First things first, however: Based on what he’s been seeing, private equity remains robust in terms of hiring, a sign that the overall economy continues to support expansion in a variety of industries.
“There’s healthy activity,” said Lueneburger, the leader of the global private equity practice, out of Egon Zehnder’s New York office. “Hiring is on the upswing, certainly at portfolio companies but also at the fund level in particular, operating partners.”
Egon Zehnder also has been busy assessing leadership teams at target companies as part of the due diligence process for buyout deals.
“A good chunk of the work we do beyond hiring is management appraisals,” he said. “We go in to assess the team at a prospective target and measure its effectiveness.”
Among the trends he’s seeing is an increased emphasis on operating experience for candidates of boards of directors at portfolio companies. In the past, boards were sometimes filled up with dealmakers from the GP who got rewarded with a seat on a portfolio company.
“Today there’s more pressure to create value during the holding period and the board has become a more prominent cog in (that) mechanism,” he said. “As that’s happened, private equity clients have begun to look more actively at outside directors who have an industry focus … We’ve seen an uptick in portfolio board directors who are not otherwise part of the fund.”
The art of management appraisals at target firms also has evolved into assessing people on an individual basis. “The dialog has become more sophisticated as a way to minimize risk and maximize speed of integration,” he said.
Lueneburger also spends a big chunk of time finding operating partners for portfolio companies. These days, some GPs offer their operating partners a share of carried interest in a fund as an incentive. “The best operating partners provide a very strong connective tissue between the GP and the portfolio company,” he said.
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(This story has been updated to correct the spelling of Christoph Lueneburger’s name.)