Uncertain times lie ahead for Boston's private equity companies.
The main players in the city's private equity industry, Bain Capital and Thomas H Lee Partners, have filed lawsuits against six banks to force the financing of their $19.5 billion acquisition of Clear Channel Communications. Earlier this year, Bain's $2.2 billion buyout of 3Com Corp. aroused concern about national security in Congress, leading Bain to pull the plug on the offer it made with a Chinese partner. THL's MoneyGram International deal had its own troubles before the private equity shop helped underwrite a recapitalization of the company, worth as much as $775 million.
How all this will play out for job hunters remains unclear. Neither company returned phone calls seeking comment. Nonetheless, the pressure the industry faces may heighten worries the region is losing its competitive edge in financial services. In recent years, several big Boston firms - including Fleet Boston, Putnam Investments and John Hancock Financial Services - were snapped up in acquisitions.
Last year, the Greater Boston Chamber of Commerce and the education-advocacy group Mass Insight warned a lack of "coordinated state strategy and fierce competition threaten the (financial services) industry's 180,000 job base." The financial industry is responsible for $40 billion in economic activity and many high-paying jobs, according to the groups' study, which was conducted by McKinsey & Co.
Noting "it's a very important industry," Timothy Sweeney, the chamber's director of public policy, says he doesn't see any trends indicating the Bay State's financial sector is any worse off than the rest of the country's. "We did see a drop-off in securities and mutual funds during the last economic downturn," he says. "Those jobs did start to return and we did make some sizable gains."
Overall, employment growth in the industry is holding fairly steady but that might change given the performance of the stock market, according to Mike Goodman, director of economic and policy research at University of Massachusetts's Donahue Institute.
"Those boom times (for private equity) certainly appear to be over for the time being," he observes. "I'm sure there are a lot firms that are writing down these bad debts just like the other financial institutions."
The picture for private equity is challenging. Older firms that spend considerable time grooming talent are loath to let it go. Tom Taulli, author of The Complete M&A Handbook and an expert on the industry, says hiring at larger firms like Bain and THL may be slowing because "there aren't as many deals to do."
The picture at smaller firms may be bleaker because "the lack of deal flow may hit their bottom lines," Taulli says. Some newer firms "are probably in panic mode," he believes.
Many firms are going to look overseas for growth, which will give job seekers with expertise in foreign countries, and particularly those with foreign language skills, an edge over their rivals.
"Any way you can boost your resume in terms of global markets" will help, Taulli suggests, adding people with experience in restructuring should also do well. However, "if you are the traditional private equity player focused on highly leveraged U.S. deals, it's going to be tough to find a job."