Mark Hauser understands that the COVID-19 pandemic dramatically impacted the U.S. economy and job market. Unemployment spiked to 14.8 percent, while the economy shrunk a record 31.4 percent. While most people have focused their attention on changes to the general labor market, the private equity sector has also been affected, thanks in part to the emotional response to the pandemic.
The private equity job market has seen an unexpected increase in demand for talent. Sharing his thoughts on recent trends and explaining how they have impacted the structure of private equity positions is Mark Hauser, the managing partner at Hauser Private Equity.
Hauser Private Equity is a hybrid private equity fund manager continuing Hauser Capital Partners’ successful strategy of directly co-investing throughout the lower-middle and middle markets via partnerships with control buyout funds and selectively with managers of growth equity and special situation funds. Founded in 2008 by Mark Hauser, Hauser Private Equity funds between $200 million and $2 billion, depending on the underlying investment strategy. The firm is headquartered in Cincinnati, Ohio, with offices in California and Illinois.
The Impact of the Pandemic on the Private Equity Job Market
“Money doesn’t always buy happiness” is a popular quote understood by all, especially during the COVID-19 pandemic. As businesses shut down and individuals were forced to work from home, people across the globe started rethinking their lifestyles and what is most important to them.
Many Americans, including those in private equity who earn more than $10 million, experienced this trend. Mark Hauser explains that people began to recognize their exhaustion and the desire for something more in life during the pandemic. While some decided to pursue personal adventures, others saw start-up companies as a way to utilize their creativity.
For example, Amy Wu Straton, a former director in a Citi division that worked on financing and risk management for deals, made $450,000 in 2021 and still decided to leave for something new. She explains, “I was just so tired of it. It wasn’t making me happy.” She continues, “You don’t have time to breathe [and] … The pandemic slowed me down and made me take stock.” She and two partners went on to develop the website myasianvoice.com, a site for Asian women who are focused on careers and social impact. She is one of the many transitioning into an entrepreneurial role.
Meanwhile, Sayene Mostowfi, a former global chief operating officer of electronic equities at Citi, accepted the position as president of the Long-Term Stock Exchange, an upstart equities exchange. She reports, “What’s great about working at a smaller company is there’s a direct correlation between the effort that you put into the work that you’re doing and the results that you get.” She continues, “I’m willing to bet that being at a startup will bring better results for me than being at a bank.”
The Response from Major Employers
Swift exits by executives left many employers without critical members on their teams, consequently increasing competition among the talent pool. Mark Hauser reveals that this change required major employees to hand out additional benefits to both existing and prospective new employees.
For example, Bank of America increased salaries for thousands of senior- and mid-level investment bankers and awarded stocks to its rank-and-file employees. Similarly, Goldman Sachs offered special stock awards to roughly 30 top executives and some 400 partners in an effort to retain them. Also benefiting from this trend were junior analysts in the industry, who saw a pay increase.
Unlike the traditional Wall Street environment, today’s companies are offering additional benefits to employees, such as the ability to work from anywhere. Although remote work was required during the pandemic, most senior-level staff were prompted to return to the office as soon as vaccinations became widespread. While smaller firms are more likely to offer executives the opportunity to work remotely long-term, larger companies are slowly following suit.
It’s Time to Negotiate
More than ever, high-level executives have the chance to negotiate their terms, leveraging the small talent pool currently available. U.S. private equity dealmakers closed 6,004 deals worth $787.6 billion from January 2021 through the end of the third quarter – an all-time high. In addition, the overall deal value of carve-outs has surpassed the highest levels ever recorded, and more than 20 private equity-backed companies entered public markets in the United States last year by way of reverse mergers with special purpose acquisition companies. Now in 2022, according to Mark Hauser, a backlog of deals has resulted in private equity firms fighting to get the right people on their teams, often at a much higher cost than previously anticipated.
Mark Hauser supports recent comments from Matthew Shore, president of StevenDouglas: “The current climate for recruiting executives in the private equity sector is incredibly challenging, and I do not see this letting up any time soon.” Shore continues, “Given the incredible bounce back in the economy, the explosion of new private equity firms over the last five to ten years, historic low-interest rates and more a trillion dollars of dry powder to be deployed, finding proven private equity leadership will be challenging for some time.”
A Shift in Work Ethic
Great leaders, especially those with a track record of successful private equity experience, have multiple opportunities available to them today. Private equity firms are not only looking to replace the talent that has left, but they are also cleaning house to ensure they are adequately prepared for the changing dynamics of the industry. The pressures of the pandemic, for instance, have caused many solid B players to transform into C and D players. As a result, firms are looking to replace those executives with others who are more “nimble and agile.”
To attract more talent, private equity firms should consider offering other benefits in addition to flexible work arrangements. Perks that focus on employee happiness, such as access to mental health resources and childcare coverage, as well as education and professional development opportunities, can also lure potential employees.
While finding talent may be difficult these days, many private equity firms have turned to technology for recruitment purposes. A majority of these firms are relying on platforms such as LinkedIn, which can increase and diversify the pool of potential talent.
According to a report from Fortune Business Insights, the size of the global human resources technology market was $22 billion in 2020 and $24 billion in 2021 and is expected to grow to $36 billion in 2028. Although not all positions are best filled via technology platforms, they do serve a purpose in finding prospects who otherwise may have gone unnoticed.
Indeed, the number of firms relying on LinkedIn and other online resources has nearly doubled since the pandemic. Prior to COVID, 42 percent of firms relied on their network to recruit potential employees, with only 10 percent using online methods. While most still rely on traditional methods, the use of online recruiting has grown to 19 percent.
Meeting 2022 Demand
Pent-up demand from the world being placed on hold during the pandemic is requiring private equity firms to move quickly, with more than 60 percent of U.S. companies proposing to initiate new hires in 2022. Those candidates with exceptional experience who are willing to meet the demands of the high-pressure positions currently available in the industry are set to benefit from the current environment.
About Mark Hauser
Mark Hauser is a private equity investor and fund manager with more than 35 years of investing and operating company experience. He is the founder and co-managing partner of Hauser Private Equity, which invests in private equity funds and directly in privately owned businesses. The firm’s four funds have invested more than $300 million worth of capital in privately owned businesses nationally across a diverse set of industries.
Before Hauser Private Equity, Mark Hauser was vice president of Cincinnati-based Reynolds Dewitt Securities. His merchant banking work there resulted in public offerings of Mid-American Waste Systems, Future Healthcare, and Health Images. Throughout his career, Mark Hauser has served on the board of directors for consumer goods and food and beverage brands. He has also served on boards for government-contracted security and defense businesses and digital advertising and textile manufacturing.
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