitment demand across Europe in 2011 and increasing demand in some emerging markets. In Europe, we saw a shift in the types of roles recruited for rather than any increase in volume. In particular, there was increased demand for fund raising, investor relations and fund investing experience at all levels with more modest levels of hiring in the direct investment teams.

Nevertheless, the direct investment demand for associates soaked up a raft of 2009 bankers and by the end of the year European recruiters were struggling to put strong shortlists together from this depleted analyst pool. Looking forward, the 2010 bankers now have a bit more experience and they are starting to make their appearance on recruitment shortlists. The increased uncertainty experienced in the banks at the end of the year has resulted in some analysts and associates feeling increasingly threatened and thinking about their future. We saw their uncertainty reflected in increased enthusiasm for private equity roles.

We also saw mid-market private equity interest in big four lead advisors and financial due diligence managers throughout the year and we had a sense of improving quality from these backgrounds. More...

Greater than 50% of CEOs are unsuccessful in delivering a minimum of twice the investment; reports a study led by Professor Kaplan of University of Chicago School of Business. The million dollar question (or should I say billion dollar question?) for PE firms then becomes: How to ensure that portfolio companies are led by CEOs that are going to be successful?

The main characteristics identified in successful CEOs by Kaplan are: Pro-activity, Efficiency and Persistence. Whilst there are a number of ways of assessing the CEO’s competence in the area including psychometric profiling and interview, the use of a 360 degree feedback process proved to be an effective tool in detecting these three ‘golden’ traits, especially when used with employees up and down the organisation, customers and suppliers.  Using open-ended questions such as the ones that follow, enabled the interviewer to assess the CEO’s competence in these three areas.

• How does he/she achieve his/her objectives? What exactly does he/she do?
• What are his/her personal strengths? In which areas does he/she really excel?
• How would you describe his/her leadership style?
• Can he/she handle criticism? How does he/she react to it?

Private equity firms might listen out for answers that indicate their prospective CEOs More...