power of the people image

Why ‘Human Capital’ Is The New Deal Clincher For Private Equity Firms, And Why FinTech Companies Should Be Thrilled

First off, a little side note. The term ‘human capital’ – though a massive buzzword among the suits of Canary Wharf – isn’t really our vibe, so, instead of using that specific term within this article, we’re going to swap it for “The power of the people”.

Phew, now we’ve got that off our chest, let’s begin.

If you currently own or work for a FinTech company that uses Private Equity firms to raise investment, then this article will be of interest to you.

Why? Because knowing that the PE firm you use seriously considers ‘the power of the people’ within its buying making decisions tells you that they are genuinely invested in long-term strategies that will garner sustainable results for you opposed to quick wins that won’t last.


Not So Long Ago In A Land Not So Far Away…

Private equity firms have historically made buying decisions based entirely on financial levers, as, it was incredibly commonplace for them to only hold the portfolio company for a short amount of time, therefore making quick wins were all the rage.

This meant that buying shares within a company based on the talent of the current workforce didn’t really matter, as – for want of a better phrase – they’d be shot of the company soon anyway.

But now – and thanks to a handful of forward-thinking private equity smarty pants – things have started to change…

See, where many PE firms still adopted the former strategy, a few wise owls woke up to the realisation of the profitable power of a long-term investment plan with quality operational leaders to drive it forward…and suddenly the script flipped and the power of the people meant everything.

So, what has this got to do with your FinTech company?

Well, put it this way…

See that work force you have painstakingly curated, nurtured and grown to love?

Well, if it was a toss-up between generating more investment with them or without them, which one would you be inclined to choose?


And that’s why this is relevant.


People Problems And The Vulture Of Culture

Of course, with the advent of any new business strategy comes the odd hiccup, especially when people are involved.

If the private equity firm you have hired is one of the forward-thinking “power to the people!” kind, then it’s important you take a step out in order to look in. This means observing the dynamics, strengths, capabilities and weaknesses of your workforce and weigh them up against the goals you and the PE firm have set.

Why though?

Well, if the “power of the people” is indeed a huge important factor for a private equity firm’s decision to work with you, then logic would suggest it would be wise to iron out any creases before you hand over the shirt.

For example, if a major goal for you and the PE firm is to grow your workforce further with the expectation that some of your current employees will step up to more senior roles, then understanding their desires and aspirations would be beneficial, as, if it transpires they don’t want to do that, you could be left with egg on your face.

In addition to this, it’s important to note that one of the recurring reasons why acquisitions fail is down to a culture issue within the portfolio company, which, if not addressed from the off could pose some pretty perilous problems.

By this we mean the culture to embrace change.

Now, as a FinTech company, you’d expect your workforce to be au fait with change, given how rapidly things advance and all, however, when it comes to structural, organisational, or even leadership change, that’s when thing can get sticky.

The best thing you can do to ensure this isn’t the case is keep your workforce in the loop at all times during the process of the PE partnership, and if possible even include them in the decision making. This means that should any cultural changes occur, it’s expected and understood.


Final Thoughts

The consideration of human capital (ahem, “the power of the people”) factors in PE firms’ decision making processes is certainly a positive thing for FinTech companies, and one that should give you reassurance that you’ve chosen a strategy fit for the long term.

If expanding your workforce is part of your strategy, then you can also be reassured that, should you ever need help with that, the team here at Syncopate are solely focused on finding the best talent fit for FinTech.

You’re welcome to get in touch with us via email at hello@wearesyncopate.com, or call us on 0333 733 559.

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