Private equity firms around the world have been cutting heads in recent weeks. While the cuts are generally across the board, the back office has been disproportionately affected.
For instance the Carlyle Group is trimming 10 percent of its staff as a result of the turmoil in the global financial markets. The firm is cutting 100 employees out of 1,000, primarily in the US. Most of those losing their jobs hold back office positions, though some of the employees work on deals, according to a person with knowledge of the situation.
As part of the staff cuts, Carlyle is shuttering its Menlo Park, California office that has been open for less than a year.
“In response to extraordinary market conditions, Carlyle has taken measured steps to balance its cost structure with the current investment climate,” Chris Ullman, a spokesman with Carlyle, said. “The firm is well positioned to take good care of our investment portfolio and has the resources to create and respond to compelling investment opportunities.”
In November, Carlyle closed its Warsaw of-fice and its Asian leveraged finance group, both of which were established last year. The firm's Warsaw office had 12 employees and focused on Central and Eastern European deals. The Asian leveraged finance group had seven people.
3i, the UK-based listed buyout firm, will cut 15 percent of its 600-member workforce as part of a cost-cutting programme. About 100 employees will lose their jobs, with cuts mainly focused on back office functions like marketing and human resources.
“Although these decisions are clearly difficult for those affected, the outlook for markets is challenging. Our near-term focus currently is on our £10 billion [€11 billion, $15 billion] of assets under management and preparing the business to take advantage of opportunities when markets recover,” said chief executive Philip Yea in a statement.
3i too will be closing its West Coast operations: the firm said in November it would close its Silicon Valley office in Menlo Park, which had a staff of 13, as it further cemented its move away from the early-stage venture capital.
Guy Hands, head of buyout group Terra Firma, recently warned that “the number of people employed in private equity will fall and those that remain will be paid substantially less”.
Meanwhile, American Capital, and affiliate European Capital will eliminate 110 jobs and close two offices in light of current economic and market conditions. The firm issued a statement saying the cuts represented a reduction of roughly 19 percent of its US and European workforce.
It did not provide specific details as to which positions would be cut, nor which offices would be closed. It said the “cost-saving measures” included the elimination of certain office functions and other undisclosed measures at some of the 11 offices around the world that will remain open.
“The number of people employed in private equity will fall and those that remain will be paid substantially less”
In the Middle East, Dubai-based investment bank Shuaa Capital plans to cut 9 percent of its workforce in the emirate as it looks to reduce “overcapacity” in the wake of the credit crunch. The bank, which has launched a variety of private equity and real estate funds through subsidiaries, said the job cuts in Dubai would be across the board but predominantly affect back- and mid-office operations. The number of jobs to be lost is expected to be 21.
Bahrain-headquartered alternatives group Investcorp also will reduce its headcount by 20 percent in a bid to cut costs. Job losses will affect Investcorp's three offices, which are based in Bahrain, London and New York and are likely to cut across the group's various business lines of private equity, real estate, hedge funds and technology, according to a source close to the situation.