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DrPeterVenkman presents: An interesting interview with TheKing. Questions came from myself and other WSO contributing authors. Thank you to TheKing for his quick and information-filled responses. See part 2 here

TheKing is one of the top WSO users and contributing authors: http://www.wallstreetoasis.com/karma/top
He has worked in MM Banking and MM Private Equity. I will let you find out more from the man himself below in Part One:

How did you break into Private Equity?

I took a pretty standard path to PE. I worked at a top middle market bank, so I didn't really have much in the way of access to mega funds. So, my focus was on middle market PE. More specifically, I focused on lower-middle market PE, with funds ranging from $200M - $750M in size. My sell-side experience was really focused on companies with $5M to $20M of EBITDA, so it made sense for me to go to a PE fund with a similar focus. I also worked with a ton of entrepreneurs / founder-owners while in banking, and I liked that, so I wanted to work in a place where that would continue as well.

After my second year in banking, I started focusing on my search. I reached out to headhunters and had occasional traction. What really helped me, though, was to work with my bank's PE coverage guys. I had gotten to know them through working on deals over the course of my time as an Analyst and they were really helpful in getting my resume out to solid shops. The fund I ended up working for came thanks to one of the coverage guys sending my resume over.

What got you interested in Private Equity?

I think I was interested in it for the same reasons most people get into it. And, to be clear, I've articulated this point a lot on WSO, but think it's worth reiterating again. I think most people, and I'm guilty of having done this, get attracted to PE for the wrong reasons. Superficial reasons, in fact. The pluses of PE are that you definitely learn more about what makes companies tick and learn to really dig into business models and financials. The flip side is that due diligence can be brutal and can really drag out. You'll still be writing memos and drafting slide decks, only what little creativity you could use in IBD is sapped from the process.

I recommend PE for people who really enjoy the diligence aspects of the job and really want to understand what makes companies tick. But, I mean REALLY like that stuff. Personally, I enjoy digging into interesting companies and interesting business models, but a lot of the deals you'll work on will be with companies that might bore the hell out of you. It's not to say that you won't learn a ton, but I think people underestimate what day-to-day life in PE really entails and overestimate how much they'll truly like it. Personally, I've enjoyed my time in PE, but I've got a bit of a creative side that gets completely shut down in the role and I don't like that.

What were some of your highest highs and what were some of the bumps in the road?

The highest high of the job search was probably getting the offer. Something that I'm not sure everyone is aware of is that, generally, when you get an offer from a PE shop, it's set to explode rather quickly. I think I had 3 - 5 days with the offer I took. When I got it, I called up another firm I was interviewing with to see if I could get them to bite and move forward with me but had no such luck. It didn't really matter since the firm that gave me my offer was solid and I knew my lifestyle would be significantly better vs. banking.

In terms of bumps in the road, I guess the biggest one would be working at my bank in '08 / '09 when there were a ton of layoffs. I made it through unscathed, but lost a ton of friends to cuts and ended up getting worked to the bone because there were so few junior resources and my group had healthy deal flow even through the darkest days of the crisis (I worked in a pretty specialized coverage group that's relatively defensive). The flip side is that I got a ton more deal experience than lots of other Analysts in my position and it helped me come interview time.

How much does someone in a role like yours make per year (base + bonus)?

It really depends on the size of the fund you go to. At my end of the market ($200 - $500M AUM), you can expect to make similar money to what you did in banking and may in fact take a paycut on the bonus side of things. Personally, my salary bumped up, but my bonuses dropped a bit from banking. That said, the lifestyle is much better than it was when I was an Analyst.

Who is best fit to work in Private Equity?

I'll answer this in two ways. If someone wants to know how to be qualified to work in PE, than the best answer is to do two or three years as an Analyst at a BB, top boutique, or top MM bank focusing on M&A or leveraged finance. Now, obviously that covers a whole ton of Analysts every single year. With that said, I think the number of people within that subset who really are a great fit for PE is much lower.

I say this for a few reasons. For one, unless you're at a megafund, chances are you're going to be in a much smaller group than you were during banking. I've always worked in smaller groups, but generally had several junior guys alongside me, some of which I became pretty close to. In PE, your classes are very small and funds are often top heavy. So, the social aspect isn't quite the same. It's very much about hunkering down and diving into analysis. Instead of putting together marketing documents, you'll be reading them and picking them apart. Instead of populating data rooms, you'll be knee-deep in them, pulling down and reading things you never really imagined you'd be reading. In many ways, it's a much more introverted job than banking. You really need to enjoy the work involved in diligence and truly have an investor's mindset to fit the job. I tend to think that people look at PE through rose-colored glasses without being honest about what the work is all about. For the right person, though, I imagine PE is one of the best jobs in the world.

Stay tuned for PART TWO when TheKing talks about his education, plans for his next step in life, his advice for college students, AND more!

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Comments (19)

  • West Coast Analyst's picture

    thanks theKing! your insight (along with compbanker's) re: lower/middle-market PE have been enlightening to say the least. wish you the best of luck in whatever endeavors you decide to pursue after you're done (as you've alluded to many times in the past posts)

  • andyinsandiego's picture

    These interviews have been great, thank you both for putting this together.

  • In reply to West Coast Analyst
    TheKing's picture

    huethan:
    thanks theKing! your insight (along with compbanker's) re: lower/middle-market PE have been enlightening to say the least. wish you the best of luck in whatever endeavors you decide to pursue after you're done (as you've alluded to many times in the past posts)

    Thanks bud.

    In many ways, from what I gather, I am Bizarro Compbanker. If that makes sense.

  • Value_added's picture

    Good stuff - looking forward to part two.

  • happypantsmcgee's picture

    Good stuff.

    If I had asked people what they wanted, they would have said faster horses - Henry Ford

  • JDimon's picture

    Nice post!

    Are there ways to break into lower-mid market PE if you haven't done IB (or if you've only done an IB internship?) I know occasional undergrads are able to get internships in PE, but I never understood how they get them.

  • In reply to JDimon
    TheKing's picture

    JDimon:
    Nice post!

    Are there ways to break into lower-mid market PE if you haven't done IB (or if you've only done an IB internship?) I know occasional undergrads are able to get internships in PE, but I never understood how they get them.

    I'll be honest, my firm did a search for a mid-level professional recently and would only look at people with prior PE experience and an MBA. For more junior roles, my firm only looks at people with traditional banking experience. We mostly look for people from middle market banks, though we definitely will interview people from bigger banks as well. I'm sure some places are different, but it's becoming insanely structured. Also, the partners simply don't have time or the infrastructure to do any training, so you sort of need to know what you're doing when you show up. Only way to really prove that that'll be the case is if you have solid banking experience.

    It's much easier, though still tough, to break into banking with a non-traditional background than it is to break into PE.

    With that said, it's not the worst thing in the world. Honestly, I have a friend who worked at a bank, got promoted to Associate, switched groups (still front office), and is on track to make VP, makes a ton of money, and has good hours. People get way caught up in the "master of the universe" nonsense view of PE and need to get that crap out of their heads.

  • In reply to TheKing
    JDimon's picture

    TheKing:
    JDimon:
    Nice post!

    Are there ways to break into lower-mid market PE if you haven't done IB (or if you've only done an IB internship?) I know occasional undergrads are able to get internships in PE, but I never understood how they get them.

    I'll be honest, my firm did a search for a mid-level professional recently and would only look at people with prior PE experience and an MBA. For more junior roles, my firm only looks at people with traditional banking experience. We mostly look for people from middle market banks, though we definitely will interview people from bigger banks as well. I'm sure some places are different, but it's becoming insanely structured. Also, the partners simply don't have time or the infrastructure to do any training, so you sort of need to know what you're doing when you show up. Only way to really prove that that'll be the case is if you have solid banking experience.

    It's much easier, though still tough, to break into banking with a non-traditional background than it is to break into PE.

    With that said, it's not the worst thing in the world. Honestly, I have a friend who worked at a bank, got promoted to Associate, switched groups (still front office), and is on track to make VP, makes a ton of money, and has good hours. People get way caught up in the "master of the universe" nonsense view of PE and need to get that crap out of their heads.

    Interesting. I guess I have to ask then do you think I could have any luck of I approached some small funds myself, and didn't need to be paid for my work? I'm still in school so money isn't a huge issue for me, but I'm really interested in any chance to get a couple months exposure to it, see if it's for me, and maybe get enough experience under my belt that real PE positions would consider me.

    I'd say what draws me to the field is how you describe it as being more thought intensive and learning about real businesses.

    Thanks again for the information

  • In reply to TheKing
    CompBanker's picture

    TheKing:
    huethan:
    thanks theKing! your insight (along with compbanker's) re: lower/middle-market PE have been enlightening to say the least. wish you the best of luck in whatever endeavors you decide to pursue after you're done (as you've alluded to many times in the past posts)

    Thanks bud.

    In many ways, from what I gather, I am Bizarro Compbanker. If that makes sense.


    Bah, we actually agree on most things TheKing. We happen to have different interests, but I think we still fundamentally approach everything from more or less the same point of view.

    CompBanker

  • Ultima-RDK's picture

    Thanks, TheKing. Great interview.

    Sometimes lies are more dependable than the truth.

  • Michael Ouyang's picture

    Excellent interview. TheKing!
    One question, might not be relevant though.
    2 to 3+ Banking experience certainly helps breaking into PE. However I am wondering the odds of getting into PE as a fresh MSF grad. Any advice? Thanks.

  • In reply to TheKing
    f4tality's picture

    TheKing:
    JDimon:
    Nice post!

    Are there ways to break into lower-mid market PE if you haven't done IB (or if you've only done an IB internship?) I know occasional undergrads are able to get internships in PE, but I never understood how they get them.

    I'll be honest, my firm did a search for a mid-level professional recently and would only look at people with prior PE experience and an MBA. For more junior roles, my firm only looks at people with traditional banking experience. We mostly look for people from middle market banks, though we definitely will interview people from bigger banks as well. I'm sure some places are different, but it's becoming insanely structured. Also, the partners simply don't have time or the infrastructure to do any training, so you sort of need to know what you're doing when you show up. Only way to really prove that that'll be the case is if you have solid banking experience.

    It's much easier, though still tough, to break into banking with a non-traditional background than it is to break into PE.

    With that said, it's not the worst thing in the world. Honestly, I have a friend who worked at a bank, got promoted to Associate, switched groups (still front office), and is on track to make VP, makes a ton of money, and has good hours. People get way caught up in the "master of the universe" nonsense view of PE and need to get that crap out of their heads.

    Great itw, thanks. Out of curiosity, what group with good hours did your friend move to? ECM/DCM or some sort of sales position?

    Cheers

  • In reply to Michael Ouyang
    TheKing's picture

    Mathew_M_Perry:
    Excellent interview. TheKing!
    One question, might not be relevant though.
    2 to 3+ Banking experience certainly helps breaking into PE. However I am wondering the odds of getting into PE as a fresh MSF grad. Any advice? Thanks.

    Traditional PE, very very very difficult. Some sort of lending / PE hybrid or mezz shop, might be doable, but will be hard. They value the experience you get in banking so much. Not just the modeling, but the understanding of the due diligence process.

  • In reply to f4tality
    TheKing's picture

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