The Ice Around Exit Activity is Finally Thawing. There are 3 Things Your Hiring Team Needs to Know

How PE firms and Leaders of PE-backed Portfolio Companies Can Take Advantage of a Changing Market to Build Winning Teams?

By Charles Egoville , Andrew Henry , and MaryJeanne Scott

After a prolonged freeze, the market is finally seeing a resurgence in transaction activity, with over 70% of PE firms expecting more deals in 2024 than 2023. Pitchbook cites a myriad of factors fueling this shift, including adjustments to more realistic valuations, improving conditions for public offerings, and a growing desire to deploy capital by investors and larger companies. In response, hiring teams must adapt to new dynamics to attract and retain the talent necessary for maximizing value. Here are three key considerations for hiring teams in this evolving landscape:?

1. Collaborative & Transparent Recruiting is Critical?

As exit activity picks up, with cash generated from investor-backed companies approaching the highest level since prior to pandemic, the demand for experienced executives who can navigate the complexities of transactions will intensify. Hiring teams need to be proactive in securing top-tier candidates and thoughtful about the recruiting process. This means being transparent about the state of the business, offering competitive compensation packages, and potentially speeding up the recruitment process.?

“In today’s market, hiring top CEO or CFO talent demands a collaborative approach. These leaders have exceptional expertise and will conduct a clear-eyed assessment of the business – both strengths and opportunities – often forecasting challenges that even the investment firm may not yet see. It’s crucial for firms to be objective and open to having a transparent dialogue about the company’s true state, allowing the candidate to shape their vision for the future of the business and the team needed to execute it in partnership with the investment firm.”??

–MaryJeanne Scott, Managing Partner, JM Search Consumer Practice?

2. Focus on a Balanced Executive with Flexibility?

With pent up pressure for deal-making, companies must ensure that their leadership teams are not only capable of guiding the company through raising capital, a sale, or an IPO, but are also equipped to scale operations efficiently. Hiring teams should prioritize candidates with a proven track record of leading organizations through periods of market volatility, which will ensure the company is agile and adaptable in a fluctuating market.?

“For investment firms, their approach to portfolio company leadership should remain focused firmly on seeking executives with a balanced approach, characterized by operational discipline coupled with a willingness to adapt when the situation on the ground changes. CEOs with a track record of top line growth and margin expansion at their core, but a willingness to be aggressive and take calculated risks, are almost always a good bet. Strategic and financial buyers are willing to pay a premium for great assets, and there is still capital to be deployed. Build a great company and the rest will take care of itself.”? –Chuck Egoville, Managing Partner, JM Search Healthcare and Life Sciences Practice??

3. Get Intentional About Retaining Key Executives?

As exit opportunities increase, so does demand for top talent. It is crucial for PE firms and executive teams to focus on retention strategies that keep essential leadership in place during this critical period. This might include adjusting incentives to align with the market or creating personalized career development plans that match the company’s long-term vision.?

“There is an insatiable demand for Operators who have proven they can create shareholder value within investor-backed businesses. As exit opportunities increase, Boards and investment firms should be opportunistic in making room for and intentional about holding onto these proven executives. Utilizing beneficial working terms like strong equity packages or hybrid work arrangements can be powerful chips on the table for the most sought-after leaders.??

Ultimately, the CEOs, Boards, and investors that can act decisively will attract and retain top talent, thus positioning themselves to have the right operating team – a key differentiating factor for top-performing investments.”? –Andrew Henry, Managing Partner, JM Search Healthcare and Life Sciences Practice??

By keeping a focus on scalability and flexibility, collaborative and transparent recruiting, and the retention of key executives top of mind, hiring teams can better position their organizations to capitalize on the improving market conditions and ensure a successful transition through the next phase of growth and exit activity.