The 2013 Private Equity and Venture Capital Compensation Report demonstrates that the private equity and venture capital markets are continuing to enjoy increases in compensation and that 2013 will bring additional compensation increases.
Less Focus on Financial Engineering
Years ago, the upside in private equity was achieved primarily through financial leverage… LBO’s were the key to return on investment. Today, with aging portfolios, firm’s are focusing on the long term success of portfolio companies. Firms are assembling appropriate capital structures and teams to execute a long term growth plan.
Deal structure is only the beginning. The combination of cost savings from operational improvements and increased top line performance result in tremendous margin growth and increases in company value.
Good Times for Private Equity
It seems this new focus in private equity has resulted in a competitive market for talented investment professionals. More than half of respondents expected their cash compensation to increase over last year, and more than 40 percent expected to wrap the year end with double digit increases.
Private equity professionals reported increases in both base and bonus compensation. The average professional earned over $270,000. Bonuses comprised over one third of this year’s mean cash compensation, with the highest earners realizing bonuses that made up more than 60 percent of their total cash compensation.
This year, even professionals at small firms reported higher base and bonus compensation. This is likely due to the new competition for these talented professionals.
Romney Raised Awareness of Private Equity
The 2012 presidential election brought with it discussion about the value of private equity in terms of its contribution to job growth and overall economic benefit. Despite democrats trying to paint private equity firms as single-minded entities willing destroy companies in effort to maximize return on investment, the reality is that these firms focus on growth, benefiting both the shareholders and employees.
The industry is performing well and has a positive outlook for 2013 and beyond. Professionals will continue to see healthy increases in base salary and, as long as portfolio companies continue to grow, bonuses will follow suit.
About The Report
The 2013 Private Equity Compensation Report is based on an industry survey conducted in October and November 2012. Data was collected directly from hundreds of private equity and venture capital partners and employees. The full report can be found at http://www.PrivateEquityCompensation.com
The Report has grown to be the most comprehensive benchmark for private equity and venture capital compensation practices. Some of the participating firms over the years include: Actis, American Capital, Bain Capital, Battery Ventures, BlackRock, Carlyle, Century Capital Management, Cerberus, Comcast Ventures, DuPont Capital Management, EdgeStone Capital Partners, GE, Highland Capital Partners, Hilco Consumer Capital, Intel Capital, Mission Ventures, Mohr Davidow Ventures, North Atlantic Capital, RBS, Safeguard Scientifics, SV Life Sciences, Siemens Venture Capital, and Wellington Partners.
