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Emerging talent

The size and scale of private equity in Central and Eastern Europe is accelerating at a rapid rate and, as it does so, demand is growing for skilled industry professionals. Private Equity Manager sought insights into the nuances of recruitment in Europe's emerging markets.

Finding good people is among the highest calling of the GP, and this applies to the private equity firm's own back office as well as to the management of portfolio companies. In emerging markets, finding talent may be the single most difficult job.

Sourcing talent in Central and Eastern Europe (CEE) remains challenging, but the challenge becomes more surmountable as the private equity market there matures. Today, some CEE-focused funds are coming to market for perhaps the second or third time to raise ever-larger successor vehicles. These include Mid Europa Partners, raised in January, a major fund for investment in the CEE region. The Mid Europa fundraising featured blue-chip LP names such as AlpInvest Partners, AXA and Citigroup, as well as CEE veterans EBRD (European Bank for Reconstruction and Development) and the EIB (European Investment Bank).

Attracting some of the industry's most respected limited partners is a sign that CEE private equity is maturing fast. As it does so, the demand for experienced and talented individuals is growing in tandem. Below, we pro-file three different perspectives on recruitment of staff into both CEE-focused GPs and the portfolio businesses they oversee.

The Polish GP perspective
Michal Rusiecki, Enterprise Investors

No firm encapsulates the increasing maturity of private equity in the CEE region more than Warsaw-based Enterprise Investors. Long recognised as one of the region's elite GPs, the firm set a new fundraising record for a local investor when closing its latest fund on €658 million in September 2006 – beating by €8 million the previous high water mark achieved by Mid Europa ten months previously.

The new fund dramatically boosted the firm's assets under management – it was twice the size of the predecessor fund and three-quarters the size of all the capital the firm had raised from its five previous vehicles combined. Unarguably, this is a GP that now has the capital it needs. Now it's setting about adding another vital ingredient to the mix: people.

Michal Rusiecki, a managing partner at Enterprise Investors, says the firm is currently seeking three new analysts, an entry level position for which the firm requires at least four years' experience in a financial environment. Much will be expected of these new recruits, according to Rusiecki: ?Our policy is that we recruit at an entry level and promote from within. Of our 13 current partners, five began as analysts here and made their way up the ladder.?

Increasing resource is going hand in hand with expanding horizons. The firm is a veteran investor in established CEE private equity markets such as Poland and Romania (the firm's two offices are based in Warsaw and Bucharest) as well as the likes of Hungary, the Czech Republic and Bulgaria. When the fund closed, it announced that it would also now actively pursue investment opportunities in countries such as Ukraine and Croatia for the first time.

As the firm sails into uncharted waters, it is seeking local nationals to provide safe passage. ?The business cultures in the region are not that different, because most countries have had a very similar experience of Communism followed by the transition to a market economy,? says Rusiecki. ?But having local contacts and being able to speak the language is very important.? To this end, Rusiecki says Enterprise Investors hired a Slovakian national as an analyst last year and is currently seeking to add a Hungarian national to the ranks. The firm has also allocated responsibility for a different country in the region to each of its partners.

What Enterprise Investors and its peers are no longer looking to do is send out a siren call to expatriates in the West – something which observers say was common practice among CEE GPs five to ten years ago. ?That stage is over for the most advanced countries in the region,? says Rusiecki. ?We definitely look for people that have built their careers here and not ex-pats.? Surely as good a sign as any that GPs in the region are determined to stand on their own two feet.

When it comes to portfolio companies, Rusiecki says the biggest challenge when the company is investing outside its home market is to identify quality chief executives in those situations where incumbent management needs replacing. ?Outside Poland, the labor markets are less deep and people are not familiar with private equity firms and hence not so keen to work with them.? By contrast, in Po-

land ?people are keen to work with private equity because they recognize that they will get more decision-making freedom and make more money from stock options.?

As one of CEE's longest established GPs, it is interesting to note that Enterprise Investors appears unwilling to embrace the trend towards in-house operating specialists that is becoming increasingly popular with counterparts in Western Europe. Says Rusiecki: ?We do look for experienced executives that we can bring into deals, perhaps as hands-on non-executives. But we don't want to bring them into the organisation full-time because when we take companies public, we want to leave the management team in place for as long as the stock market wants them there.? This is an issue of more relevance to Enterprise Investors than most GPs, having listed 24 of its portfolio companies on the Warsaw Stock Exchange.

Headhunter on the inside
Poul Pedersen, Pedersen & Partners

If you're a CEE-based GP looking for help in bolstering your team or adding a senior manager to a portfolio company, the chances are you'll come into contact at some point with Pedersen & Partners. The firm is the self-proclaimed largest executive search firm in the region, with 20 offices spanning established capitals such as Budapest and Warsaw as well as more exotic locales like Baku and Tirana. Among its specialties is a private equity and venture capital practice group.

Says founder and managing partner Poul Pedersen, who has been conducting searches on behalf of private equity firms in the region since 1995: ?Most GPs that have successfully raised funds have been, or are in the process of, increasing the size of their teams. Across the region, we are currently doing six searches for fund managers at different levels and in different locations, which is a high number.?

When the mandate involves private equity firms or advisers hiring internally, Pedersen says demand is fairly even across the board – except when it comes to venture investors. ?Venture funds are not being raised here and angel investors tend not to use executive search firms to staff their teams.?

Pedersen says there are three main types of recruitment scenario that his firm typically gets involved in on behalf of GPs: a fund wanting to open a new office in the region or hire a person to cover a new market for them; a fund that wants to enlarge its deal sourcing or deal execution teams; or a fund setting up shop in the region and needing ?a complete set-up? from scratch.

That said, Pedersen adds that most of the firm's mandates are at the portfolio, rather than GP, level. Like Enterprise's Rusiecki, Pedersen feels that recruiting suitable chief executives for portfolio companies is one of the toughest tasks in the region. But he claims that shoddy GP processes are often to blame. He says: ?Each portfolio firm is different and requires a different type of CEO, but the process of how to recruit a person can be systematised to some extent, just all the other steps that a PE fund takes when making due diligence or investment decisions. Too often funds make a decision as important as hiring a CEO in a very ad hoc and spontaneous way.?

Headhunter on the outside
Gail McManus, Private Equity Recruitment

London-based Private Equity Recruitment (PER) is a specialist private equity and venture capital headhunter focused primarily on Western Europe, but which is seeing increasing demand for new recruits to cover Central and Eastern Europe from the UK.

Gail McManus, a former 3i executive who founded PER in 1998, says the firm is seeing a new type of mandate emerging for the first time. She says: ?Firms in the UK are recruiting people at a junior level with cultural backgrounds in the CEE region. The interesting thing is that they are being recruited in advance of the actual need. We've never seen that before.?

McManus explains that these GPs want the recruits to immerse themselves in the GP's own culture before being parachuted at some point in the future – on either an opportunistic or permanent basis – into a local CEE market. The ideal recruit, she says, is one with as much experience of the UK as their country of upbringing. ?There is less interest in those whose entire experience has been based in the region,? she adds.

This contrasts strikingly with the approach to recruitment that local GPs in the CEE region now typically have. For them, ?entire experience? within the region is a plus point. And it's testament to the increasing maturity of private equity in that part of the world that such hires are increasingly easy to find.