Long time viewer and yet to post anything yet. I've got some free time today and thought I would give back via a Q&A. Background: I work for one of the Big 4 in the Transactions Services - Financial Due Diligence group as a senior associate. I mainly perform buy-side due diligence for private equity firms and tech corporations.
Career Resources
Where would you like to see yourself in 5 years? How do you plan to get there?
My long term goal is to break into private equity, most likely at the middle market level. So, I'd hope to be at a reputable middle market PE firm at the VP level.
In order to achieve that goal, I likely need to stay in my current practice for another year or two and network directly with some of our clients and peers who have made a similar transition.
It is my understanding that someone in TS Big 4 mainly deals with putting together reports based on Q of E, NWC, etc. A big question that I am assuming you will get asked by PE or IB is about financial modeling experience? How will you address this? Forgive me if you have this from some other setting.
My long term goal is to break into private equity, most likely at the middle market level. So, I'd hope to be at a reputable middle market PE firm at the VP level.
In order to achieve that goal, I likely need to stay in my current practice for another year or two and network directly with some of our clients and peers who have made a similar transition.
What are the typical exits you see and at what level do they occur??
What is the best way to break into TAS? How much does having an internship in IB, Accounting, or TAS impact your chances of landing a TAS position?
Exit opportunities vary by level, but generally I have seen the following:
Associate: BB IB analyst or get out of finance Senior Associate: IB experienced analyst/1st year associate, MM PE, Corp dev, start-up, bschool Manager: IB Associate, MM PE, Corp dev, FP&A, B-School, strategy group at a F500 Director: Corp Dev, FP&A, PE (not as common) MD/Partner: Lateral moves to another Big 4/boutique, PE at the senior level (not as common)
I think while these are doable I would say these exits are more of the exception opposed to the rule, I'd also like to point out that just because your a senior associate doing TAS for a Big 4 doesn't necessarily mean you are going to be able to transition an associate in IB.
I'm also a bit skeptical of the transition from TAS straight into PE, while obviously possible in the grand scheme of things by being at the right place at the right time - I'd say you have an uphill climb with lack of modeling and transaction experience.
I believe the most likely exit out of PE/IB/CD from TAS is probably IB. I think even as a Manager in TAS you would still need to start out as an analyst in IB (unless you have an MBA). Then IB to PE.
I'm not trying to be a Debbie Downer but I wanted to be able to give some insight to help set expectations. I wouldn't consider the exits you listed as "Typical" - unless you are in a super TAS group that I am unaware of (I used to work in accounting - so I have a decent idea ;) )
I would still encourage you to shoot for your goals but knowing the lay of the land will help you navigate to your destination much more efficiently.
Just my 2 cents.
You are probably correct in that they more the exception rather than the rule. However, for my group, it is what I have seen as most common thus far. I would argue that exit opps differ for each city and fdd group (re, fs, pe, tech, corp, etc) even though the skillset is almost identical. As for the modeling, most people in our group can put together a decent lbo model from scratch.
As for the lateral move to associate, it is actually fairly common at the manager level without an MBA. I haven't seen it at the BB level but very common at reputable MM banks and regional boutiques.
TAS is a fairly broad term that encompasses many different practices/functions like M&A Tax, Corp Fin, Accounting Advisory for M&A, and Financial Due Diligence (FDD). That said, each practice tends to hire from different backgrounds. For FDD, we typically hire out of audit and other financial advisory/consulting groups.
As for an internship, any of the ones you listed would help landing a spot in a TAS group. Although, it's not as common to go from undergrad to FDD because we typically like people to have some professional experience prior to joining the group. That said, we probably take 15-20 people from undergrad nationwide for FDD and usually have about the same number of summer internships available.
IMO, the best way to break into the group without going through audit (should be avoided if possible) would be to come directly in from undergrad at a target school (think U of Texas at Austin, UC Berkeley, UCSB, U of Wash, UNC, USC, Michigan, etc).
What about breaking in from a school which only recruits audit, tax, and assurance employees?
I would suggest that you ask if you can apply for an FDD position. If you are a strong candidate, we generally will allow non-target applicants to apply for an FDD position and often times will take a few. For example, I would say 10% (about 2 out of 15-20) of our starting associates will come from a non-target.
thanks for doing this, i'll put it on the frontpage now and again one more time later this week
In TAS, is there still an "up or out" mentality as there is with the assurance and tax divisions of the B4?
I think on the specific practice within TAS but for the most party the "up and out" mentality not as extreme as seen in tax and assurance. I believe audit has a 20%-30% turnover rate year over year and TAS is usually sub 10%.
Thanks for posting, this is very helpful. Would you broadly explain what kind of work Corp Fin, Accounting Advisory for M&A, and Financial Due Diligence (FDD) generally consists of? Also, what is the typical career progression and a general compensation structure for each role?
Corp Fin is the big 4 IB group. They mainly represent MM companies. Not too sure on pay but I know it is below the street. That said, hours are typically better than the street. Career progression is similar to any other IB.
Accounting Advisory is basically the "Bruce Lees" of accounting. They do carve-outs, open-balance sheet work, IPOs, change in control provision accounting for stock options, etc. The group mainly recruits from the high performers in audit who actually like accounting. The pay is slightly above audit, maybe a 20% bump but partners in this group can make more money (high 7 figures) than most other service lines as the fees tend to be really high. Career progression is similar to audit - Assoc---> Senior Assoc--> Manager ---> Director/Senior Manager ---> MD/Partner
FDD performs buyside and sell side due diligence on mergers, acquisitions and significant investments (placements into companies). A standard engagement would involve computing EBITDA, Adj. EBITDA, Quality of Earnings (stripping out one time events/other items out of reported earning, computing net working capital, revenue analysis (usually the most value add), net debt position, and any other items that we might be useful for an acquirer to know. Career progression is similar to Accounting Advisory and pay is higher below the partner/MD level. As far as partner/MD pay, can range a bit but generally low 7 figures.
One big difference with these groups compared to assurance is that is much more merit based promotions so sometimes you will see a rockstar make partner/md in 8 years and others will never make it.
Do you have any suggestions on how to lateral from assurance to FDD? I'm only a first year and have some time, but I've been very surprised at how somewhat arbitrary the ratings seem to be. There were a few people I thought would do really well that only got average ratings. I've heard you need to really crush it to get there, but is there a way to get int with only average ratings? I think I know finance very well, especially for an assurance person, but does that matter at all if you're trying to do the switch internally?
To be honest, the best way to get into FDD from assurance is to move to another big 4 firm and enter directly into the FDD group. Trying to do an internal transfer is a game of politics that usually doesn't work out to well and can add years to the transition.
Thanks LMULA, this is great. Couple questions...
1) How common are boomerangs from industry? I had a TAS offer (sub-Big 4) coming out of Big 4 audit (3.5 years). I turned it down due to a variety of factors, but 2.5 years later I am now regretting my decision. I'm "only" 28 so I don't think that my age would preclude me from a senior associate-type role, and I'd like to think my internal experience would be a plus. (Unfortunately I have gotten used to 40-hour weeks...)
2) Which leads to my next question - how many hours a week do you work and how much travel? "Up to 50%" travel was definitely a factor in my decision. But is it really that much? I feel like the workload ebbs and flows...
3) Re: Exit Opps...obviously branding is a tad different when you're comparing two candidates, the first going from Big4 audit to Corporate/BU Accounting to FDD, and the second straight to FDD out of college. FP&A/Strategy feels like it would be my end goal (compared with MM PE - simply don't have the background for it). Does FDD really develop those skills, however? Budgeting, variance analysis, etc. are all things I lack experience in that are seen as "requirements" for FP&A roles.
Thanks so much!
1) Boomerangs aren't uncommon and I don't think you age would be an issue.
2) Travel can vary greatly but generally the higher you move up the more you travel. As a senior associate, I would say I travel 1-2 per month, with each trip ranging from 1 night to a week. As far as hours go, it really depends on your industry group. The private equity group works the hardest and hours can range from 35 to 90+ hours but generally are 60-70. The reason for the wide range in hours is due to tight deadlines for PE/financial sponsor related M&A. That said, it's not like IB or auditing in that you aren't expected to show face time when your not on a deal. Real estate, FS, Corporate and Tech probably range in the 50-60 hours per week but can push to 90+ hours on a rare occasion (once a year). Also, if you work in the a major city (think NYC, SF, Chicago, Dallas/Houston) your hours will be higher compared to a mid market city like Los Angeles or Boston.
3) FP&A roles are probably one of the easier exit opps. The skillset you build in FDD prepares you very well for most items you will encounter.
Do you know how well valuation is paid relative to the other tas groups? Mainly talking about MD/Partner level here.
Thank you for doing this! I'd like to echo the hours/travel question. Also, do you think an FDD role lends itself to a transition into the finance world better than the accounting advisory / Bruce Lee roles?
Please see my prior post for hours.
If your goal is finance then I would recommend valuation or FDD. AAS (bruce lees) will brand you as an accountant and that stigma is hard to shake off.
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Thanks for doing this!
A few questions: -How well does Big 4 TAS place for b-school? -Obviously TAS attracts the top auditors and candidates so how do you become a top-performer in an already high-performing group?
Big 4 FDD places top 7 MBA at the experienced senior associate role and manager level. I think it has to do more with uniqueness rather than prestige/skills. At the end of the day there are far more bankers and MC consultants than FDD professionals applying for b-shchool. Thus, your not really competing against many candidates compared to other typical backgrounds.
What is the comp range (salary and bonus) for TAS Senior Associate and Manager? It seems to be difficult to get accurate numbers since there are fewer people in TAS than in audit and tax, and some of the Big 4 call valuation, etc. "Transaction Advisory" so I'm not sure the numbers on sites like Glassdoor can be trusted.
It would be helpful if you could also give us an idea of the city size for comparison purposes.
Thanks for doing the AMA!
Are there significant differences in prestige / exit opps between the Big 4 groups? This is for FDD btw. What about big 4 vs. A&M / Duffs?
From what I have seen....failure to exit to IB (not speaking about PE that's a different story) from valuation/FDD is predicated upon lack of motivation rather than lack of traction. Most people I see in these groups are not looking to work more hours or increase the intensity of their day job. Those that try to exit usually can place pretty well in terms of banking/corp.dev. gigs.
Thanks for the earlier response.
I saw you said best way to get into FDD without Audit is from undergrad. Are you a CPA and do the Big 4 weigh that heavily for experienced hires? Most of the Associates/Sr. Associates in FDD that I've engaged with on the job did not have it but I see on most of the job board qualifications that it is either preferred or required.
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Thanks for doing this.
Do the same exit ops apply to Big 4 Valuations? I know those groups are more modeling focused but don't get actual deal experience, like IB analysts. Are buy side / corp. dev exit options common?
The exit ops are similar to what was laid out above.
GreenLabel - hailing from HK, I'm not sure whether this would apply in the U.S. but recently they had an individual with 4 years of experience making a transfer to a BB as a first year associate whereas I don't think that had ever happened for the FDD team.
Moreover, in the recent year many people from valuations have made successful transitions to corporate finance / IBD functions.
In response to your question, I think the exit ops are around the same but based on what I've seen here, valuations seems to have an edge.
I can confirm the transfers to IBD/ corporate finance groups from another valuation group this year. A common misconception in many threads I see on this topic is that "FDD = deal experience, Valuation does not", which is actually not true.
The big 4 firm I work for has a highly regarded strategy team that works with us on fairness opinions, Spinoff Readiness, etc. which involves significant financial modeling and synergy/cost cutting type analysis. There is a component of post-deal PPA type work but that's only part of what we do. If you can get on pre-deal projects valuation has the edge over FDD because of the modeling component.
This is possible. PE/HF will be a bit tougher without a strong network/supplemental schooling. IB/CD is an easier route but will take some resiliency.
You have a good base of modeling but the "pre - deal experience" is lacking - which is a hurdle that needs to be overcome. You can still set your resume up in a "deal experience" fashion. You could word it something like: - "Performed equity valuation of a Industry company which was valued at approximately $XX Million" -"Performed fair value calculations of intangible assets of a Industry company with a purchase price of $XX Million"
just an example of how you can leverage valuations experience into a deal-orientated format.
I'd also suggest - trying to get on the fairness/opinion projects as well. Those would be good resume builders as well and experience that would help out the most.
This is really helpful! I wanted to know 2 things:
Trojan,
I can shed some light on this. It depends on what you mean by TAS. Some big 4 have a due diligence group, valuations, tax restructuring, etc. Do you want DD or tax transactions? I know of a tax intern who went into a DD group full-time but you still usually need some audit experience.
My advice would be to switch to audit ASAP and maybe even try to apply to big 4 audit and mid tier (GT, BDO, McG, etc.) before you start.
How common is the CFA in either due diligence or valuations or do most people get the CPA?
From my understanding, the CFA is common in Big 4 Val. if you were hired out of undergrad. If you are an experienced transfer from audit / tax and already have a CPA, you wouldn't have to work towards the CFA. But some do anyway.
Not sure about FDD but I would assume its similar.
FDD typically does not hire out of undergrad from my experience....99% of the FDD guys that I've met are ex-Auditors with around 3 years of experience before being hired. That being said, they typically have the CPA and I've never heard of anyone going for the CFA. It wouldn't be useful for them because they literally clean historical financials......was just on a 3 hour call for a deal we are all working on together and there is literally nothing finance related to the FDD practice.
In valuation you actually use allot of the information from the CFA. I passed level I this past summer and everyone in my group except for one CPA is on track to get the certification. The CPA is great and everything but I do notice that most people who have it get shittier projects......it's a perception thing. If you want the pre-deal work I would stick to the CFA and try to brand yourself as someone who really gets the early stage analysis vs. someone who's great at cleaning up the beans post-deal.
Within my stint in valuations - I noticed the most common designations were ASA (American Society of Appraisers) then CFAs. Didn't run across too many people who had CPAs but then again it is an accounting function, so wouldn't surprise me.
ASA was a certification that was pushed (more so than the CFA). ASA gives you a pretty solid knowledge base of valuation methods and the real technical aspects of valuations. Each level is a different method (First was market approacf, second was income approach etc.)
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