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  • Writer's pictureMatt Ting

Private Equity Headhunters (The Industry's Gatekeepers)

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Love them or hate them (but, probably… generally hate them), private equity headhunters are a very, very important part of the recruiting ecosystem.

Private equity firms, hedge funds, and other elite buyside institutions are often too small to have a dedicated recruiting function. Many of the most coveted investment firms have fewer than 30 investment professionals and most of these professionals are wholly focused on winning deals or earning alpha.

As such, headhunting firms earn their keep by doing important tasks that private equity firms and hedge funds often don’t have the time to do themselves. Headhunters are essential for organizing candidate information, doing an initial screen to filter out poor fits, and keeping a pulse on the industry’s recruiting dynamics.

This recruiting function is in sharp contrast to investment banks, which is where the majority of private equity candidates come from. Although equally predatory towards its candidates, investment banking recruiting is carried out by corporate HR functions. Resultingly, most candidates pursuing on-cycle private equity recruiting will have no prior experience dealing with headhunters. This leads to rampant information asymmetry and can make it difficult for candidates to effectively navigate the recruiting process.

If you’re interested in learning more about how to deal with headhunters and the key North American private equity firms they cover, you should check out our Private Equity Recruiting Course.

In this post, we’ll name some of the key headhunters and cover some high-level detail attributes of headhunters.

Key Headhunting Firms for Private Equity

In the United States, which is the home to the majority of private equity mega funds and upper middle market firms, headhunting is controlled by a surprisingly small number of firms.

There are just a handful of private equity headhunters that represent North American large cap and upper middle market clients. In total, almost 100% of >$1B private equity funds are represented by the same ten or so headhunters.

Private equity headhunting is a very top-heavy business, with the same top four firms representing most of the large cap clients.

In my view, the four main headhunting firms in private equity at the large cap and upper-middle market level are:

This essentially means that if you want to go to a mega fund, you absolutely need to nail your 30-minute interviews with these headhunters. There is a very small margin of error.

The other key headhunting firms include:

All of these headhunters are notable, but most of them only have 2 or 3 large cap clients at max.

Note that a headhunter firm’s structure is remarkably similar to that of an investment bank. It is a commission-driven business where junior headhunters focus on execution and senior headhunters try to win new clients. Just as in investment banking, you will find that senior headhunters commonly leave to start their new firms.

This is a people-oriented business with very low capital requirements. Once a top headhunter has a a list of trusted clients, it’s very logical for them to go off on their own.

In recent years, this was demonstrated when Ratio Advisors spun out of Amity Search Partners and when Gold Coast Search Partners spun out of CPI. Ratio and Gold Coast both took several high-quality clients with them.

Important Considerations When Dealing with Headhunters

There are a couple of strategic observations that can be helpful to be aware of as you are going through your own recruiting process.

Headhunters are compensated per placement and can receive 20-30% of a single year of salary

I want to be clear that headhunters generally aren’t actively malicious actors. I have a couple of finance friends who went down the headhunter road and I would describe them as affable and reasonable.

Unfortunately, the incentives at play ordinarily force headhunters to be incredibly sales-y. It is unlikely they will ever have your genuine career interests at heart and you should view them as a first round of interviews as opposed to a career counsellor.

The goal of a headhunter is to efficiently place candidates at firms they represent. They want to make sure that the candidates showed to the firm are of an acceptable quality. They also want to make sure that the firms they represent have a high acceptance rate on their offers (i.e., every offer they extend to a candidate is accepted).

The hasty nature of the private equity process exacerbates this dynamic. Some common headhunter behaviors to be aware of include:

  • Headhunters may aggressively steer you towards certain firms because they think it will result in a faster placement for them.

  • Headhunters may not show you to new firms once you receive an offer in order to preserve their clients’ acceptance rate (e.g., if you receive an offer from American Securities, they might not give you any other interviews so that you’re more likely to accept that first offer).

  • Headhunters may quickly typecast you in order to pigeonhole you towards a specific client (e.g., keep you in the same geography or industry).

Headhunters have the ability to screen and filter out candidates

It is important to take headhunter interviews seriously. Some people take interactions with headhunters lightly and underestimate their influence on the process.

Even if you’re a great candidate at a top firm and know your technical skills, you could easily get bounced if you butcher your behavioral interview with a headhunter.

Private equity recruiting processes are often tightly controlled by headhunters. Networking is still important and helpful, but all candidates that get put in front of a buyside firm will have gone through a headhunter screen.

Most of these headhunters have direct investment banking or buyside experience and many will dive into the strategic or technical parts of your deals.

The small number of headhunting firms means that impressions can last a long time

You should be careful to manage your communication with headhunters very carefully. I generally recommend not to even respond to headhunter emails until you’re absolutely certain that you will be recruiting soon. It can send the wrong message to take headhunter interviews and then ultimately decide that you want to postpone recruiting.

Similarly, you will likely see the same headhunters and same people throughout your career. If you want to stay in private equity or move to a hedge fund after your associate position, you will be talking to the exact same people at the exact same headhunter firms. The buyside world is extremely small.

The impressions and preferences you indicate to them at the start of your career will be pinned to your profile and referenced in your subsequent interviews with them.

Further Reading

These are just some of the most high-level considerations when dealing with headhunters. If you’d like to see a list of which firms each private equity headhunter represents or learn more about the recruiting timeline, you should check out our Private Equity Recruiting Course.

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