The huge increase in secondaries deal volume has been a blessing and a curse for advisors. On the one hand, it means more work and more fees; on the other, a struggle to find more people who can do the work.
This is hardly surprising given the specific skillset required. While at a junior level firms can bring people in from the M&A world and train them up, this is more difficult in mid-level and higher ranking positions. Advisors can either poach from their rivals or coax people over from the buyside.
While you wouldn’t call it a flood, a growing trickle of people have been moving across in the last year on both sides of the Atlantic, and not just in the junior ranks. In July, Michael Camacho, a principal with 10 years of secondaries buyside experience at AlpInvest Partners, joined the secondaries advisory team at Rede Partners. It was the variety and potential for innovation that most appealed, he tells Private Equity International.
“As a buyer there is a tried and tested playbook – you have promised investors that you will invest their money in certain types of asset and types of transaction. On the sellside you can be much more creative in a faster period of time. You are able to stay at the front of the market.”
This sentiment is familiar to Richard Jones, who leads the secondaries business at private equity recruitment firm PER. He has encountered his share of investment professionals drawn to the pace and variety of advisory work, particularly those that have grown tired of doing the groundwork for deals that don’t make it across the line.
The move doesn’t necessarily mean having to take a financial hit, either. According to Jones, when you take into account base salary and bonuses, pay at the larger secondaries advisors is on par with the leading secondaries firms and above other types of comparable work.
“Even in institutions like the larger banks, with multiple advisory arms, you often see the secondaries advisory professionals are better compensated than their M&A colleagues,” he says. “It’s usually a relatively lean team and they’re generating good fee income on a per-head basis.”
One secondaries GP believes the changing priorities of younger investment professionals in both the primary and secondaries markets mean this trend is likely to accelerate. With returns flattening out and bills needing to be paid, the deferred gratification of carried interest holds less appeal than it did.