The rise of the transaction advisory candidate in healthcare services organizations

by  Josh Kotelnicki

Traditionally, the Charles Aris Corporate Development Practice has introduced the search work we do as “recruiting and placing current and former investment bankers.” In healthcare, recent data suggests we may need to expand this introduction to include “current and former transaction advisory talent from finance and accounting firms.”

In Q1, our firm placed a higher percentage of Big Four transaction advisory candidates than investment bankers in healthcare portfolio companies for the first time (60% vs. 40%). Compared to Q1 of 2021, this is a seismic difference (0% vs. 100% for investment bankers), and this also continues a trend we started seeing in Q4 of last year (36% vs. 64% respectively). Also of significance, Q2 of this year marks the first time we have kicked-off more searches in provider where the hiring authority has expressly asked us to find transaction advisory profiles (four searches for transaction advisory and one for investment banker profiles).

According to our clients, here’s why:

  • Financial due diligence (FDD) skillset: Provider deals are not as complicated as other sectors of healthcare but understanding the truth behind P&L statements is where the rubber meets the road. One client commented “I can teach the strategic part of M&A on my team if they have good people skills, but I don’t have the time to take someone who has never had to do a quality of earnings analysis and make them proficient at it.”
  • Decreased level of service from F&A firms: The bonanza of 2021 and the hot start of 2022 have the demand for firms who do FDD at an all-time high. As a result, many of our private equity backed clients are not able to get the same level of service they have in the past for time-sensitive deals. “I would just rather bring it in house so we know we can do it ourselves and do it well if we need to” was the logic one of our clients gave us.
  • Compensation: Individuals currently working in transaction advisory practices have (historically) not been privy to the same level of compensation as their investment banking cousins. This is particularly true of their bonus (15% at a good F&A firm as opposed to 50% at an investment bank). As a result, these individuals are typically more conservative about their compensation expectations when they are ready to leave. In addition, the sign-on necessary to pull one of these individuals from an F&A firm is much more modest than a current investment banker (typically). We have found these individuals more willing to “sign” when they are less than six months from their bonus, as our clients are more often able to offer a compensation package that keeps them closer to whole on their bonus.

It's worth noting that from a market-sizing standpoint, there are approximately half as many individuals with a transaction advisory background in the provider market today than those with investment banking backgrounds. If you’re looking to build out your team with this type of talent, be aware of how rare it is and (perhaps) be flexible on the level of experience you’re looking for, if you really need someone with this skill set. Of course, we here at Charles Aris are always happy to jump on a call and discuss further.