The War for Talent in Private Equity backed Healthcare Services Companies

 

Noah Waldman

Senior Client Partner

Korn Ferry

June 21, 2018

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Private capital investment in healthcare service companies reached an all time high last year and is showing no signs of slowing in 2018. With this level of investment, the war for talent has only increased as the pressure for PE firms to recruit and retain the very best leaders becomes just as essential as proper due diligence and the overall investment thesis.
 
Growth investment dollars have poured into a variety of healthcare services sectors including physician practice management – dental, dermatology, ophthalmology, nephrology, orthopedics and many others.  Outsourced clinical services such as hospitalists, ER management, anesthesiology and radiology continue to thrive. Facility-based or ambulatory site services in behavioral health, senior care, rehab, post-acute, and ambulatory surgery centers are also attracting enormous investment.  
 
These deals range in terms of size and scale and complexity; however, the profile for the highly sought-after leader is remarkably consistent. PE investors require the following:
  • Extensive experience in a P&L role in the industry, preferably in a very relevant sector (CEO experience is strongly preferred).
  • PE or public company experience.
  • A clear track record of profitable growth (acquisition and de-novo).
  • Demonstrated ability to build and lead high performance teams.
  • Physician relations, customer experience, culture builder.
  • High energy, hungry for success.
  • At least one successful exit.
  • Willing to relocate to the desired location, or at the very least, commute full time.
Sounds easy, right? The challenge today is finding a candidate pool big enough and deep enough for Private Equity investors to feel confident in their final choice. The best candidates are gainfully employed with an exit on the horizon. Those coming off successful exits have multiple opportunities and are often no longer “hungry” and not willing to relocate or commute. The remaining candidates in the pool tend to have flaws, social challenges (those darn kids), planned vacations, burn out, etc. So, when a great PE firm with an amazing platform and opportunity identifies a slate of A+ candidates to guide their prized investment to the next level, they need to be prepared to be just as much “the buyer” as “the seller.” Having the mindset that top candidates have multiple opportunities will help PE firms create a truly differentiated value proposition and increase their chances to attract the best leaders.
 
A few ideas to consider:
  • After appropriate confidentiality agreements are executed, be prepared to share plenty of information with prospective candidates.
  • Offer access to current and former executive teams as references (candidates like to do their due diligence on you as well).
  • Be flexible on location (especially short term), commuting and associated costs.
  • Look for great #2’s! Oftentimes the hard charging COO, President or CFO is the CEO of the future and still hungry for their first big win.
  • Be transparent regarding compensation and equity. Provide clearly understandable waterfall analysis around valuation, debt, projected exit multiples and value creation opportunities for executives.
  • Share all concerns, challenges, and opportunities (good and bad) in a fair and balanced way.  Everyone should be going into this potential union with their eyes wide open.
 
With the right recruitment strategies, smart Private Equity firms can win the war for talent and successfully grow the value of their portfolios. They can also enhance their reputations as a PE partner of choice and a preferred destination for top performing executives.
 
Noah.Waldman@kornferry.com
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