Buyout and mezzanine firms are feeling good about the future, judging from their hiring and compensation plans.
Nearly one in four (24 percent) plans to add to its employee count this year, according to a summer survey of North American buyout and mezzanine firms. Nearly three in four (72 percent) plan to maintain the same employee count, while just 4 percent plan to reduce it—for a pdf of the results, click the link at the right. Most of that hiring is likely to occur at the junior professional level, the survey found.
Firms in the survey sample also have reasonably aggressive plans for raising salaries and bonuses for employees in 2011. For example, four firms in 10 say they anticipate salaries will go up for partners or managing directors in 2011, with the rest expecting that they’ll stay the same. Meantime, more than half of the firms (53 percent) anticipate that bonuses for partners or managing directors will go up in 2011, another four in 10 (42 percent) anticipate they’ll stay the same, and just 5 percent expect them to go down.
All told, 25 North American buyout and mezzanine firms—22 buyout shops, three mezzanine firms—participated in the survey of firm-wide compensation practices conducted by Thomson Reuters. Firms in our sample have an average of $1.2 billion under management, and a median of $265 million. The average firm in our sample employs 10 full-time investment professionals, out of 18 employees total; the median for our sample is six investment professionals out of 12 total.
More about the sample: Six in 10 firms in our sample have a bonus program for all employees, while another 28 percent have one for investment professionals only. Seventeen percent of firms in our sample have a co-investment program (letting employees invest in individual transactions) for partners only; 17 percent have one for all investment professionals only; and 13 percent have one for all employees.
Lower-paid professionals at buyout and mezzanine firms also have a lot to look forward to next year, the survey found. More than three firms in five (62 percent) say they anticipate salaries going up for junior professionals next year, 78 percent say they will go up for back-office personnel, and 84 percent say they will go up for administrative assistants. As for bonuses, more than half of respondents (58 percent) anticipate they will rise for junior professionals, 44 percent anticipate they will rise for back-office personnel, and 44 percent also anticipate they will rise for administrative assistants.
Along with a firmwide compensation survey, Thomson Reuters this summer also asked both buyout and venture capital firms around the world to supply compensation data for individual employees. About 70 firms ended up providing data on nearly 1,000 employees. It wasn’t quite enough to publish a full-fledged annual compensation study, as originally intended. (Thomson Reuters is providing a set of statistics to participants as a thank you.) Nevertheless, the statistics we did generate do nothing dispel the notion that the buyout business remains a highly lucrative one, and that professionals in it have a big incentive to boost assets under management.
Partners at North American buyout firms with more than $1 billion under management will earn an average of $923,333 this year in salary and bonus (for 2009 performance), and $969,472 when you include carry distributions (earned in 2009). By contrast, partners at North American buyout firms with $350 million or less under management will earn a far smaller average of $341,625 this year in salary and bonus, and $367,461 when you include carry distributions.