Since late February, companies have been faced with market conditions unlike those seen during previous downturns. Whilst the deep freezing of the global economy differs from previous economic recessions, the pressure on cost optimisation, restructuring and opportunity identification are broadly familiar.
Covid-19 has presented significant challenges from a leadership perspective and hiring cycles that have been in many ways reminiscent of 2008 / 2009.
Within our Private Equity and listed client base, we have seen three clear phases to the Covid-19 response that seem to be broadly consistent regardless of geography, size, and market vertical. These stages can best be categorised as:
The ‘Survive’ phase can be identified as the period from mid-February onwards. Whilst companies will continue to make difficult decisions, the actions taken during the early phase of the crisis will have clear ramifications as to whether they are able to survive.
The COVID-19 crisis is most immediately one of liquidity and resulting financial stress. To survive amid the economic fallout, we have seen significant hiring demand across the financial department, especially around the treasury, working capital and liquidity specialist skillsets. Our CFOs’ top priority has indeed been to optimize cash reserves, as the magnitude and duration of the crisis remain unclear, and to develop different financial scenarios based on potential paths of the virus’s spread. More broadly we have also seen clients focussing on accessing government support, negotiating banking covenants, furloughing staff, and renegotiating payment terms and rates with suppliers.
The ‘Reorganise’ phase focuses on setting businesses up to continue trading through tough market conditions. The steps taken during this phase vary, but similar to in 2008-2009, have been extremely busy from a restructuring, cost optimisation and staff competence review perspective. During this phase, we have seen companies deploying consultants or interim management to assess internal re-organisation, transformation and streamlining. Senior leadership are analysing their businesses and making tough decisions to adjust their size to fit the new conditions, replace key personnel, and align expenditure to strategic imperatives.
‘Reorganise’ predominantly focuses on putting the right building blocks in place from a people, process, and structure perspective. Our clients have highlighted the need to fast track the digitalisation agenda, drive sales staff to be ‘hunters’ rather than ‘farmers’, and ensure that financial leadership teams are able to drive organic growth using strong MI and capex prioritisation rather than purely through acquisitions. The hiring we are seeing is led by the need for ‘player-coaches’ rather than the traditional ‘managerialist’ approach; the ability to roll up your sleeves is a must. The ‘Reorganise’ phase is not purely focused on strategic replacements; we are seeing specialist interims hired to augment team to assist with embedding processes to enable companies to accelerate their growth when the market allows.
The ‘Thrive’ phase may feel some way off, however, some commentators such as Andy Haldane, Chief Economist at the Bank of England, have suggested that a V-shaped recovery has started. We expect to see significant pain as governmental support diminishes, but there are tremendous opportunities available for companies that are looking towards the future. In the past six weeks, we have spoken with clients who are driving growth by identifying acquisitions, re-focusing on growth markets, targeting strategic talent, and exploring upskilling opportunities. The ability to outgrow the competition and seize the initiative will, in our view, directly correlate to spotting required changes and future opportunities. The need to hire the right talent to improve functions in the short term or completely re-shape them will be paramount.
From a hiring perspective, the last few months have been challenging (with a few skillset exceptions). This is to be expected, with transaction volumes in the private markets sitting at roughly a quarter of their year-on-year comparison, and public companies feeling the pain in their share prices. We are, however, now seeing a significant uptick in demand for strategic replacements, and as both private equity and venture capital clients refresh their deal pipelines, we expect the market to be far busier for executives who are able to drive change and transformation. We have seen a significant increase in June of retained mandates compared to May and are not far behind February levels as businesses take the opportunity to upskill.
Despite initial concerns around onboarding, the use of technology has enabled effective engagement and collaboration whilst working on a remote basis. And for clients looking to hire, the current circumstances offer an unparalleled opportunity to attract talent.
La Fosse Executive cover Executive Search and Interim Management across a variety sectors, especially within PE-backed businesses. Specialities include NED/Chair, CEO, CIO, CFO, CMO, CCO and functional heads.
La Fosse recruit extensively across the private equity and venture markets. In 2019, 87% of placements were made within our clients’ portfolio companies, 42% of which were in mainland Europe from our London headquarters. The views expressed are an amalgamation of conversations with clients, both within funds and portfolio companies. As ever, we would like to thank our clients for sharing their experiences and insights.
If you would like to discuss these trends in more detail or share your own views, please contact Olly Wakefield at [email protected] or by calling 0207 9321671.