Recruitment returns to Germany

Prospects are looking up for jobseekers in the private equity market in Germany. Recruitment firms expect an upturn in hiring this year, especially at junior level.

It will come as a relief to the country's beleaguered industry, which suffered a staff level cut of nearly a third, from 1,600 to 1,100, in 2002, according to the European Private Equity and Venture Capital Association.

Joe Haim, consultant at headhunter Egon Zehnder International, said: "There has been a comeback in German private equity hiring in the past few months. Funds that had laid people off are adding people."

Firms are searching for staff to act as their "financial horsepower", said Haim: they want highly educated 30-year-olds prepared to work long hours. "Most of the senior people have been hired, it's the execution force that is needed," he added.

The staff losses experienced in 2002, which German private equity specialists said continued last year, were mostly among venture capital firms. The market was also hit by the retreat of 12 international mid-market buy-out firms, including Alchemy Partners, Legal and General Ventures and Botts & Company, which pulled out of Germany in 2002 and 2003, while the US buy-out firm Clayton, Dubilier and Rice, and the UK's Duke Street abandoned plans to open offices there.

However, here has been a flurry of activity at the large end of the German buy-out market in recent months, including a €3.1bn ($4bn) bid made in December by Blackstone for Celanese, a listed chemicals company. Merrill Lynch is advising BC Partners, a pan-European private equity firm, on €1bn IPO for Grohe, a German manufacturer of bathroom products.

German tax changes are expected to aid the revival in the fortunes of private equity job seekers. Last month, a clarification by the government of the tax status of private equity funds raised the likelihood they will be classed as tax-free investment vehicles. This is expected to help attract inflows from German pension funds.

Buy-out firms such as Blackstone, Candover and Axa Private Equity hired senior staff for new German offices in the second half of 2003. Mid-market funds such as Advent International and the Fortress Group also recruited late last year.

Merrill Lynch is advertising for associates and senior analysts to work in its European private equity division, covering UK and continental European markets.

As Germany fell out of favour in 2002, the French market became a focus of private equity hiring. Guy Townsend of search firm Walker Hamill said hiring was buoyant as firms that might previously have settled in Frankfurt opted for Paris instead.

Denis Marcadet, chief executive of Vendôme Associés in Paris, said there was a rush of French private equity hiring in early 2003 as funds such as Duke Street, Doughty Hanson and BC Partners sought to establish or expand French offices.

This year, however, French private equity recruitment may go off the boil. SG Capital Europe, CVC and Duke Street Capital hired at the end of 2003, but Marcadet does not expect much additional hiring this year. "There are too many new funds on the French market," he said.

According to Townsend, most French firms are well staffed. Additional hiring this year will be driven by a small number of firms, such as Doughty Hanson, which have only a few staff in their French office.

However, Valerie Barthes de Ruyter, of search firm Whitehead Mann, said some French firms, like their German counterparts, lack execution strength. "There are a lot of coverage people in France, but not so many execution teams." She predicted junior team members will be needed.

There should be no shortage of candidates. Haim at Egon Zehnder said pay at European private equity firms has risen in line with the growth in fund sizes and fees.

According to Haim, a top-notch 35-year-old with three or four years' experience in private equity working in a US or pan-European fund could expect a salary of 200,000 to 300,000, plus three times that amount in shared profits.