Welcome to the 2021 Europe and Africa Private Capital Compensation Survey, the ninth annual edition. Our goal in producing this survey is to develop and share with the industry a comprehensive understanding of both compensation practices and backgrounds of investment, fundraising, and operating professionals at private capital firms across Europe and Africa.

This year’s survey includes responses from 439 professionals working across Europe and Africa. (For more on the methodology of this report, see “Methodology” on page 5 of the full report.) Many thanks to all who have completed the survey, whether you have done so every year or participated for the first time this year. We appreciate your time and effort in contributing to the project. If you wish to discuss the survey in greater detail, please do not hesitate to contact us.

Executive summary

This year’s survey includes a review of private capital activity in Europe and Africa for 2020 and 2021 to date, our thoughts on the major hiring trends for private capital professionals, and an in-depth look into the structure of compensation packages in the United Kingdom.

The private capital market in Europe has rebounded from the lows early on in the COVID-19 pandemic: deal count for the first half of 2021 is already close to the full-year total for 2020 and, with GPs sitting on €249.7 billion of dry powder, total deal value is on pace to surpass the high of 2018. Hiring freezes have thawed, competition for talent is fierce, and compensation is growing, particularly in the United Kingdom.

We note that while female private capital professionals do not yet have compensation on par with their male colleagues, the increased competition for diverse candidates could help to close the gaps for women and other diverse professionals relatively quickly.

State of the private capital market 2021

It has been an astounding year for private capital in Europe and Africa. Economies have, on the whole, rebounded sharply from the first few months of the COVID-19 pandemic, private capital activity along with it. Pricing for assets is higher than ever and competition is strong.

Private capital deal making in the second quarter of 2021 posted its second-highest quarterly numbers, propelled by middle market activity as sellers reaped the benefits of high valuations and GPs began deploying the resources they amassed in 2020. In addition, PE firms took many public companies private in the first half of this year, putting deal value on pace to reach its highest level in a decade. Exits in the first half of 2021 alone topped 2020’s full-year exit value.¹

Europe is readying for strong deal making ahead, with capital raising up nearly 20% in just the first six months of 2021: European GPs have €249.7 billion of dry powder at the ready. All told, 2021 is shaping up to have more deals done than 2019, when there were 4,446, and a greater deal value than 2018, which reached €470.9 billion.²

There are many favorable conditions for growth in 2021, including the fact that financing and refinancing deals are historically cheap thanks to liquidity among institutional investors and an aggressive hunt for yield. European leveraged loan issuance hit a record high in Q1. And while the United Kingdom has completed its withdrawal from the European Union (EU), the presence there of the €750.0 billion NextGenerationEU pandemic recovery fund is likely to improve the outlook for transitions at several private capital–backed companies in Europe. In addition, firms are already showing a desire to invest in private markets in order to expand their exposure and we have observed a continuing trend of new entrants into the industry.

If there is a caution, it may lie in the outlook for general economic growth. The International Monetary Fund (IMF) is predicting a 4.3% increase for the Euro area, below that of the United States at 4.9% and only marginally ahead of the forecast growth for Africa, at 4.1%.³

Much of the private capital funding that is being deployed in Africa now is making its way to the continent’s booming fintech sector. There are 576 active fintech companies in Africa now, and the sector grew by 17.3% from 2019 to 2021. Nearly 68% of these start-ups are located in just three countries: South Africa, Nigeria, and Kenya, which are also where many of the African respondents to this survey are based.⁴

Hiring trends

In terms of 2021 hiring, the contrast with 2020 could not be more stark. As the pandemic spread last year, firms imposed hiring freezes. What little hiring did happen was largely for operating partner roles as firms focused on strengthening their existing assets for exits, many of which were stretched beyond initial timelines due to uncertainty.

Operating partners are still in demand in 2021, and once again firms are keenly seeking investment professionals and those with the expertise to handle pre-acquisition work and fundraising. Hiring has been particularly strong at the pre-partner and deal captain level, which in many firms in a more receptive entry point than the partner level. Hiring has also been strong at more junior levels, but private capital firms are facing more competition for talent from entities outside of financial services, such as technology and innovation firms.

The pandemic still casts a shadow on hiring, however. Professionals who might have eagerly moved to a new country for a new role in the past remain hesitant to do so. There is also greater hesitancy (than there was before the pandemic) to switch firms because the increased private capital activity has professionals waiting for past awards to vest.

As a result, candidates now have more negotiating leverage than they have had in the past. Compensation is rising in many cases and hiring firms must be organized to move quickly to win the right talent.

This is particularly the case in the competition for diverse talent. In the past, firms have made some efforts to hire candidates of underrepresented genders, ethnicities, socioeconomic backgrounds, and academic pedigree, as well as those who identify as LGBTQI. This year, they are demanding such candidates and the competition for them is fierce.

We believe that in order to further diversify, firms will need to commit to bringing in lateral talent—people who may need 6 to 12 months to get up to speed. And firms will need to commit to this development time even though deal teams are lean. Firms will also need to work harder on retention and development, which will mean building a more inclusive culture and replacing common apprenticeship and “up-or-out” models with true development programs. Those models have some merits but, grounded as they are in a relatively homogeneous and male workforce, they fall short in a more diverse environment. The largest and most operationally sophisticated firms are starting to develop a proactive, forward-looking strategy to hire and retain diverse talent, and we believe that all firms will need to follow this model if they are to compete for diverse candidates.

State of private capital professional compensation

Compensation is once again rising for all professionals, with increases in base salaries of 21% or more for almost half of respondents expecting an increase. Associates continue to make strong gains. (See charts, “General observations on compensation trends,” on pages 8 and 9 of the full report.)

We see generally lower compensation for women, particularly at the most senior levels. Private equity investment professionals in the United States reported the same pattern. (For more, see 2021 North American Private Equity Investment Professional Compensation Survey) (See chart, “General observations on total compensation trends, by gender,” on page 10 of the full report.)

We believe that it is at least in part a reflection of the fact that there are relatively few women at senior levels at PE firms, particularly at the firms with the largest volume of assets under management, where compensation base and bonus is always higher than at smaller firms. Compensation also rises with years of experience. (See charts “Mean base, bonus, and carry by fund size, 2021,” “Cash compensation by years of experience,” and “Years of PE experience and compensation” on pages 11 and 12 of the full report.)

By investment strategy, distressed and credit investment professionals report the highest 2021 compensation. (See chart, “Mean base, bonus, and carry by investment strategy, 2021,” on page 13 of the full report.)

Looking over the three years covered in the survey, on the whole both fundraising and IR executives and operating executives reported rising compensation at all levels. (See charts, “Mean base, bonus, and carry, 2021,” on page 14 of the full report.)

Across the region, senior investment professionals in the United Kingdom reported the highest total cash compensation, followed by those in southern Europe (Spain and Italy), Africa (South Africa, Nigeria, Kenya, Morocco, Egypt, and Cote d’Ivoire), the Nordics (Denmark, Finland, Norway, and Sweden) and, finally, western Europe (France, Germany, Netherlands and Switzerland).

Spotlight: United Kingdom

We looked more deeply at compensation patterns in the United Kingdom this year. UK managing partners and partners reported a sharp increase in bonuses this year, with male professionals reporting greater gains than their female counterparts. UK associates have made compensation gains in recent years, with a compound annual growth rate of nearly 21% over the last three years. And, as expected, compensation generally rises with fund size. (See charts “United Kingdom: General observations on compensation trends,” “United Kingdom: General observations on total compensation trends, by gender,” and “United Kingdom: Mean base, bonus, and carry by fund size, 2021” on page 15–17 of the full report.)

About the author

Tom Thackeray (tthackeray@heidrick.com) is a partner in Heidrick & Struggles’ London office and a member of the global Private Equity Practice.

Acknowledgments

The author wishes to thank Mohd Arsalan and Daria Sklyarova for their contributions to this report.

References

¹  Dominick Mondesir, European PE Breakdown, Q2 2021, PitchBook, July 19, 2021, pitchbook.com.

²  Dominick Mondesir, European PE Breakdown, Q2 2021, PitchBook, July 19, 2021, pitchbook.com.

³  World Economic Outlook Update: Fault Lines Widen in the Global Recovery, International Monetary Fund, July 2021.

⁴  Leah Hodgson, “Is Africa fintech's next frontier?” PitchBook, August 6, 2021.