Unlocking Growth in Uncertain Times: Key Findings from the 2H 2024 Private Equity Talent Report

Oct 29, 2024

By Eric Walczykowski, Adam Boone

Eric W
Adam Boone

As 2024 begins to wind down, one truth stands out in private equity: securing the best executive talent is the key to thriving in today’s competitive market

This month, we’re excited to release the 2H edition of our Private Equity Talent Report, highlighting the most recent trends in executive recruiting for software and SaaS companies backed by private equity.

Compensation Continues to Rise

Although the pace of increase in executive compensation has slowed, average OTE (On-Target Earnings) continues to rise due to high demand for seasoned executives in a tight market. Despite a modest recovery in sector deal flow and lower executive turnover, top-tier talent remains sought after, driving compensation upward. Mid-hold upleveling also contributes to this rise, as firms facing extended hold periods replace underperforming executives with proven leaders who command higher pay. As a result, there is no indication of softening demand or compensation for elite executives in software and SaaS.

Rising Turnover in Revenue-Focused Roles

One of the most significant trends in 2024 is the heightened turnover rate in revenue-generating roles, especially among GTM leaders.

These executives are key to driving growth in a highly competitive market, and private equity firms are looking for leaders who can implement aggressive yet efficient strategies. CEO turnover is also returning to pre-pandemic levels, indicating a renewed focus on finding the right leadership to balance growth with capital efficiency. Firms are increasingly seeking leaders who can navigate complex market conditions and deliver sustainable results in a challenging economic environment.

Deal Activity and Tight Labor Markets

The recent interest rate cut in September has sparked hope for increased deal activity, with many deals already pricing in the expected change by late Q2 and early Q3. PitchBook reports a 10% year-over-year increase in middle-market deal activity, but this surge has tightened the executive labor market. Executives are hesitant to make career moves while their companies are preparing for or navigating sales, which has driven compensation upward. Both cash and equity packages reflect the competitive landscape and growing optimism around future exit valuations, signaling a cautious recovery in the market as private equity firms compete for top talent to lead their portfolios through uncertain times.

Executive Turnover Index

Valuation Gaps and Portfolio Management

Despite the optimism around increased deal flow, valuation gaps between buyers and sellers continue to challenge exits, particularly in the middle market.

This has resulted in longer hold periods, causing what some refer to as “portfolio bloat,” with firms managing larger-than-expected portfolios. In response, private equity sponsors are focusing on mid-hold performance improvements, especially in CEO and COO roles, which are critical for driving capital-efficient growth during extended hold periods. Leadership upgrades are being prioritized to keep portfolio companies on a growth trajectory, reflecting a long-term view of value creation even in the absence of immediate exits.

Mid-Hold Leadership Changes and Ongoing Challenges

Private equity firms are also facing concerns about a potential slowdown in corporate spending, especially in the software and SaaS sectors, which makes mid-hold leadership upgrades even more important. Experienced executives are needed to guide portfolio companies through this volatile environment. Although CEO and COO turnover has increased, overall executive turnover remains below historical averages, indicating that firms are holding on to top talent during this uncertain period. This focus on retaining and upgrading key leaders is essential as firms navigate a constrained exit environment while striving for continued operational growth.

As we approach the end of 2024 and look toward 2025, the private equity talent landscape remains dynamic and complex.

While the interest rate cut offers hope for increased deal flow, persistent valuation gaps and potential headwinds in corporate spending continue to pose challenges. In this environment, private equity firms will remain focused on leadership upgrades, positioning their portfolio companies to thrive amid uncertainty.

Get your complimentary copy of the Private Equity Talent Report Market Update here: www.bespokepartners.com/private-equity-talent-report/

Bespoke Partners Named in Top 10 of the “Top 49 Retained Executive Search” 2-Years Running by C-Suite CV Secure.

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Eric W

Author:
Eric Walczykowski

Chief Executive Officer

Eric is passionate about building high-performing teams that value doing their best, working together, overcoming adversity and learning.

As a proven growth executive, Eric has served as CEO, President, Board Member, Investor and Advisor for technology companies that achieved over $4.5B in successful exits.

Eric brings to Bespoke Partners significant professional services experience from Deloitte and Andersen, as well as the high-growth client executive perspective for private equity-backed technology companies.

Eric earned an MBA from the Kellogg School of Management at Northwestern University and a BS in Business from Fresno State University.

Outside of work, Eric enjoys spending time with family, coaching baseball, travel, attending live events and sipping good wine.

Adam Boone

Author:
Adam Boone

Chief Marketing Officer

Boone has led marketing, demand generation, branding, product management, services marketing, or alliances marketing programs for numerous successful companies including Avaya-acquisition Sipera, Sequoia start-up Syndesis, Subex, CoManage, and others. He has driven joint marketing programs and go-to-market initiatives with iconic industry leaders including Microsoft, IBM, GE, AT&T, Oracle, Comcast, Cisco, Ciena and Samsung.

Boone holds an MBA in Business Strategy from the WP Carey School of Business at Arizona State University and completed the Competitive Marketing Strategy Program at the Wharton School at the University of Pennsylvania.

In his personal time, Boone enjoys travel, fine food and wine, mountain biking, playing and listening to music, and movies.