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Taking the Temperature Full Report April 2020 2

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THE RIGHT PEOPLE
FOR SECURING
THE RIGHT PERSON
THE RIGHT
TAKING
THE PEOPLE
FOR SECURING
TEMPERATURE
THE RIGHT PERSON
THE RIGHT PEOPLE
FOR SECURING
THE RIGHT PERSON
TAKING THE
TEMPERATURE
21 APRIL 2020
On Friday 3rd April, PER sent out a survey to track private equity’s response to the coronavirus
situation. So far, we’ve heard back from 684 private equity professionals; 49% based in the UK, 24%
based in the DACH region, 9% across the rest of Europe, 7% in Latin America and 18% based in other
locations around the world.
Across these respondents, 27% were Partners, 26% Directors, with 21% at VP level, 22% at Associate
level and 4% at Analyst level.
To what extent is the current situation affecting your organisation’s recruitment processes?
As we’ve said in our recent updates, not all hiring has stopped. Out of 284 respondents at a Partner or
Director level, 24% are continuing with hiring as planned, 65% have suspended some or all processes
and only 11% have cancelled hiring.
24%
65%
Continuing as planned
Suspended
11%
Cancelled
Does your organisation have plans to change the size of its teams in the next six months?
In answer to our questions about how team sizes were expected to change in the next six months,
almost a third said they expected to increase their investment team sizes, predominately at Analyst and
Associate level. However, across the board, the majority predicted no change in team sizes.
28%
25%
63%
70%
12%
82%
82%
2%
93%
4%
91%
8%
6%
6%
7%
5%
5%
Portfolio / Asset
Management
Fundraising /
Investor
Relations
Finance /
Accounting
HR
Legal
No Change
9%
21%
Increase
28%
17%
16%
77%
78%
81%
71%
Investment
Decrease
1
11%
65%
10%
88%
10%
8%
7%
6%
6%
2%
Other
Operations
Analyst
Associate
VP
Director
Partner
Decrease
No Change
Increase
Is your organisation prepared to make hiring decisions on the basis of video conferencing only?
Video conferencing is often used in the initial stages of a recruitment process; will firms use it to make
final hiring decisions? The results are split in our survey, with 52% saying they would be prepared to
make an offer based on a video interview in at least some cases and 48% saying that they would not
make their decision without a face to face meeting.
19%
33%
48%
Yes
In some cases
No
Do you expect the current situation to affect compensation in your organisation?
Base
14%
84%
Bonus
Carry
1%
66%
32%
40%
59%
Decrease
No change
2%
2%
The majority, 84%, expect to see no
change in base salary as a result of the
coronavirus situation. However, two thirds
expect bonuses to decrease and 40%
expect carried interest to be affected.
Increase
Is your organisation utilising any job retention schemes?
Investment
93%
7%
Portfolio / Asset Management
95%
5%
Fundraising / Investor Relations
95%
5%
Finance / Accounting
91%
9%
HR
92%
8%
Legal
93%
7%
Other Operations
86%
Not using job retention scheme
Using job retention scheme
2
14%
Of the 284 Partners and Directors who
responded, over 95% are not yet utilising
job retention schemes. However, 34
respondents stated that they are using job
retention schemes for administrative or
other operational roles, including finance,
HR and legal. So far, only 17 respondents
stated that they are using job retention
schemes for investment roles.
Most recently raised fund size (USD)
Smaller funds under $50m are making the most use of job retention schemes.
Over 10bn
85%
15%
5bn - 10bn
86%
14%
1bn - 5bn
84%
16%
500m - 1bn
83%
17%
250m - 500m
86%
14%
50m - 250m
86%
14%
Under 50m
22%
78%
Not using job retenti on scheme
Using job retention scheme
Of those who shared further information on these schemes, many appear to be making whole the
salaries of furloughed staff who are within the boundaries of the government scheme. For team
members outside these boundaries, there are a range of actions being taken to make good some or all
of compensation at base salary level (see comments on page 6).
How is the current situation affecting confidence?
Out of 448 respondents from private equity or other investing organisations, 50% said their sense of
job security had decreased and 27% felt more inclined to make a career move.
How ha s the current situation a ffected your s ense of job security?
7%
13%
13%
17%
20%
How ha s the current situation a ffected your i nclination to make a ca reer move?
10%
18%
36%
27%
35%
45%
37%
Analyst
42%
Associate
Decreased
46%
60%
60%
49%
30%
VP
No Change
Director
22%
43%
40%
37%
45%
34%
Partner
Analyst
Increased
42%
Associate
Decreased
28%
VP
No Change
28%
58%
38%
20%
Director
Partner
Increased
We asked the same question to those working in investment banks, strategy consultants and other
commercial due diligence suppliers. While they reported a similar impact on their sense of job security,
they were much more likely to be considering a career move as a result of the current situation,
particularly at Analyst, VP and Director levels.
How ha s the current situation a ffected your s ense of job security?
8%
9%
12%
15%
20%
30%
50%
20%
24%
36%
How ha s the current situation a ffected your i nclination to make a ca reer move?
9%
28%
55%
60%
53%
45%
45%
50%
Analyst
65%
43%
Associate
Decrease
3
65%
15%
30%
VP
No change
Director
Increase
15%
55%
Partner
Analyst
28%
Associate
Decrease
25%
VP
No change
35%
45%
12%
Director
Increase
Partner
How do you think the current situation will affect the following in your organisation in the
immediate short term, ie the next 3 months, and in the medium term, over the next 6 – 12
months?
More than 60% expect fundraising to decrease in the next three months with more optimism apparent
in the medium term, with 42% anticipating a decrease.
Only about 15% of respondents expect new investment levels to increase in the short term, with 75%
expecting levels to drop. Many are anticipating investment levels to return, with 36% expecting levels
to increase and less than 40% anticipating a continued reduction. There is continued pessimism over
portfolio returns with 84% expecting a short-term decrease and this improving somewhat to 58%
towards the end of the year.
It’s no surprise that 74% of respondents expect carried interest and LTIP values to drop in the next 3
months with an improvement to 52% of respondents in the next 6 to 12 months.
6%
3%
13%
15%
19%
36%
10%
31%
3%
18%
12%
23%
24%
36%
40%
27%
84%
75%
63%
42%
3 Months
74%
58%
52%
38%
6-12 Months
3 Months
Fund Raising
6-12 Months
New Investment
Decrease
3 Months
6-12 Months
Portfolio Returns
No change
3 Months
6-12 Months
Carried Interest / LTIP Values
Increase
Main findings by geography
We looked at the findings by geography, which showed broadly similar results to the all respondent
data. The main findings are below.
Carry / LTIP
Bonus
Base Salary
Do you expect the current situation to affect compensation in your organisation?
UK
DACH
Rest of Europe
Latin America
14%
85%
21%
95%
17%
70%
28%
56%
2%
42%
52%
2%
48%
86%
14%
39%
60%
33%
1%
64%
38%
2%
57%
45%
5%
55%
Decrease
4
5%
83%
UK
DACH
Rest of Europe
Latin America
UK
DACH
Rest of Europe
Latin America
1%
79%
No change
Increase
How is the current situation affecting confidence?
How ha s the current situation a ffected your i nclination to make a ca reer move?
How ha s the current situation a ffected your s ense of job security?
8%
15%
18%
17%
38%
24%
25%
36%
40%
21%
40%
39%
41%
43%
29%
47%
62%
54%
45%
43%
35%
32%
31%
17%
UK
DACH
Rest of Europe
Latin America
UK
DACH
Rest of Europe
Latin America
How do you think the current situation will affect the following in your organisation in the
immediate short term, ie the next 3 months, and in the medium term, over the next 6 – 12
months?
Decrease
6%
8%
No change
12%
19%
Increase
3%
14%
Decrease
12%
14%
27%
29%
15%
35%
32%
8%
44%
Increase
13%
17%
40%
14%
37%
5%
17%
39%
11%
11%
31%
24%
27%
52%
43%
40%
50%
37%
35%
3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months
DACH
71%
70%
62%
55%
UK
82%
78%
74%
66%
Rest of Europe
1%
3%
16%
16%
14%
11%
3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months
Latin America
UK
DACH
Rest of Europe
Latin America
New Investment
2%
16%
10%
13%
3%
30%
24%
4%
11%
20%
19%
28%
35%
33%
Fund Raising
13%
14%
21%
28%
33%
38%
32%
3%
20%
37%
15%
86%
89%
83%
84%
41%
80%
76%
75%
69%
65%
56%
41%
21%
51%
40%
No change
51%
55%
56%
52%
49%
38%
3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months
UK
DACH
Rest of Europe
Portfolio Returns
Latin America
3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months 3 Months 6-12 Months
UK
DACH
Rest of Europe
Latin America
Carried Interest / LTIP Values
It has been useful to get a picture of the level of confidence in the hiring and recruitment area with
some general perspective on the outlook for private equity.
We will repeat the survey when we have more visibility on lock-down restrictions being lifted to track
the trends.
5
Comments on compensation support schemes
“For lower earners, we will make whole. For impacted higher earners,
we will top up but up to a certain cap.”
Director, HR, Private Equity, UK, Size: 500m - 1bn (USD)
“We’re topping up so the furloughed staff receive 80% of their normal
salary.”
Partner, Investor Relations, Private Equity, UK, Size: 50m - 250m (USD)
“We’re asking staff to take between a 5 to 20 percent pay cut.”
VP, Portfolio / Asset Management, Private Equity, UK, Size: 50m - 250m
(USD)
“We’re making salaries whole for furlough where actioned.”
Partner, Investment, Venture Capital, UK, Size: 50m - 250m (USD)
“Furloughed staff will still receive their salaries, although they have had
to take pay cuts.”
Partner, Finance / Accounting, Infrastructure, UK, Size: 250m - 500m (USD)
“We have one employee who is a former doctor who is returning to
the NHS for 3-6 months. We are supporting by topping up comp and
benefits to full normal amount.”
Partner, Investment, Venture Capital, UK, Size: 50m - 250m (USD)
“Working less and paying less at the same rate.”
VP, Industrial Company, Germany
“Not yet using any schemes but might be considered in the near
future if things continue for longer than anticipated.”
Director, Investment, Private Equity, UK, Size: 50m - 250m (USD)
“Furloughing support staff only.”
Analyst, Investment Bank, UK
“Kurzarbeit across the company.”
Partner, Technology Company, Germany
“90% salaries for furloughed staff.”
Partner, Investment, Private Equity, UK, Size: 250m - 500m (USD)
“50% cut in base salary for all senior management until end of the
year.”
Partner, M&A Boutique, UK
6
Some of the other insights that were shared with us
“Prospects for doing business in Mexico are rapidly deteriorating.
New USD based investments might find better margins due to peso
devaluation and less competition; however recession is imminent
and that will continue to affect local consumption and demand for
capital goods. Capital raising for Mexico in this environment will be
challenging.”
Partner, Investment, Real Estate, Mexico, Size: 500m - 1bn (USD)
“Carried interest will be severely hit, potentially wiped out completely
for well invested funds.“
VP, Investment, Private Equity, UK, Size: 500m - 1bn (USD)
“Terrible crisis but optimistic about the opportunities post crisis.”
Partner, Investment, Private Equity, UK, Size: 500m - 1bn (USD)
“Firmwide decision not to lay off staff or enforce salary cuts at staff
level. Counter cyclical parts of the business expected to prop up other
departments and partners will take a hit. Still very unclear how the
situation will unfold, but leadership seems keen to invest in keeping
things running.“
VP, Operations, Distressed / Special Situations, UK, Size: Over 10bn (USD)
“We are on hold in terms of investing for the next month or two, but
hoping to ‘hit the ground running’ in 2- 3 months, both in terms of
investment and fundraising.=”
VP, Investment, Venture Capital, UK, Size: Under 50m (USD)
"New investment will be complicated in the short / mid term,
especially in most touched areas (southern Europe), further
exacerbated by difficulty to pro-forma / adjustment for current
covid situation. Most sellers will wait for 12 months full results ie
2021. Industries untouched will be key focus of PE activity. Length of
lockdown will further ease / exacerbate situation.”
Associate, Investment, Private Equity, France, Size: 1bn - 5bn (USD)
“Many PE firms I work with have a hiring freeze in place. Although
some choose not to make it official in order to present a strong
position for the firm for fundraising and retaining AUM. Boutique
investment banks like mine are downsizing.”
VP, Investment Bank, UK
“We are expecting to have a difficult 2020, but consider that before
the end of the year things will be back on track.”
Director, Finance / Accounting, Real Estate, Mexico, Size: 1bn - 5bn (USD)
"Lack of banking market will negate possibility to make most new
investments. Uncertainty will greatly reduce divestment activity too.
Portfolio liquidity key. Likely to be challenging if crisis runs into the
Summer. “
Partner, Operations, Private Equity, Canada, Size: Over 10bn (USD)
7
OUR CONTACT DETAILS
Managing Director
Gail McManus
+44 20 7747 7877
[email protected]
Director of UK
Charlie Hunt
+44 20 7747 7879
[email protected]
Director of DACH
Rupert Bell
+49 89 4111 84001
[email protected]
Head of LatAm
Margaret Cauley
+52 55 6843 8863
[email protected]
Head of Asia
Linn Cheng
+852 2293 2413
[email protected]
PER-people.com
LONDON
Private Equity
Recruitment Ltd
Kinnaird House
1 Pall Mall East
London SW1Y 5AU
T: +44 20 7747 7888
MUNICH
Private Equity
Recruitment GmbH
Neuturmstraße 10
80331 München
FRANKFURT
Private Equity
Recruitment GmbH
Goethestrasse 14
60313 Frankfurt am Main
ZÜRICH
Private Equity Recruitment
(Switzerland) AG
Bahnhofstrasse 100
8001 Zurich
T: +49 69 3487 32130
T: +41 44 562 7225
T: +49 89 4111 84000
MEXICO CITY
PER LatAm, S. de R.L. de C.V.
Paseo de los Tamarindos 400
Torre B – Piso 6
Col. Bosques de las Lomas
CP 05120 Ciudad de México
T: +52 55 6843 8862
HONG KONG
Private Equity
Recruitment Ltd
Level 8, Cambridge House
Taikoo Place, 979 King’s Road,
Island East, Hong Kong
T: 852 2293 2414
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