HEADHUNTER IN THE HOUSE
It has become almost clichéd to extol the importance of good portfolio company managers in private equity. There's an old saying among venture pros: “An A idea with a B team is a C. But a B idea with an A team is an A”.
In other words, the ability to identify, woo and hire talented managers for portfolio companies is among the most crucial skills – some would argue is the most crucial skill – resident at a private equity firm.
Increasingly, firms for which recruiting is a core activity are bringing headhunters in-house. This is especially so among venture capital firms, which often must entirely staff or re-staff growing companies. Last month, venture capital powerhouse Greylock hired Mike Ahearn away from search firm Conley & Company to serve as a ‘recruiting partner.’ Ahearn says that in ‘informal discussions’ with colleagues, other venture capital firms may make similar moves.
In London, Abingworth Management recently announced the hiring of Sarah Shackleton, a former recruiter of healthcare executives and a veteran of search firm Spencer Stuart.
The idea of an in-house recruiter is one that gathered steam through the late 1990s as talent-starved startups proliferated like rabbits.
In 1997, Benchmark Capital hired Dave Beirne away from his own executive search firm to become a partner at the Silicon Valley venture capital firm. In 2000, Boston's Bessemer Venture Partners bought a controlling stake in Lexington Partners, an executive recruiting firm. Now the firm, called Bessemer Search Group, exclusively places professionals in the various Bessemer portfolio companies. The once-ascendant Internet Capital Group had 40 in-house headhunters at its peak in early 2000.
The pace of venture investing may be less torrid now, but GPs are increasingly looking for better ways to manage their franchises and investment processes. At Greylock, Ahearn's role will be less resume-flow management and more sorting through the many contacts that Greylock's partners already have.
“Greylock has dozens of active portfolio firms and two equal-size offices, one on each coast,” says Ahearn. “Even without the economic resurgence that everyone believes is underway, there is a lot of executive recruiting work necessary. Bringing someone onboard internally to coordinate and manage the inventory of exceptional candidates from the Greylock partners' personal networks… makes good sense.”
CSFB PRO JUMPS SHIP TO BLACKSTONE
The Blackstone Group has hired James Quella as senior managing director in charge of monitoring the strategy and operations of Blackstone's private equity portfolio companies. Quella will also become a member of Blackstone's investment committee. He joins Blackstone from DLJ Merchant Banking Partners, a division of CSFB Private Equity, where he was a managing director and senior operating partner. Quella joined DLJ in 2000, just prior to its merger with CSFB. Quella was previously vice chairman of Mercer Management Consulting and a director of Mercer Consulting Group, a subsidiary of Marsh McClennan Companies. In a statement, Blackstone CEO Stephen Schwarzman said “With the dramatic growth in both the number and size of our private equity portfolio companies, it was becoming increasingly important to formalize our process of monitoring both the strategy and performance of these entities.”
YUSKO TO LEAVE UNC
Mark Yusko, the outspoken chief investment officer of the University of North Carolina at Chapel Hill will step down next month. Yusko helped build UNC's influential investment programme in hedge funds and private equity. Last year, he led the creation of UNC Management, an asset management company that provided services to other campuses within the UNC system. According to reports, Yusko will now focus on his other related business activities, including consulting and investment management. UNC's endowment currently has roughly $1.2 billion (€1 billion) in assets under management. Yusko joined UNC in 1998. He was previously a senior investment director at the University of Notre Dame.
DEUTSCHE BANK'S FLYNN JOINS BREGAL
Bregal Investments, the €2.5 billion ($3 billion) private equity group affiliated with Europe's Brenninkmeijer family, has hired Chuck Flynn, the former head of private equity fund investment at Deutsche Bank. Bregal, which invests on behalf of Cofra, the Switzerland-based group managing the wealth of the Brenninkmeijers has offices in New York and London. Flynn joined Deutsche in 2001 after helping to build and manage the global fund of funds business of AXA Private Equity. At Deutsche, he inherited a $4 billion portfolio of private equity fund investments which in 2003, following the dissolution of DB Capital Partners, was integrated into the bank's asset management division. At Bregal, Flynn will oversee the management of $750 million allocated to US and European buyout fund investment. In 2003, Bregal raised eyebrows by committing €650 million to Englefield Capital, a new London-based European mid-market firm founded by former Warburg Pincus deal maker Dominic Shorthouse. Another $600 million was committed to Centre Partners, a New York-based private equity firm investing in US midsize companies.
SPECTRUM NAMES NEW PARTNER
The Boston-based media and communications specialist announced that Steven Price, previously head of LiveWire Capital as well as a former senior Pentagon official, will join the firm. Price was US deputy assistant secretary of defense for spectrum, space and communications from 2001 to 2003. He was also president and CEO of PriCellular, a publicly traded cellular telephone company that was sold in 1998 for $1.4 billion and HO Systems, a provider of billing and customer care to wireless carriers that was sold in 2001 for $340 million. Live Wire was founded in 1998 by Price and Stuart Rosenstein, the former CFO of PriCellular. The firm is backed by large private equity firms including Thomas H. Lee Partners and The Blackstone Group who have invested in Live Wire controlled entities over a number of years. Spectrum, one of the dominant investors in media and communications private equity, most recently teamed with Charles McCurdy, a co-founder and former head of targeted media company Primedia, to create an ‘investment initiative’ that will commit between $175 million and $200 million (€146 million and €166 million) in niche media and publishing companies.
FREMONT OPENS BOSTON OFFICE
The San Francisco-headquartered middle market firm has relocated managing director Mark Williamson to open a new office in Boston. The firm called the expansion part of its strategy to improve access to management teams and deal intermediaries. The firm said it is still recruiting and expects to announce new hires in the coming months. In August, Fremont recapitalised medical device company Kinetic Concepts for $1 billion (€840 million), resulting in a liquidity event for limited partners in the firm's Fund II. A day later, Fremont completed a $132.5 million add-on acquisition for its plastic closure portfolio company, Kerr Group.
TH LEE PUTNAM LOSES SCARPA TO COLLER
Rudy Scarpa of Thomas H. Lee Putnam Ventures (TH Lee Putnam) has joined secondary giant Coller Capital's New York operation as a partner. Scarpa was previously a principal at TH Lee Putnam, a venture capital firm affiliated with Boston-based buyout firm Thomas H. Lee Partners and mutual fund giant Putnam Investments. Prior to joining TH Lee Putnam in 2000, Scarpa was a placement agent with Merrill Lynch. Jeremy Coller, the chief executive officer of Coller, said in a statement “The United States currently represents approximately 42 percent of our capital and some 38 percent of our assets. Rudy Scarpa's appointment reflects the importance of the United States to our business.” Coller raised the first ever European secondaries fund in 1994 and closed its fourth fund, Coller International Partners IV, last October on $2.6 billion, making it the largest global secondaries fund ever raised.
MERCER PRO MUNDT JOINS VESTAR CAPITAL
New York-based private equity firm Vestar Capital Partners has hired Kevin Mundt as a managing director. Mundt joins Vestar's portfolio monitoring and advisory group, providing on-call support for the firm's portfolio company management teams. A management consultant for 24 years, Mundt most recently served as vice president and director of Mercer Oliver Wyman, formerly known as Mercer Management Consulting. Previously, Mundt was a co-founder and director of Corporate Decisions Inc., an international strategyconsulting firm, which merged with Mercer in 1997.
CD&R CONSULTANT JOINS CSFB ALTERNATIVE CAPITAL
Chuck Pieper, former general partner a t Clayton Dubilier & Rice Consulting, is joining CSFB's newly formed Alternative Capital Division as managing director. Pieper will assist the new division with improving operations in its portfolio companies, strategic planning and growth for new ACD funds and the development of operating plans for ACD businesses as they come online. Pieper will work closely with ACD head Bennett Goodman and Tom Dean, head of Leveraged Corporate Private Equity and DLJ Merchant Banking Partners, as CSFB integrates the private equity businesses into ACD. Prior to this, Pieper served as a partner at CD&R and helped to open the firm's European practice in London.
WACHOVIA NAMES HEAD OF PLACEMENTS
Charlottle, North Carolina-based Wachovia Securities has named Marc Lamarre head of equity private placements. Lamarre will report to Jeff Armstrong, the head of Wachovia's financial sponsors group. Lamarre joins the firm from Credit Suisse First Boston, where he was a managing director in charge Internet infrastructure and services. Prior to joining CSFB, Lamarre was at Cowen & Company, a technology and health care investment banking firm.
CALPERS' HARRIGAN LIKES PRIVATE EQUITY
Sean Harrigan, the president of the 13-member board of administration of the California Public Employees' Retirement Systems, told The San Francisco Chronicle last month that the pension's seven percent allocation to private equity would hold firm. “I can tell you our board is excited about private equity,“ he said in the interview. “It provides an opportunity for us to not only produce superior returns, but also to improve our overall performance in terms of the fund.”