Every quarter we gather Vice Presidents in PE to discuss current industry topics and to offer these peers the chance to gather, share information, and decompress with one another. In our most recent event, we discussed how scarcity and inflation are impacting human capital in PE as well as how firms are approaching finding opportunities in a choppy market. We’ve listed our top takeaways below.
These forums are invite-only and follow Chatham House Rules, so listed below are high-level takeaways only. Are you in private equity and interested in joining fellow PE VPs during our next PE VP Forum? Register here.
Scarcity and inflation impacting human capital: One of the unsung areas where inflation is impacting the economy the most is human capital.
- Firms are taking a closer look at culture to increase retention and not just thinking about wages, but the total employee experience and related rewards.
- Investments are being made in portco HR (CHROs, VPs, Directors) to collaborate with marketing functions on recruiting content to promote the benefits of an organization beyond dollars per hour. Portcos are also utilizing their current staff to recruit and network with candidates, such as incentivizing them with referral bonuses.
- Another interesting concept is building in-house training programs to grow net-new talent pools instead of taking and losing employees to and from competitors.
Finding opportunities in a choppy deal market: The confluence of rising interest rates and geopolitical pressures are causing the deal market to become increasingly choppy. Firms are looking for ways to find opportunities in the face of risk and rising recession risk.
- Teams are getting creative in deal sourcing by exploring new channels by moving down-market and supplementing with add-ons, focusing on proprietary or limited process situations, looking for failed auctions, and continuing to build new relationships.
- It’s becoming increasingly necessary to be mindful of quality when selecting which deals to pursue and heightened diligence in underwriting, particularly when modeling downside scenarios. This has become even more important as we’ve seen multiples climb higher and higher over the past 12 months. Deal teams are adding extra layers of scrutiny to verify that businesses are valued at a level that will be appropriate over the coming foreseeable months.
- Teams are spending significant time exploring targets’ operating leverage to understand performance in downside scenarios.
- A number of firms are seeing an economic reset as an opportunity to find unique opportunities to potentially get quality assets at lower multiples, gain market share, and/or consolidate markets as weaker competitors seek safety and circle wagons.
We thoroughly enjoyed getting to gather with PE VPs to discuss these current industry hot topics. We’d be happy to connect you to the PE-grade, exact-fit, third-party resources you need to assist you in this pressurized market, just contact us here.
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