Europe: PE may have peaked, but pay for finance division to increase

Employees in European private equity firm finance divisions saw their compensation increase in 2019, and most administrative and support staff expect further bumps in compensation next year despite a slowdown in overall PE activity, according to the 2019 MM&K–Holt–PEI PE/VC Compensation Report.

The largest increase in compensation of any firm role was for fund accountants. Fund accountants in the 50th percentile of base salary saw a 9.3 percent increase in that metric in 2018, according to the study, with an 18.3 percent increase in salary plus bonuses. The average increase for fund accountants, in salary and bonus combined, was 37.1 percent year-over-year. You can purchase the report here.

CFOs in the 50th percentile saw a 6.3 percent increase in base salary and a 7.8 percent increase in salary plus bonus.

European activity in buyouts and related deals decreased 19 percent (€41.6 billion) in the first half of 2019, compared with the same period in 2018. There was also a significant decrease in the number of PE exits in the first half, the report noted. Fundraising in the first nine months was down compared with the same periods in 2017 and 2018. Europe-focused fundraising totaled $33.6 billion equivalent by the end of Q3, compared with the $76.2 billion equivalent raised in the entire year of 2018, according to the report.

“Optimism in Europe’s private equity sector does though seem to have reached its peak, at least for a while,” the report said. “After consecutive years of growing optimism among financial investors, for the first time in several years more private equity professionals expect a decrease rather than an increase in the number of transactions.”

And despite expectations of a slowdown, most employees in administrative and support roles think their base salary and bonuses will both go up next year. That is likely to be because of the mass of dry powder that firms have at their disposal to invest. Some 58 percent of firms surveyed are expecting to increase their administrative and support headcount, and people already in those roles expect pay increases. Furthermore, 68 percent of partners in administrative and support roles – and 94 percent of non-partners – think they will be getting a salary increase next year. Most people in admin and support roles, whether partner or not, think their bonuses will remain unchanged.

An increasing number of firms are also offering carry to non-investment partners. In 2019, 65.9 percent of firms did that – a 2 percent increase on 2018’s figures. Non-partners in administrative functions are offered carry at 40 percent of firms.