About the Participants

NICOLE FORBES is deputy general counsel at G-P, a global employer of record company that helps customers engage talent all over the world without needing to set up their own international branch offices or subsidiaries. G-P works with clients of all sizes, industries and geographies.

JULIA KAROL is president and COO of the Watermill Group, a middle-market private equity firm that invests in manufacturing and industrial businesses. For more than four decades, the familyowned and -managed firm has been acquiring, operating and improving companies.

MICHELLE NOON is a co-founder and managing partner at Clearhaven Partners, a Bostonbased, lower middle-market software and technology buyout firm. Clearhaven invests thematically in growth-oriented companies with revenues below $100 million and where Clearhaven can partner with management and add value through operational improvements.

ILAN WEISER is a partner in the labor and employment practice group of Ellenoff Grossman & Schole, a New York-based law firm. He provides advice and counsel to businesses all over the country on how to comply with workplace laws concerning their employees. The firm was founded in 1992 and employs more than 120 lawyers.

A related issue that is important to address is that many companies had become complacent with respect to employee retention and career pathing. We’ve got to be better at recruiting, hiring and onboarding in order to be good at retaining. We have a saying inside our portfolio, which is, “Always be recruiting.” You’re not necessarily always hiring, but you’re always recruiting. To Nicole’s point, on the younger generation demanding more, it’s not just about more compensation. It’s about feeling valued, feeling that they’re a part of something that they believe in and that type of corporate investment in younger folks is a show of commitment. It’s harder to do that remotely.

WEISER: The employee empowerment concept is only becoming stronger. We’re seeing unionization efforts at Trader Joe’s and Amazon and even at much smaller companies. Gym memberships and free food aren’t as attractive as they may have been in the past, and I don’t even think working from home permanently is that important to certain employees. Employees want to be part of something bigger and be valued. They want their concerns and suggestions to be heard and acted upon. That said, I think flexibility and transparency are probably going to continue to be the most important things going forward.

FUGAZY: Is flexibility—not necessarily work from home—what employees are after?

KAROL: Yes. There are a few things that are important to employees today. First is flexibility. The dynamics around having families and balancing it with work have shifted dramatically. Today, you have more flexibility to be present in your family life if you’re at the executive or professional level. I think companies that support family lives are going to be the ones to attract and retain talent much more readily.

On the other hand, we know that the large burden of pandemic childrearing fell to certain people who had to exit the workforce, predominantly women, which is one of the reasons we’re having a talent shortage. Corporations can recruit or retain by paying attention to families, because we’ve lost real talent to this pandemic.

Secondary things are the perks like working from home and gym memberships.

It’s also about knowing that you’re aligned with corporate values.

NOON: That last point is important. When we make an investment in any portfolio company, we have an exercise to align on strategy, which includes reviewing the company’s mission, vision and values. What we often find is those aspects are not consistently articulated by the team. Employees want to know what kind of company you are. It’s almost more important for us to talk about the culture and the company’s beliefs and ethics before getting into job responsibilities, because people want to feel like they’re doing meaningful work in a place that matches their values.

FORBES: That really resonates. We often focus on and talk about the mission of our company, which is to break down barriers to global business and enable opportunities for everyone, everywhere. Our company provides employment opportunities to individuals who they otherwise wouldn’t have access to because the company doesn’t have an international subsidiary. And on the other hand, we provide customers access to a talent pool they otherwise wouldn’t have considered. A lot of employees feel energized by the mission of the company and want to know what their career path could be and how they can contribute to the mission, rather than being interested in some of the tangibles like a gym membership, free meals and ping-pong tables.

WEISER: Flexibility can mean different things. It can be about letting employees carve out how they want to do their work or where they are performing that work. If I’m going to let you be flexible and work from home, or work from wherever you want, does it mean I can just work from my weekend home versus the city office? Does it mean I get up at 5 o’clock in the morning and finish my work, so I can do other things during the day? Do I have to be on a 9 a.m. call every week even if I haven’t contributed to that meeting in any meaningful way in the past five years at the company? Employers seem to be more open to changing their practices and not sticking to what was previously done.

NOON: There are some benefits of what you are describing and then there is the potential downside of losing some of what makes a business more efficient, more cohesive and more effective. There is a need for some synchronous interaction. A lot of companies are faced with how to allow for flexibility while at the same time not losing the entirety of that cohesion.

The sooner we can get the right blend of flexibility and together time, the better off the company will be.

KAROL: In lean manufacturing, one best practice, which isn’t always universally applied, is the team huddle. At the beginning of a shift, everyone gets together on the floor for the huddle. When you apply tiny actions to bring teams together like that, you see dramatic improvement in the environment and performance.

However, the other side of it, is that these days nobody wants to attend the “stupid” meeting every Tuesday at 9 a.m., so there is something to striking the right balance.

FORBES: Because then your days become eight-plus hours of meetings on Zoom. You don’t have the time to think or the time to have personal interaction and problem-solve in person. I think that’s a huge struggle that a lot of companies are facing, but the key is finding a balance.

FUGAZY: What is the disadvantage to people being remote?

KAROL: I was having a conversation with somebody recently who said,“I can’t believe I spent my entire professional career showing up in an office in a suit every day, that was so asinine. I wish I had joined the workforce a little bit later.” My reaction was, yes, I get it, but we're trained so that our best practices, our self-awareness of how we are most efficient and effective personally were already patterned by the time the pandemic hit so that you can be your best self. If you’re a junior person coming in for the first time and you’re not shadowing and you’re not being taught how to work, how do you learn?

FORBES: You can lose out on that mentoring, seeing different people in the workforce and how they interact with other people, how they problemsolve or deal with conflict, how they show up to work.

FUGAZY: There are clearly challenges the business community is still working through, but everyone has some degree of remote work now. What does it mean to hire outside of your jurisdiction from a legal perspective?

FORBES: Supporting a global workforce and allowing individuals to work in different locations comes with compliance challenges. You can’t just put someone on the ground in a different country and give them a U.S. employment contract and wire them money from the company’s U.S. bank account.

Generally, you need a legal entity in every country in which you have an employee, and the employment laws in that jurisdiction apply to the employment relationship. If a company wants to hire and expand internationally, you need to think about setting up a corporate entity, getting local tax advisors, lawyers, a local payroll company, insurance providers and making sure you have compliant employment documentation. It can be complicated.

There is no one-size-fits-all approach when hiring internationally. That said, you can use a company like G-P as an employer of record, so you don’t have to set up your own legal entity, run payroll, do taxes and deal with all of the employment and HR compliance issues.

WEISER: It’s difficult to hire employees on an international level without first doing proper due diligence to ensure you are complying with that country’s own local laws. And don’t forget that you also have different laws from state to state in the U.S. to worry about. Companies have to decide if they want to take on the burden of spreading out so far and wide. It’s a challenge with risks, and costs.

FUGAZY: What are best practices if you are going to hire remotely?

FORBES: Work with trusted advisors. Don’t feel like you have to go it alone. There are people and companies that advise on these issues and can make the process of hiring internationally much easier. And don’t assume what you’re doing at headquarters can apply everywhere.

WEISER: Do not let employees fly under the radar. You have to know where your employees are and where they are working from. The Department of Labor doesn’t know your private equity world and they’re looking at compliance in a black and white way. You don’t want to be caught off guard and be in legal hot water because you didn’t know where your employees were living and working, and which specific laws you were required to comply with.

NOON: We do labor and employment due diligence, we do tax and other legal due diligence. These are some of the issues that we’re looking at: Where are your employees based? Are these employees or contractors? Then it’s a risk-based assessment of how you remedy it, because you can’t snap your fingers and change your compliance overnight for every issue.

FUGAZY: There is a good and bad to the new world of remote work Where do we go from here?

NOON: Corporate leaders are still struggling to find that new normalcy because when it became obvious that people could work from anywhere during a pandemic, which was clearly at the time a temporary situation, we figured there would be a reversion to some level post-pandemic. You could withstand the notion that you’re in multiple time zones and people are taking Zooms from the beach. But now, some companies can maintain better than others, depending on the nature of their work and their employee base. And there is a reality that suggests maybe it’s not ideal that one member of the team is constantly taking calls at 5 a.m. Each company needs to decide what works for it. We are far from establishing a steady state as a business community.

KAROL: We have assumed that people who thrive in an in-person environment are the ones that will thrive by going into the office and will not like remote working, and those people who put their head down and work can be happier working remotely. I think it’s the opposite.

Those people who like an in-person environment will more naturally gravitate to pick up the phone and say,“Here’s what I’m working on. Can I get your advice?” The person who is a lone wolf, likes to put their head down and just chug along is the person who needs to be in an office where you can pop your head in and say, “What are you working on right now? How are things going?” Otherwise, they become pretty isolated.

FORBES: There’s going to be a different balance for every company. As a company, we have had to figure out, how do we gather? What does that look like?

If you have a global workforce, you have to be attentive and make sure you are working to create intentional interactions. We have gatherings and meetings across multiple time zones. For example, we have a company-wide all-hands meetings, but we have two sessions. One in the morning East Coast time to include Europe, LATAM, and East Coast U.S., and one in the evening to include employees in APAC, West Coast U.S., and those who might prefer an evening meeting. We want everyone to have a chance to participate.

WEISER: That’s smart because it makes employees feel part of a group, gives them flexibility and speaks to retention as well.

FORBES: Balancing remote work will continue to evolve and be refined, but it’s not going away. //

DANIELLE FUGAZY is a freelancer writer covering private equity for more than 20 years. She is based in Glen Cove, New York.

JULIA KAROL President and COO, Watermill Group

CATCH UP QUICK: From a promising segment in the pet industry to the impact of remote work on the tech sector, here are some of the highlights from this edition of DealMaker.

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California Scheming

The widespread shift to working from home has come with pros and cons for software companies based in second-tier cities. On the one hand, they have a broader pool of talent to hire from; on the other, they’re now competing with employers in high-wage markets like Silicon Valley, which can lure away talent living in less lucrative locales. “Recruiting and Retaining Talent in a PostCOVID World,” p. 78.

Family Values

GF Data, an ACG company, analyzed the characteristics of transactions funded by private equity groups compared with those led by family offices. Its findings revealed that, while family offices pay less for deals on average, they’ve been forced to pay more in the last seven quarters than they had previously. They’re also putting in less equity and more debt on average, compared with their PE counterparts, the data showed. “Investors Brace for a Bumpy Ride,” p. 34.

Kits For Cats

Long wait times for veterinary appointments and demand for high-quality care prompted the startup

MySimplePetLab to launch a line of at-home health test kits for pet owners to supplement their animals’ care between vet visits. The wellness segment in which the company operates is among the pet industry categories that is expected to prove recession-resistant, given the high priority that owners place on their animals’ well-being. “Putting the Pet Category’s Recession-Proof Reputation to the Test,” p. 28.

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To Be Continued

Continuation funds appear to be here to stay. If market conditions worsen and LPs have less capital to deploy, these vehicles offer a way to balance the needs of investors seeking liquidity, without having to rush to sell in a low valuation environment. Moreover, they offer an alternative to selling to a competing sponsor when a business still has room for additional growth. “In It for the Long Haul,” p. 16.

Down But Not Out

Some private equity firms are seeking late-stage startups unable to raise their next venture capital round, along with those waiting on the sidelines to avoid a potentially lower fundraising round, according to one investment banker. These PE firms, many of which are fresh off of recent fundraises, are eager to snap up strong companies that are hurting from market forces outside of their control. “Hunting in the Enchanted Forest: The Search for VC-Backed Treasures,” p. 68.