Many private equity firms grew too large and were overpaid at the peak of the economic boom, and that’s going to lead to structural changes in the industry. So says private equity manager Guy Hands in a recent interview with the New York Times.
Hands is well known for his own unfortunate $4.73 billion purchase of record company EMI in March of 2007, a move that will likely cost his investors and his PE firm, Terra Firma, millions, if not billions in losses. Now he is desperately trying to keep the business afloat while delivering vast interest payments to the banks that financed the transaction, most notably, Citigroup.
Hands comments that many funds grew so large during the peak that their 2 percent management fee became just as important as the 20 percent cut of performance. Success had less to do with performance than simply bulking up on assets. And managers did not use the excess fees to invest in resources and grow the skill base of their funds.
Now he sees the industry beginning to contract, as firms struggle to raise enough new money (and corresponding fees) to support the hundreds of people they already employ. It is similar to what happened in the venture capital industry in the late 1990s, when investors realized too much money was chasing too few deals.
Nitin Gupta, an executive search expert at Spencer Stuart in India, had some good advice for financial professionals who may have 20 or more years of work experience but have either hit a plateau or found themselves out of a job.
“What looks like a career setback can be an opportunity to leap into a new phase of life altogether,” he says, in a recent article for the Wall Street Journal India.
The first step is to come to terms with the situation and start planning your next steps. Perhaps the first question you need to ask is, do you want to revive your corporate finance or private equity career? If so, Gupta suggests you focus on a few key questions such as:
- What are your core competencies and strengths?
- What really excites you: growth companies, turnarounds, start-ups?
- Could your expertise be useful to smaller companies which do not normally have access to your kind of talent?
- What assets and equity (financial and human) have you built up throughout your career that you can leverage now?
Of course, you may also decide that this is a turning point in your life, and a good time to go in another direction entirely, rather than back to the world of finance. In which case, is this setback really the answer to a subconscious dream you’ve had for years? Do you have the assets and the passion to start your own business, or start consulting, mentoring or nurturing young entrepreneurs? Perhaps teaching, coaching or writing is in your future.
Gupta’s bottom line: what looks like a career setback can in fact be a once-in-a-lifetime opportunity to change the course of your career. And only by answering the big questions and clarifying your next direction, can you begin to build the positive outlook you’ll need to move forward.
The Wall Street Journal has been following the lives of several senior professionals in finance who lost their jobs during the recent downturn.
One of them, Heidi Mannetter, formerly a senior marketing strategist at Principal Financial Group Inc., offers some useful advice for anyone hunting for a job right now, including jobs in private equity. Ms. Mannetter, 33, has an M.B.A. from the University of Iowa’s Tippie School of Management and lives in Des Moines, Iowa. A few of the lessons she’s learned after months of job searching include:
- Network in an organized fashion. Mannetter has started working her network of personal and professional connections in a more systematic way, scheduling regular follow-up meetings with key people.
- Shift to smaller organizations. She has shifted her search tactics from primarily focusing on Fortune 500 companies to smaller firms with headquarters near where she lives. One reason: the ability to meet face-to-face with local executives. She can make a better impression in person than by simply submitting her resume and cover letter to companies far away.
- Be selective. Focus on job opportunities for which you have a genuine enthusiasm. That enthusiasm will come across in your cover letter and interview, and be sorely lacking when applying for jobs that don’t excite you.
- Develop confidence with practice. The silver lining of being unemployed is that the longer you go through the process, the more polished you should become, both in person and on paper.
- Have patience. Mannetter points out that you never know what’s going on in the life of the person doing the hiring. They could well have issues that are far more pressing than hiring for this position. Understand their priorities, and try to strike the right balance between patience and persistence.
