The dizzying pace of hiring at Canada's private equity shops, particularly those inside the country's big pension funds, has finally come to a halt.
For the past few years, major players such as Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan added plenty of people to their ranks as they participated in more global buyouts.
Such a serious hiring spree created a shortcut of sorts for many people on Bay Street, particularly those in the junior ranks. Historically, young men and women who worked in investment banking did two to four years of service, grinding through the long hours, then left to do an MBA with the hope of landing a dream job in private equity upon graduation.
Because the big funds needed to staff up so quickly, they plucked people right out of the investment banks, saving the hires hundreds of thousands of dollars in MBA tuitions. Bay Street veterans were also hired, albeit with less frequency, offering those who were sick of the grind the opportunity to jump to what many people view as greener pastures.
But private equity is no longer the refuge that it once was. After a flurry of hires in 2010 and 2011, the pace slowed last year, and now new hires are few and far between.
"It has become a lot more selective," said Bill Vlaad, founder of Vlaad & Co., one of Bay Street's best-known recruiting firms. While that's not necessarily a bad thing because many of the big funds have simply met their hiring targets, he acknowledged it's certainly been a big change from as recently as one year ago when these funds recruited people from all over the Street.
At Teachers, new hires were brought on to help the shop meets its growth plans, but spokesperson Deborah Allan said in an e-mail that they're now "just about at full complement." The size of Teachers' Private Capital, the fund's private equity arm, rose by about 10 per cent last year, bringing the total number of professionals to around 50. CPPIB, one of the most aggressive hirers, declined to comment.
However, hiring hasn't stopped altogether. OMERS Private Equity added about 10 per cent more staff last year, and wants to grow by a similar amount this year, according to spokesperson Lori McLeod. The private equity arm now employs about 60 people, including support staff. But overall the pace is certainly slower, especially at boutique private equity shops.
"Where you would have 20 companies in private equity that might hire [in the past]," Mr. Vlaad said, today "you might only have five."
For some, the retreat comes from poor performance, but others are simply seeing both less need for their services matched with more competition for deals. When the big pension funds started to do more in-house, they had less reason to shell out money and invest in other people's funds. Plus, rival companies to acquisition targets, known as strategic buyers, have been more likely to strike deals in order to boost their market shares now that organic growth is so sluggish. Their bids steal companies away from the traditional private equity buyers.
While the slowdown is bad news for people looking to switch jobs, it's something the banks can celebrate. For nearly three years they saw some of their top talent jump ship, forcing them to adjust in order to keep their best workers happy. If someone working in mining mergers and acquisitions got burnt out, they learned to offer up a position in debt or equity capital markets.
"The cost of getting new talent is very expensive compared to just rebranding someone in your own shop," Mr. Vlaad said.