Advice on PE
I am very interested in pursuing a career in private equity and would appreciate any info., advice or insights you can offer. I would like to know more about how it is to work in private equity, including the typical hours, the people you work with, the required skills, and the day-to-day job responsibilities.
I am also curious about the reality of working in private equity. Are there any misconceptions about the job or the industry that I should be aware of? Are there any particular challenges that I should be prepared to face if I decide to pursue this career path?
Finally, I am wondering about how to land a job in private equity. Is it always necessary to start in investment banking and then transition to PE, or are there other paths that could lead to a job in PE? I am particularly interested in any advice on how to position myself for a successful transition to PE from my current background.
Thank you in advance,
Cheers!
Typical hours can range from 60-80 on average/nice(r) weeks, but can jump up to IB hours (90-100+) on live deals. Such is the nature of the job. The people you work with can vastly differ based on the shop you’re working at, the city, the group, etc. You will definitely meet a wide range of people. As for day to day activities, it could be looking at CIMs from banks/brokers, making revisions to decks, hopping on calls with prospective sellers, etc.
It is now increasingly possible to jump to the buyside post undergrad, and even more possible to collect PE experience through internships during college. I’d start with that, then recruit for both IB/PE when recruiting season comes around. Cheers.
Reposted from another thread:
I will specify—the below is directed toward megafund PE analyst roles not just all PE roles. The short answer is the jobs are different and doing IB at the start of your career will likely make you a better PE professional and just more well rounded professional. I would strongly advise against doing PE out of undergrad unless it is a very large shop with a very established training program.
The PE versus IB debate is an interesting one. The truth is college kids don't know what they want to do and it's really hard to say what is actually better for your future. I think the actual answer is it doesn't really matter contrary to what prospects and others will say, with both having pretty solid pros and cons. Also, both likely can lead to the same path down the line. Most the Megafund PE analysts seem to jump to another Megafund PE firm for associate anyway, or go to a HF. WSO will take this as a prestige debate, but I'm going to tell you some differences in what I learned in IB and PE (although growth) and why despite hating IB I'm actually very glad I did it. My personal take really is it's actually less meaningful than people think, with potentially IB teaching you a skill set that is beneficial the rest of your life and undergrad megafund PE potentially being a quite impressive position that gets you to where you want to be sooner. I don't know if there's an obvious choice and both are great places to be. I think it's more a coin flip than people would think based on the benefits of the skill set you get in IBand the ability of both to get to the same end destination.
Background on me, I did IB at a MM and thought when I recruited I was pretty certain I would do PE or broader investing long term. Some of the advice I received from mentors was IB and PE can often times be similar, but there are subtle differences that can teach different skill sets. I also was told to do mm IBspecifically (again really contrary to this website, so hang on!). Doing IB for a little bit could potentially be helpful for making you a better investor in the long run or just an overall more knowledgeable business professional. I sorta knew I would leave IBwhen I did it, but I was surprised by how much I hated my time in IB. There was less critical thinking, more abuse, less interesting work, worse people, and tons of people who just completely lost sight of the bigger picture. That said, There are a few things I learned that were really important:
Now at a megafund pe job, you likely would learn most these. However, a huge part of investing is the 80/20 rule and further most the time in investing your role is looking at potential investments and saying, "yeah, this one isn't for us". So it's very possible to go to a private equity firm and spend a great deal of time not seeing the process of a company getting bought or sold. People refer to this as deal execution. IB your job is literally deal execution, so you will get more reps seeing processes than you would at a private equity firm, the con is you don't evaluate opportunities in IB and are always trying to frame a company as great when many aren't. Further, the reason I say I am glad I did IB is I know how to raise capital and market a business-you wouldn't learn this at a private equity firm outside of hearing from an investment bank that is helping you sell a portfolio company or participating in a process, which isn't the same thing. I have assisted numerous early stage and growth companies in creating materials and preparing them for series A, B, and C raises and it's a skillset that I learned from banking. Had I done PE, I wouldn't have this skill set and really wouldn't know how to prep materials or provide advice on a process like an ex-banker would. Ultimately understanding how to fundraise and market a company as well as deception used by banks to make companies look better than they are is a skill set that is invaluable for 1) running/working for a growing company (entrepreneurship, startup work etc.) 2) assisting growing companies (VC, growth equity) 3) to some degree understanding the deception used can be helpful for evaluating opportunities (large-cap PE, other types of private investing).
Now PE will help you be a better critical thinker when IB actively discourages critical thinking. That said, in IB you can look at each deal you are on and think critically about whether you think a company is worth what a buyer is paying for it and what you would pay.
Finally, something that also is very relevant: your first year on the job, you are very useless anywhere and likely won't really learn about an industry. Notice how some of the biggest skills I listed were outlook/ excel/ ppt proficiency? The truth is no matter how smart a person is, out of undergrad they just need reps writing emails and doing tasks to become effective in a working environment. This takes time, and really makes the first 6 months of a job in any IB firm or PE firm virtually the same.
You know Megafund PE is arguably the most prestigious position an undergrad can get, which provides superb optionality. There's some pros to IB and switching as I listed. IB really does suck though and I think would be a more miserable experience than a megafund PE role. Ultimately both are great options and you can't choose wrong. I think that's the weirdest part about being an adult-for the first time in your life you need to make a decision that will close doors. Up until the end of college, most your decisions just open doors, but post, you start needing to make choices that will close opportunities. My advice, pro con the paths of each, call people who have had to make that decision before and ask them how they handled it, and trust your gut. The one thing I would caution you on-getting advice from people who are ignorant. This thread will likely have 10+ college undergrads saying "megafund PE for sure" without any idea of the pros and cons. Weight knowledgeable peoples opinions heavier than random ignorant peoples views. Good luck!
Edit: the one other thing I would say is to be careful about maximizing optionality above all else. My favorite type of person is the IB-> buyout PE -> HBS person who has no idea what they want to do with their life despite being almost 30 because they have never listened to their heart and pursued "optionality" above all else. Have a spine and take a chance at some point otherwise you will just be a wondering corporate shell continuously using other peoples definition of success to define your own, which from what I see is the best way to be unhappy and unfulfilled.
That was an amazing take, thank you very much it helped me a lot it was just what I needed. I've been juggling with IB an PE for the last year and this helped a lot!
Cheers
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Great writeup. Was wondering if you could speak on some of the most important skills you’ve picked up working on the buyside that you don’t get exposed to in banking
SB'ed, a nicely written and thoughtful post.
Agreed
What are your thoughts on MBB -> buyout PE?
Possible and many people do it. Also, the shops that hire consultants generally tend to be less harsh. Think I view a MBB consultant role like having a great mm IB role—everyone knows you are sharp and have great experience. Individual preference and decisions determine much more than the brand at that point, so think looking for where people exit to can be misleading.
Being more explicit, if you have the opportunity to work at an MBB or a mm IB, you have a golden ticket whether this website wants to acknowledge it or not. Post the role, your own career decisions and risk appetite are going to matter way more than that initial role. Hairsplitting is pretty useless because the real wealth comes from venturing out and doing your own thing in your 30s or 40s not working up a corporate ladder of a mature organization.
That said, mm IB and MBB both make it an uphill battle going to a mega fund if that is your dream. I’m sure people do it, but it’s really an uphill battle. Fortunately, MF PE roles tend to be very overrated imo. There are a ton of people investing in private businesses getting great returns aside from just 5 ish funds. Many of those funds even have senior partners who worked at those funds for decades and spun off because they realized the opportunity was better leaving those large firms. Also, smaller shops if they succeed will almost certainly have better economics than a large fund, that said—it’s riskier.
Now, all that said, the transition to PE is almost always very hard for consultants. From my experience, consultants all seem to think they are smarter and work harder than anyone because the consulting job is pretty intense relative to a corporate role and the people at consulting organizations are sharp.
Then they enter PE and realize there actually are people at a whole higher level who are full-blown neglecting major areas of their personal life to be wealthy. I mean have no significant other missing a relatives funeral for a management presentation type people. All those people chose IB over consulting because it paid more out of the gate and once they have to adjust to the pace and culture of IB/PE they realize the lack of compassion, warped view of personal time, and extreme sacrifice is worse than they realized.
So I’m summary, MBB is a great role. You learn a slightly different skill set than IB, but it sti
Love this. Thank you so much for the explanation
This is a great write up. Thank you for this response.
First time I think I've seen this comment - great post and I love your last edit especially on perpetually maximizing optionality.
Misconceptions:
truthfully, more of a PE professionals role is focused on purchasing companies and doing diligence on what should be paid for an asset. Operations are usually outsourced to consulting firms or operating partners.
Again, much of ops work is outsourced. But if it isn’t, ops usually is the part of the job PE professionals hate the most. Operations work usually means there is some severe disorganization going on in a company and fixing it requires a lot of focus, energy, and time working on a narrow issue working with incompetent people who likely are indifferent to the issue getting fixed and they may have animosity toward you. If they are sending you in to help fix an ops issue it likely means there is some problem in the organization and this can be draining and require very small detail oriented focus to fix
Through hearing why deals aren’t done and viewing various companies you will learn what other people think and this can help you become a better investor. However, because hold times for assets are 5+ years, it many times is difficult to tell whether something was a good investment during a two year program. Point is if you start at a PE firm and do a deal in the first 4 months, you still might not know the outcome of that investment a year and change later. As a result, you don’t get a great idea of what works and what doesn’t.
The classic bait and switch analysts fall for every year. The deferred comp of PE and the performance of the portfolio and the maturity of the org can all make comp variable. Maybe associates in IB make more than PE professionals. It’s going to depend on where you work. Similarly, culture of a PE firm and if a bank is going to depend on the group and team. Many PE firms are just as or worse in terms of hours and abuse when compared to an investment bank.
Thank you! I've heard about all of them and that's why I wanted to clear it out haha. Thank you very much!
Helpful
Depends on the firm. The larger the firm, the more hours you’ll work.
From my limited experience you cannot be a soy boy, especially at smaller firms. Expect to eat shit for a bit but it’s fun
What are your thoughts on MF private credit to MF private equity from undergrad PC?
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