The Need For Speed: What’s Next For Talent Acquisition And Management?
According to the 2021 Preqin Global Private Equity & Venture Capital Report, the global private equity market now manages assets worth $4.7trn with further growth predicted as investors look to diversify and chase down higher returns. When it comes to capitalising on openings around the globe, however, fast-growth companies are being confronted by a hyper-competitive talent market that is making it difficult to find and retain key talent.
There are big opportunities for organisations that are proactive and agile. Firms that are able to adapt their human capital strategies to access quality talent fast, anywhere in the world, stand to gain a significant competitive advantage.
Getting back to business
Facilitating international expansion is becoming a core component of the value-creation playbook. Recent market disruptions and upheavals have widened the pool of available targets, either for sponsors seeking new platforms or those pursuing add-ons for existing portfolio companies. For example in Japan, de-conglomeration is yielding a number of non-core assets that are ripe for the picking.
According to Ernst & Young’s Global Capital Confidence Barometer 2021, 63% of participant firms were already in pursuit of new acquisitions, with international assets accounting for the lion’s share of this acquisition interest. Indeed, 2021 proved a record breaker for mergers and acquisitions (M&A) with dealmakers around the world announcing $5.1 trillion transactions. Indications are that 2022 will prove equally strong for M&As, as PE firms rebalance portfolios for longer-term growth and profitability.
With PE firms investing in regions such as EMEA, their portfolio companies will need to be able to execute their international growth plans at speed. That includes being able to get operational in new markets within a matter of days – hiring whoever they want, in any location, quickly and easily. However, when a portfolio company goes international, it will need to surmount some tough challenges in the most cost-effective and frictionless way possible. That includes finding and onboarding talent.
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Whatever the driver for expansion - testing new markets, enhancing supply chain resilience, diversifying products, services or solutions – the cost and complexity involved in establishing international subsidiaries, navigating local employment, and privacy laws can be significant.
In today’s competitive world, where speed is the key and ultimate advantage to accessing sought-after markets as fast as possible, working through the red tape involved can be daunting. This is especially true for smaller, less experienced portfolio companies that lack the processes, procedures and know-how needed to scale internationally. For instance, in a recent Deloitte survey, respondents overwhelmingly identified tax law requirements as one of the biggest challenges confronting firms looking to pursue cross-border deals.
In certain countries in Asia, it can take up to a year to register and establish a recognised business entity. Added to this, firms need to ensure they mitigate risk and manage compliance throughout key hiring tasks, like filing taxes and setting up benefits and payroll. This can prove especially challenging in M&A scenarios where matching the employee benefits of an acquiree that operates outside of the acquirer’s local market can prove extremely complicated to manage appropriately, and in a manner that doesn’t result in a mass exodus of talent.
Going beyond borders: hiring ahead of the growth curve
Knowing how to hire people in accordance with varying country-specific labour laws will be mission-critical for firms looking to initiate their 100-day plans as soon as the ink dries on a purchase. It’s also vital for any company that wants to quickly establish on-the-ground expertise, or add employees in new geographies in order to access new markets.
Getting it wrong, however, can prove costly in more ways than one. Latham & Watkins, for instance, has documented a notable uptick in international enforcement actions relating to firms ‘gun-jumping’ in-country regulations, with fines as high as €125 million.
Fortunately, today’s Employer of Record (EOR) platforms now enable firms to surmount these regulatory and legal constraints, utilising a turnkey process that makes it easy to manage compliance, tax, benefits and payroll anywhere in the world. There is no need to establish multiple international subsidiaries, and new employees can be onboarded within days.
Delivering the agility firms need to complete deadline-sensitive M&A deals, and enable the seamless and compliant transfer of people talent, or fast track the onboarding of strategic hires to quickly determine new geographic opportunities, EOR platforms accelerate how portfolio companies are able to navigate international markets, and optimise their cross-border deals.
Managing Momentum: Accelerating Value Creation in the next decade
PE firms play a key role in supporting their myriad portfolio companies in multiple ways. That includes enabling them to scale internationally and expand their capability, capacity and reach.
Having successfully embraced remote or hybrid working, many portfolio companies are now able to explore how they next position themselves as global or borderless companies that can extend across traditional geographic borders with ease.
Adopting a borderless approach will deliver significant competitive benefits over the next five to 10 years. First, it elevates employer brand appeal when it comes to recruitment and retention, since the ability to work remotely is now one of today’s most sought after employee perks. Plus, organisations that have the ability to support a remote, dispersed workforce will have access to a much deeper pool of global talent, and drive the business forward in an exponentially larger number of locations.
Helping portfolio companies de-risk the human capital dimensions of their pre and post-close transactions are just part of the story. Outperforming the competition and achieving sustained long-term growth now, also depends on being able to accelerate talent engagement and onboarding and scale people, systems and processes to support people and customers – anywhere in the world.
Sam Perry is Director of Strategic Alliances – Private Equity & Venture Capital at Globalization Partners
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