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In 2021, over 75% of our Head of Corporate Development searches had the position reporting directly to the CEO of the portfolio company. This is up from roughly 50% in 2020 and 33% in 2019.
What’s leading to this organizational up-level? Here are several potential drivers we identified:
Corporate development as a central strategy
While acquisitions have always been a component of the private equity portfolio landscape, it’s now become a central thesis for many portfolio companies up and down the middle market. CEOs are spending more and more time on the function, and it’s no longer unusual for a CEO to be a driving force in sourcing / pipeline development. Because of that, it’s only natural that this position would gravitate “to the table” and report to the CEO directly.
War for talent / candidate expectations
In 2019, when only a third of these searches reported to the CEO, candidates viewed this feature as a luxury. In 2020, when it grew to 50-50, more candidates viewed it as a “nice to have.” But in 2021, it became an expectation, and candidates now consider it a hindrance if a role does not include a direct line to the CEO. This has become especially true as candidates are likely viewing several different opportunities that do include this structure.
There’s no better way to get the top tier of corporate development roles (and salaries) than to have previously worked alongside a CEO in transforming a business through M&A. For those searches, direct-to-CEO reporting tends to be a “must have” rather than a “nice to have.” Candidates know that by getting CEO-reporting experience, they can accelerate their path to the top-paying portfolio company M&A jobs.
Corpdev as more than just M&A
Given the backgrounds and horsepower associated with these kinds of hires, many sponsors want these roles to be involved in more than just M&A. In the current market, it’s not unusual to see Head of Corporate Development hires spending a portion of their time working alongside the CEO on mission-critical non-M&A projects for the CEO. This is yet another reason candidates have come to expect this reporting structure.