The Finance Industry Post-COVID: More Capital, More Start-ups, More Recruitment

16 Nov, 2021

With a combined 50 years of personnel consulting, Andreas Weik and Axel Gester are the new Business Unit Manager and Senior Advisor of Hager Unternehmensberatung’s Financial Sponsor Coverage division, which specializes in the executive search for national and international investment companies. Weik and Gester describe the new dynamic in the investment market and explain why start-ups fail

You joined Hager in June 2021 and took over as head of the newly created Financial Sponsor Coverage business unit. What was your motivation to work in this new division?

Andreas Weik: In fact, this is not a new division, because Hager has worked with private equity and portfolio companies before; Just not with a unit specifically created for the purpose. That is about to change. My colleague Axel Gester and I have over 50 years of experience in personnel consulting. I have a particular focus on investment banking and headhunting, and Axel Gester on private equity so we’re a perfect match.

There is a lot of movement in the market right now, there has never been so much investment capital available...

Weik: In the last five years, a new dynamic has emerged. Banking is losing volume, and, at the same time, there are more and more private equity firms as well as increasing investment capital. Our job now is to recruit for private equity firms and fill positions from the director to the partner level. We are currently managing the recruitment of suitable candidates for a 1.5-billion-euro fund that is being established by former partners of international private equity firms. The focus is on the German mid-market, just like at Hager. What we bring to Hager and what makes this synthesis so attractive is our deep industry knowledge across various units. This enables us to staff the companies in our portfolio accordingly. Hager is very technology-driven and well-positioned here, but we can also cover the sports industry with our Sports Business Unit. Therefore, we are both specialists and all-rounders. 

Axel Gester: The dynamics described above are both an opportunity and a challenge for us. On one hand, there are more and more potential clients in the market and therefore more opportunity to acquire new clients and mandates. On the other hand, there is a limited candidate pool, and all our competitors are competing for the same clients.

As well as private equity and investment firms, as a third pillar you also take care of the family offices. You have a lot of experience in this area. What is the appeal of this unique sector?

Weik: Over the past 20 years, I have repeatedly filled positions for family offices, some of them very prominent. Most of the successful candidates are still there. Sustainability and continuity are important. Our job requires a high degree of discretion, and, in the case of family offices, this is even more true. Here, without going into detail, we recruit according to different standards than we would for “normal companies.” 

Gester: What particularly appeals to me about working with family offices—and by that I mostly mean single-family offices, not large multi-family offices, which tend to be typical asset managers—is dealing with interesting entrepreneurial personalities; People who have created something through their own efforts, with the right ideas and the strength to implement them.

How does the interaction between the individual business units and your new finance department work?

Weik: The private equity companies approach us and ask us, for example, to fill a new CXO or CFO position; CFOs are usually the first people to be replaced when a new investment is completed. We then talk to the business units but remain the lead because private equity as a shareholder usually wants it that way. This means that we are involved in all processes, but not in the sense of control or operational involvement. It's more about the customer having a contact person.

Gester: Generally, the business unit brings its deep knowledge of the industry and, of course, expands our large and resilient network that we have built up through our activities. In the end, this knowledge serves to fill positions for the customer faster and with more precision.

You are very active in the mid-market and with established companies, which is why the topic of start-ups is more of a marginal aspect. Nevertheless, I would be interested to hear your assessment: Although more capital is available than ever before, the number of start-ups is declining. Can you explain why?

Weik: I think this is due to the ongoing effect of the pandemic. There is certainly enough venture capital available. For example, you can see that now with N26, which just raised another 760 million euros. It certainly depends on the area; In some, more investment is being made than in others. I don't get the impression that it's slowing down. I work with a company in southern Germany, a sort of McKinsey for the mid-sector, and I receive pitch decks from them all the time. Most of them are spin-offs from universities. I don't see any reluctance or even a downturn there—on the contrary!

Gester: Andreas is right. During the pandemic, many people were initially concerned with securing their livelihoods and not with setting up new businesses. However, there is, in fact, sufficient capital available—even for start-ups. Start-ups are now an established concept in Germany, even if not yet to the same extent as elsewhere, for example in the USA. In my opinion, they are even a fashionable product. Many young people want to start a business after they have worked for a well-known consultancy for three years. But their focus is not always on an interesting business model, as you see with the successful founders of the modern era and earlier years. Today, people often found companies because they are already thinking about a sale worth millions or even billions. Of course, this is the completely wrong approach. The sale is perhaps the cherry on top after years of hard work, constant improvement of your business model, and, sometimes, huge existential fear in the early days. This is where dreamers are easy to distinguish from real entrepreneurs, and it naturally leads to a high rate of failure.

On the subject of culture. To what extent has this changed? Do you look at different skills and personality traits than you did ten years ago? 

Weik: With CFO roles, it's perhaps a little less important; There, it's a matter of fitting in with the culture of the company. With a CEO, it's completely different. You're looking for candidates who demonstrate skills of modern leadership, can work in a team, have great social skills, and can inspire employees. What has changed drastically is the relevance of human capital. I believe that people have only just become aware of how closely recruitment and a company's performance are linked. Or to put it another way: how much return is lost through the miscasting of management teams. A former colleague, a private equity expert, once quoted us a figure of five billion euros. I can't back that up, and it seems a lot to me. But one thing is certain: it's a staggering sum.

Gester: Yes, a lot! When I started my career, people were hired who had the right professional qualifications. Does he have transactional experience? Can he build valuation models? etc. Today, during the selection process, the professional essentials are often checked off quickly, and companies attach enormous importance to their personality, their value system, having similar views of the company, and its essence. However, in my opinion, this also leads to a situation where the diversity of opinions is somewhat lost. For example, anyone who thinks "green" is great is taken on board, therefore excluding a huge color palette and creating a one-size-fits-all approach.

This article is part of a content cooperation between FemaleOneZero (F10) and Hager Unternehmensberatung. The company, which specializes in executive search, has repeatedly been named one of the best personnel consultancies in Germany by the magazines WirtschaftsWoche and Focus. Hager Unternehmensberatung employs around 110 people and, in addition to its extensive know-how in the field of digitalization, is also considered a specialist in issues relating to diversity and innovation.

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