To say the private equity industry has grown over the past year is putting the matter mildly. Global private equity transactions exceeded $1.2 trillion in 2021, an increase of 111% over 2020. As a result, many firms are eager to expand their operations in 2022 to build on these gains, and are finding private equity recruiting more challenging than it’s been in the past.
This isn’t the only change affecting private equity firms, either. Investors’ priorities have been shifting over the past few years, and the widespread adoption of remote work and ongoing talent shortages have necessitated significant changes to how companies hire and work. Here are some of the major trends affecting private equity hiring going into the second half of 2022.
Top Talent Remains in High Demand
In a recent survey of private equity firm leaders, 58% said their portfolio companies will be hiring in 2022 because they’re expanding. Growth at the client level means many of these surveyed firms are hoping to similarly increase their workforce, putting more strain on an already tight labor market.
While some analysts predict this growth will cool in coming months, that doesn’t mean business leaders can take a “wait and see” approach with hiring. The 2022 Momentive Workforce Survey found that workers who describe their company as understaffed were more likely to have recently considered quitting than those who feel their workplace is well-staffed. As a rule, a talent shortage is a problem that only gets worse if it’s ignored. Since it’s unlikely hiring will get any easier in the coming months, the time is now for companies struggling to reach or maintain a full staff to get proactive in identifying new talent pools and improving their recruiting strategy.
Increased Focus on ESG
A majority of respondents (69%) in the Dechert 2022 Global Private Equity Outlook said that environment, social, and governance (ESG) issues are a factor when they’re considering investments. This same trend can be seen among private equity firms, with 60% of firms in North America intending to increase their scrutiny of ESG issues during their decision-making process in 2022.
As issues like sustainability and equity become core values for more companies, the demand will continue to rise for professionals who understand how these concepts translate into reality. An increasing number of firms are adding value-focused leadership roles like Chief Diversity Officer or Chief Sustainability Officer, along with expanding their workforce focused ESG initiatives. For many firms, this will mean looking outside your usual recruiting sources to find candidates with the background and skills to excel in these roles.
Embracing Virtual Communication and Remote Work
Much of the sector’s growth over the past two years was driven by rising deal valuations. Another shift certainly contributed, however: the switch to widespread remote work. Replacing in-person meetings with virtual ones eliminated the cost, time, and logistic headaches of traveling, letting firms make deals faster and easier.
Workplaces in private equity experienced a similar shift. In a 2019 survey by MJ Hudson, only 7% of private equity professionals reported regularly working from home. Compare that to a May 2022 survey, where 25% of PE team members report they currently work remotely, and nearly 70% say they would prefer to work remotely at least 1-2 days a week long-term.
As a relationship-driven industry, it’s understandable why the private equity industry resisted remote work pre-2020. Now that it’s arrived, however, it’s proving to have substantial benefits. Remote hiring expands a company’s recruitment reach to potentially include professionals around the world. It can also help companies attract Gen Z and Millennial talent, who are more likely to look for scheduling flexibility in a potential employer than older generations. For these and other reasons, offering remote and hybrid positions is one way for firms to solve staffing shortages in the current competitive hiring landscape.
The Future of Private Equity Recruiting
Every industry has experienced disruptions over the past two years, and private equity is certainly no exception. Increasingly, business leaders and investors need to pay attention to social and environmental issues, and this may mean changes to their workforce needs or how they hire. That workforce is equally mindful of a potential employer’s values, and for the time being it continues to be a candidate’s job market, meaning the top applicants will often have their pick of offers. Staying current with the latest private equity hiring trends can help firms navigate this complex landscape.