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Private Equity – A Recruiters Perspective

13 Nov 2023

CRS Group Managing Director and Compass Executives Director, Sam Leighton-Smith, discusses emerging trends within the Investor community and the changing landscape being noted from the perspective of recruiters. 

The last 18 months have been a period of solid activity across the health, social care and life sciences sectors. For us personally, we delivered a record number of assignments, which saw us not only firmly secure our credentials in this space and with it the award of Search Firm of the Year at the 2022 HealthInvestor Awards, but also deliver a body of work unsurpassed in our history as an executive search partner. We have delivered over 150 assignments in this time and have accumulated a significant amount of data and insight which is useful to share here.

In the following article, I will share not only the emerging trends in the Investor community, but I will do this through the lens of a recruiter and the changes we have witnessed in talent acquisition and assessment, and what I see will be patterns that will shape the sector over the near future and beyond.

The emerging trends and changing landscape within the Investor community

Firstly, let’s take a closer look at the demand and the changes we saw in the leadership teams. There is little doubt COVID has had a significant impact on sale processes from a timing perspective. One of the effects of this has been an ongoing need to reshape the management teams to reflect the position the organisations have found themselves in. Challenging economic factors as well as the dramatic increases in cost base have led to a greater emphasis on operational efficiency and financial governance.

Little wonder then we have seen a significant increase in the CFO community for example and across operational roles too (COO and MD). For the CFO and finance sector, this doesn’t just manifest itself in greater cost control, but also in assembling the team needed to take a business through the digital and data transformations needed when readying a business for impending sale.

Looking at the placement data, we have delivered a real point of difference here, by bringing new talent into the space. I have always felt that Finance and HR specifically represent an opportunity to demonstrate that skills acquired and honed elsewhere are easily transferable. This has been borne out by our ability to connect our clients to sectors which share common values and commercial similarities; and with it reduce the restrictive nature of diminishing talent pools within the sector.

The rise of out-of-sector hires

Over 60% of our hires this year came from out of the sector, leading this transition were CFO and CPO mandates, yet increasingly CCO and COO mandates saw a similar shift in focus. Data migration, digital transformation and business partnering were top of the agenda for the criteria in demand for the CFO mandates, so as you can see it wasn’t just operational efficiency and cost control that drove the spike in demand this year. For CPOs it has been people led as you might imagine, so connecting into retail and hospitality has enabled us to co-create shortlists with real depth and wider lived experience.

Across the wider leadership team, we have delivered mandates across CEO, COO, MD and into the Non-Executive Boards (NED and Chair). Here too, we have seen more flexibility with our clients having a keen interest in understanding the gains made in other sectors of the PE community. Having a 14-year track record in Health and the associated networks is a big help clearly, but to deliver on the wider auspices of the ESG agenda, the ability to co-create wider longlists brings with it the diversity we strive to deliver, both in ethnicity and gender as well as diversity of thought.

The introduction of ESG and Cultural Intelligence

ESG has been a significant factor in our conversations with our clients. It has enabled us to further develop our offering into advising them on the wider areas of Board composition, or as we refer to it “Cultural Intelligence”. This is an area of great sensitivity but has both commercial and cultural impact. I wrote earlier in the year of the impact I know ESG will have on investment value, and this has been supported by our client’s openness to look at diversity and Board composition through the many lenses of diversity and equality.

Behind these placements have been at least as many briefings, not to mention the conversations we have every day across the Investor community. What have we seen, apart from the obvious Talent challenges? For one, there is a certain amount of neutrality in the market. Funds are there in real depth as is the desire to invest, but with the debt markets as they are and valuations in stasis, we have seen a slowdown in committing those funds to the market.

What is clear is that there will be a surge of investment, most are predicting Q4 this year and into 2024 , so what impact will that have? Talent and the structure of management teams pre and post deal will be examined for sure, but what we will see are new entrants to the market and the obvious consolidation that will follow. Those organisations who were able to get ahead of the talent curve will fare better for sure.

By then, one would assume the cost challenges will have been overcome, and margin pressure would have been controlled, which should lead to some healthy valuations and a resurgence of confidence to a market that has always delivered well for its investors.

Diversity is a force for change

So what do I see from this body of work from a recruiters perspective? One can only see the desire for organisations to look more creatively for talent as essential, not a passing phase. Diversity in all of its forms is a force for change, but one that delivers on many levels. We will continue to advise on the social and cultural aspects of Board composition and with that continue to open up our networks beyond the usual suspects.

Trite maybe, but the true value of any organisation lies within and from what we have seen market forces may slow the need of growth, but not the desire to strengthen and ensure teams are balanced to cope with what may come.

Read Sam’s bio.

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