Few things characterised the Noughties boom as much as the highly leveraged buyout. The driving force behind many of these multibillion-pound deals was private equity, a sector that consequently became among the most fashionable in the legal market.
These days it is a different story. As Celene Yon, in-house private equity specialist at Barclay Simpson, points out.
“The market is a great deal slower, unpredictable and unstable than in previous years,” says Yon. “Private equity houses are choosing to juggle existing portfolios and consolidate rather than commit to acquisitions and sales.”
Chronic illiquidity and fears of a triple-dip recession are having an obviously negative impact on the private equity market, confirms Justin Gyphion, a senior consultant in the private practice team at Taylor Root.
“Firms have become very risk averse, so the exposure of hiring a specialist private equity lawyer is significantly greater than hiring a corporate generalist who can turn their hand to something else within the corporate finance field,” says Gyphion. “It is, therefore, increasingly valuable for candidates to possess skills that cross transactional work, general advisory and disputes.”
From an in-house perspective private equity tends to be a low volume area for recruitment.
“Private equity houses tend to have small legal teams compared to, for example, the investment banking or asset management sectors. They prefer to outsource, have rolling secondees or use foreign local counsel in the locations where they are investing,” says Yon. “That said, in 2012 there were a small number of legal roles in this sector, mostly at mid level – ie three to six years PQE – with a couple of the large private equity houses, the private equity arms of asset managers, as well as sovereign wealth funds. Clients will often look for private equity transactional experience, as well as fund formation experience.”
In the private practice sector, Gyphion says the second half of 2012 saw significant demand for private equity specialists, though 2013 “has definitely seen a drop in requirement for such lawyers”.
Jonathan Glass of Glass Consultancy strikes a more positive tone, however.
“From its nadir in 2009, private equity feels like it is back,” insists Glass. “Good pricing, cheaper funding, and funds that need to use their investments by the end of their term means that there are some very active clients out there. In the legal market we’ve seen demand at partner and associate level pick up significantly this year.”
Last year was a bad one for deal volumes, as Glass confirms. However, he says that firms seem to have followed their clients with an optimistic eye to the future, particularly after a very strong start to the year in terms of M&A levels and capital raisings.
Private equity seems to be on the bounce-back at the moment and opportunistic firms are seizing their chance to recruit,” says Glass.