Private equity calling the shots on hiring in portfolio firms

Private equity calling the shots on hiring in portfolio firms

On a dusty October day in Allahabad more than 200 sales executives queued up for an interview for the post of regional sales manager at a non-banking financial company. The person who interviewed them was not a company official, but a principal of a private equity fund that had recently invested in the NBFC.

Private equity has come a long way in the country, from fund management and investing to micro managing businesses, and their influence is not limited to the CXO level but increasingly extend to senior and middle management.PE funds such as Kedaara Capital, TrueNorth and Advent International are extensively engaged in hiring mid-senior to CXO level talent for their portfolio companies, industry insiders said. Principals, managing directors and investment teams at these funds are the first line of filters for hiring at the investee companies.

Others like Sequoia Capital, Multiples Asset Management, Everstone Capital and Apax Partners, too, play a crucial role in CXO and CXO-1 level hiring for portfolio companies, sources said.“We work not just as a traditional PE fund but also as a conglomerate. We have a dedicated team of seasoned HR professionals who not only hire for the portfolio companies but also see to it that best culture practices are implemented at these companies,” said Vishal Nevatia, managing partner at TrueNorth.

As volume of buyout deals increase in India and PE funds have a greater stake in their investee companies, and are exercising a stronger hold in people and talent, sometimes replacing the entire existing management with seasoned professionals, HR and talent experts said.According to Nevatia, the performance of any business is directly proportional to the talent which is there in the business and hence getting the right talent on board is critical not just at the top but all the way up.

Funds such as TrueNorth run management training programmes for Indian Institute of Management (IIM) graduates who can intern/train with various portfolio companies. “This gives the grads exposure to various industries and the companies an opportunity to tap top talent who have the potential to be business leaders in the future,” Nevatia said.

Some of CXO-level hirings in the past 12-18 months where investor funds are said to have played a leading role in identifying and recruiting include Anil Banchhor, CEO at RDC Concrete, and Maninder Singh Juneja, CEO at NBHC. They both are investee companies of TrueNorth.

Blackstone is said to have played a key role in the appointment of Nitin Rakesh as CEO at Mphasis while Apax Partners is said to have been involved in hiring of Sandeep Kishore, CEO at Zensar Technologies. Everstone Capital is said to have played a crucial role in senior-level hiring at Burger King.

“PE deal size in India has gone up, and funds are doing $500-750 millionplus deals. There is a lot of focus on hiring professional talent in portfolio companies,” said Anshul Lodha, director at recruitment agency Michael Page India.

Initially, PEs would pick small stake in promoter companies and literally have no say. But with stakes increasing, the level of engagement of funds with investee companies has gone up in the past 12-18 months, Lodha said.Earlier, initial screening would be done by the promoter company, now it is the PE firm shortlisting talent, sometimes even drafting job descriptions and running the entire search, experts said.

“What is crucial is that there is an alignment between the investor/PE company, the promoter/leadership of the investee company, and the incoming CEO/senior leader in terms of the vision for the investee company,” said Dhanpal Jhaveri, managing partner at Everstone Private Equity. “As a group, we often directly work with our portfolio companies to support their growth, and this deep operational experience helps us better in evaluating potential CEOs and senior leaders for our investee firms,” he said

K Sudarshan, managing partner at executive search EMA Partners India, said, “When funds are the majority shareholders, they want to ensure that the right kind of people are recruited. Funds exercise more say when it is a controlling stake.”

A greater involvement of the investor also helps in getting talent. “A marquee investor adds so much more to the ability of a company to attract top talent,” Sudarshan said. Motilal Oswal PE is said to have been active for CXO-level hiring of contract electronics manufacturer Dixon Technologies.

AION Capital Partners is said to have been closely engaged in the hiring of senior management of Clix Capital, a commercial lending and leasing company run by former GE India executives Pramod Bhasin and Anil Chawla. Kedaara Capital is said to have been involved in senior-level hiring for Hyderabad-based diagnostic chain Vijaya Diagnostics

CX Partners was involved in Mrs Bector’s Food senior sales hiring. “PEs are playing an active role in engaging and selecting leadership talent for portfolio companies with an objective of deriving long-term value,” said Vivek Kapadia, director at executive search firm Vito India. “Funds want people from established organisations with an ability to scale businesses’ profitably and create shareholder value,” he said.

The Economic Times, New Delhi, 5th December 2017