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Published on:

10th Oct 2024

The Truth About Private Equity BD Compensation

In today’s episode, Matt and Dan break down compensation structures in private equity, focusing on sourcing professionals and business development (BD) teams. They emphasize aligning base, bonus, and carry structures to drive scalable capital deployment and discuss how discretionary bonuses and performance-based incentives ensure long-term success. The episode also covers salary ranges across experience levels and highlights the growing importance of BD professionals in shaping firm outcomes.

As private equity compensation trends evolve, our hosts outline how aligning incentives with firm goals builds high-performing sourcing teams. From base salary to carry structures, they offer a roadmap for creating competitive, results-driven compensation plans. In today's competitive landscape, firms that implement these strategies will lead in talent acquisition and capital deployment. You can’t afford to miss this must-hear episode packed with crucial insights for thriving in private equity business development.

Episode Highlights:

00:00 Understand Differences in Private Equity Compensation Structures

01:22 Break Down Base, Bonus, and Carry for Sourcing Roles

02:31 Identify Standard Compensation for BD Professionals

03:40 Review Base Salary Ranges for Sourcing Professionals

05:48 Balance Base Salary and Bonus for Maximum Performance

06:49 Differentiate Between Junior, Mid-Level, and Senior Tiers

07:18 Adjust Bonus Structures Based on Experience

09:00 Set Clear Expectations for Base Salary and Bonus

10:50 Structure Discretionary and Performance-Based Bonuses

11:09 Implement Common Bonus Structures

12:42 Tie Discretionary Bonuses to Firm Performance

14:54 Incentivize Sourcing Teams

16:50 Adopt Performance-Based Bonuses for Larger Teams

18:01 Use Common Performance Metrics to Drive Compensation

19:06 Decide on Flat or Percentage-Based Bonuses

21:12 Distinguish Proprietary vs Banker-Sourced Deal Compensation

23:20 Clarify Add-On vs Platform Deal Bonuses

25:50 Align Sourcing Compensation with Lehman Fees and Buy-Side Origination

27:50 Embrace the Evolution of BD Compensation in Private Equity

29:04 Bridge the Gap Between BD and Deal Team Compensation

31:00 Offer Carry Compensation for BD Professionals

35:15 Use Equity in Sourced Companies as an Incentive

37:37 Incorporate Team Bonuses into BD Compensation Plans

40:29 Tailor Carry Packages to Attract Top Talent

44:10 Plan for Long-Term Carry and Vesting

48:08 Adapt Sourcing Compensation to Firm Goals

50:44 Prepare for the Future of BD Compensation in Private Equity

52:59 Structure Compensation to Build a High-Performing BD Team

59:51 Apply Best Practices for Performance-Based BD Compensation

01:02:57 Negotiate and Maximize Your Compensation in BD Roles

Key Takeaways:

"Not every private equity firm is the same. Maybe they're value-focused, or maybe they're a bit more patient. All of that influences compensation structure."

"In years where folks have success, the bonus can far surpass their base salary."


"The three main pieces of private equity compensation are base salary, bonus, and carried interest or equity."


"In years where folks have success, the bonus can far surpass their base salary."


"The BD function is maturing. Compensation is growing, and the gap is narrowing between BD professionals and their deal team counterparts."


Links:

Dan Herr: https://www.linkedin.com/in/danielherr/

Matt Rooney: https://www.linkedin.com/in/matt-rooney-coastalpartners/

Coastal Partners: https://www.coastalpartners.co/

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About the Podcast

Deal Sourcery
Engagement & The Art of M&A
Deal Sourcery is the must-listen podcast for Private Equity professionals aiming to master the art of deal origination. Hosted by Dan Herr - who’s closed over $1B in transactions in the last decade while building and leading world-class deal sourcing teams - and Matt Rooney, a top recruiter in PE business development, we dive into cutting-edge trends, proven tactics, data-driven sourcing strategies and the technology shaping the future of M&A. Each episode features in-depth discussions with exited founders, PE professions and investment bankers, delivering exclusive, actionable insights you won’t find anywhere else. Tune in to elevate your sourcing skills and optimize your firm’s capital deployment.

About your hosts

Daniel Herr

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Dan is the visionary Founder & CEO of Acqwired after more than a decade sourcing more than $1B in TEV in proprietary private equity deals across software, services and industrials highly engineered end markets like aerospace, medical and consumer electronics.

Matt Rooney

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Matt is the Founder of Coastal Partners, a specialized recruiting firm focused on placing deal-sourcing and investor relations professionals in mid-market private equity. With over a decade of experience, he has placed hundreds of professionals and advises firms on building BD teams.

He regularly shares insights on private equity business development, breaking down role dynamics and hiring strategies for firms and professionals navigating the space.