Private equity funds hire in juniors

It's been a good year globally for private equity funds, whose partners are in line for a pay bonanza. But recruiters say junior private equity staff top the list when it comes to hiring.

"We've been extremely busy recruiting people who are fairly junior," says Barbara Valaperti, a partner at Heidrick & Struggles in Milan. "Many of our clients are top heavy and their execution capability has been a little light. There's been space for hires at the base of the pyramid."

Jonathan Goldstein, a principal at New York City-based Sextant Search, says there is a similar trend across the Atlantic. "Private equity funds are showing strong hiring from the analyst level up," Goldstein says. "These firms are leanly staffed at the best of times, and they have been very leanly staffed of late."

But that's not the only reason for the hiring boom. Recruiters also cite two other factors. First, the fundraising climate is favourable. The Blackstone Group, for example, is well on its way to raising a bumper $12.5bn fund. Secondly, the arrival of hedge funds like Crest View Partners and Eton Park Capital in the private equity space also are feeding the demand for new hires. "Hedge funds have been able to raise a huge amount of money very quickly," Goldstein says. "They've recruited a couple of people from the private equity world to focus on long term investing."

In Europe, recruitment is being driven by mega-deals, such as Starwood Capital's buyout of French champagne company Taittinger, valued at €2.6bn ($3.0bn) According to Initiative Europe, a research group, the total value of European private equity transactions soared to €94.8bn in the first three months of 2005, up 50% over the same period last year. Third quarter private equity activity was abnormally strong in France and Germany, where transaction values doubled and tripled, respectively.

Sedate hiring in France

Valaperti, who doubles as a consultant in Heidrick & Struggles' Paris office, says the French market is trailing the Italian when it comes to recruitment: "France is much calmer," he said. "Right now, most of the teams are well staffed, although there is still some strengthening at the junior level."

Pan-European hirers include Electra Partners, a UK mid-market private equity group with more than €2bn ($2.4bn) under management, which added five junior associates across its London, Frankfurt and Paris offices in October. Cinven, another UK-based fund, recently opened an office in Italy, joining the likes of 3i, BC Partners, Apax and Bridgestone, which are already well established in the country.

Despite the widespread pursuit of junior staff, private equity recruiters say there's no sign of funds relaxing their strict admissions criteria. In continental Europe, Valaperti says funds look for candidates with experience working at top strategy consultants or at investment banks. Two of Electra's new associates, for example, came from Bain & Co. and one joined from JP Morgan.

In the US, Goldstein says, funds are fussier than ever. "As the private equity market has matured, funds are becoming narrower in the types of background they're looking for," he reports. "They're less willing to hire people without previous private equity experience. If they recruit through us, they're not even willing to entertain the idea of hiring someone who's been a banker, consultant or lawyer."