John Marshall Interviewed by Mergers & Acquisitions Magazine

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Hiring C-suite professionals is never easy. Add in the wrinkle that the company is owned by a private equity firm and the recruitment process becomes even more complicated. John Marshall founded JM Search in 1980 and has been helping private equity firms retain top management for more than 30 years. Clients of the King of Prussia, Pa.-based firm include Littlejohn & Co., Oaktree Capital Management and Sentinel Capital, among others. The list of challenges private equity firms face when looking to step up their talent is a long one, says Marshall.

What’s unique about hiring a c-suite executive at a private equity-backed company?

There is a lot of pressure on management teams in PE portfolio companies to drive growth or change quickly. Public companies focus more on stability and incremental growth while PE firms’ look to maximize value immediately. There is more board scrutiny and close oversight of management teams. When recruiting these executives, you need to determine if they can thrive in this high pressure environment where they constantly need to produce results. An executive must have an extremely high sense of urgency and be decisive. They need to come into the business – analyze, assess, and execute from day one.

How is retaining a top manager at a portfolio company different than retaining a top manager at a non private equity-owned company?

Candidates like to work for PE firms because the objective is black and white. Equity plays a big role in attracting and retaining these executives. The potential to realize significant financial gain in a relatively short period of time is appealing and unrivaled by opportunities in public and other private companies. When an executive accepts a position with a PE portfolio company, they are committing to the PE firm’s vision for the company. Their ability to realize the full potential of their equity is dependent upon them executing on the plan and growing Ebitda. As long as they perform, retaining executives is generally less of an issue than it might be at other companies.

Are candidates concerned when they hear you are looking to place them at a private equity-backed company?

Generally candidates are excited by the opportunity. One concern may be that the PE firm could sell the company early in the cycle. If they project an exit in five years and the company is sold in two, an executive might not make as much money as expected and could be forced to look for another job sooner than planned. But these concerns exist regardless of company ownership and all executives can be subject to unexpected change.

What is a common mistake of a PE sponsor that is made when trying to hire a c-suite professional?

Private equity firms often make the mistake of hiring people without truly understanding their capabilities. This is a result of poor assessment of candidates. Searching for A+ candidates is generally not a strength for PE firms. They are experts in transactions and assessing deals. Too often they judge candidates based on their resumes or one of their own sources rather than spending time to do a search correctly. It is mandatory to do extensive due diligence and get the professional help needed to ensure you are exposed to the best candidates.

Do you have any tips for private equity firms looking to hire strong top talent?

Evaluate the state of the company and determine how the executive you are hiring will make the company succeed. Is the business in turnaround or growth mode? Do you need to compliment a weakness in the organization, change the culture and drive sales? Once you know what is needed, it is easier to identify the qualities and experience you are looking for. Understand how the candidate has increased shareholder value in previous roles and how that experience translates to the company’s needs.

Be extremely critical when hiring talent. You may be in a rush, but spend the time on due diligence. You can never do enough back checking on people. At JM Search, we look for flaws and weaknesses in candidates – it is our job to shoot holes in people. Private equity firms should have that same approach. It takes time to find the right person but the impact they have on returns can be drastic.