Private equity jobs are out there, but thin on the ground

Do you have a good sciences degree from somewhere like Oxford or Cambridge, a top MBA from somewhere like Insead, and some years at a bulge-bracket bank like Goldman Sachs or Morgan Stanley behind you?

If the answer to all of the above questions is 'yes', then perhaps private equity/venture capital, these days termed together as 'private capital' is your calling.

But beware - it is currently a buyer's market, and as a career, its demands are exacting. &quotEducation, flexibility of intellectual horsepower, a 'nose' for investment judgement as opposed to deal-making skills, and the 'right' attitudes to behavioural risk, are some of the attributes for success in this business,&quot says a senior headhunter at a global search firm who deals with private equity and VC search.

On the VC side, making early investment decisions, you find mavericks, entrepreneurs, and those with a 'nose' for judgement. They have largely gone into hiding at the moment, shell-shocked at the plunging share prices and bankrupt portfolio companies that litter the horizon.

Private equity people overseeing existing investments are said to be more about analytics, operations, and deals. They are more systematic - and perhaps they need to be.

A report by KPMG and Manchester Business School, which polled senior executives from 24 private equity houses with a combined capital of 57bn under management, found a definite need for superior business management skills if private equity investors are to 'add value' to the companies in which they invest.

While the debate about the skills required continues, headhunters face largely flat markets for a sector that could take off at any time on an underlying rising level of activity.

Towards the end of last year 3i, the global private equity firm, said it was cutting 185 jobs, amounting to 17% of its staff, and closing seven offices across Europe. Other firms have also cut back or closed.

Some hiring continues, however. Apax Partners expanded its operation in Paris in December to manage an increase in French deals, while this year PPM Ventures has opened an office in Singapore.

James Hickman, partner in financial services at global search firm Russell Reynolds, says: &quotThe main activity is within the portfolio companies, with funds hiring for themselves. There may be a handful of investment bankers being hired but otherwise it is very quiet. They are looking at deals but not doing anything.&quot

A reluctance to commit themselves is characteristic of most VCs at the moment. The bulk of hiring is in areas where they seek an upgrade of existing talent in a bid to rescue flagging companies. The need to change a CEO, CFO or executive chairman is often seen as paramount to turn around a company.

In making those decisions, many portfolio companies require a form of management assessment, or due diligence on human capital. This is notably provided by search firms such as Egon Zehnder, which has led the way in relationships in the UK and Europe in private capital.

Joe Haim in London, who heads Egon Zehnder's private equity practice for the UK and Europe, says that out of every 10 assignments the search firm gets in this field, at least five currently involve its human capital due diligence service. He says: &quotIt is a way of finding out whether the team works, and exactly how it works together.&quot

Haim says the pool of people is small, the networking tight and the long-term relationship between candidate and headhunter is everything.

In Europe, the UK is the most advanced private equity market and Germany comes second, with more players per square inch and less to do. France is less developed than Germany, while Spain and Italy are fledgling markets.

There is activity also as the more traditional UK firms such as Candover look to expand on the Continent and find German partners.

At the niche financial services search firm, The Rose Partnership, newly-appointed managing partner Heather Kleeman is also responsible for senior levels of private equity search. She says: &quotSince the 3rd or 4th quarter last year most firms have put a hold on hiring and decided to sort out existing investments. The economics of pay (at top levels) makes it very difficult to hire people because of the carry.

Carry is a share of profits received by many private equity firm employees.

Headhunters find they are chasing staff who are high quality but do not want to move job, while being approached by people who are desperate to move into private equity but are not wanted. As a result many are watching the sector from the sidelines.

Haim at Egon Zehnder says the excitement of filling many positions lies partly in the way they are inter-linked. &quotFive years ago 70% of the private equity business was chasing the top tranche of people - now you look for 'operating partners' in tranche two, 'killer managers' in tranche 3, and a fourth tranche of non-executives dictated by a rise in interest in corporate governance,&quot he says.

&quotThe person you spend nine months recruiting will also be the one responsible for giving you the mandates for tranche two, three and four,&quot he says.

A company such as Invesco, for example, may have 15 portfolio companies amounting to a huge market capitalisation - it is a niche in which &quotit is wonderful to be a headhunter,&quot says Haim.

James Marlar, who launched a wealth management business last year under the umbrella of the search firm Marlar Bennett, says: &quotIn Switzerland there is a lot of interest in the hedge fund industry. Non-traditional wealth management is looking at people from VC backgrounds as well as private banking.&quot

But as another headhunter puts it, private capital experience is unlikely to make you want to jump ship to private banking or wealth management. Those fortunate enough to have a good background and reputation are more likely to bide their rime waiting for the next good deal.