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BB associate to PE associate. Should I leave banking?
 

randomguy's picture
O
(Baboon, 118
 
Points)
 on 5/26/12 at 3:25pm

This is probably going to be more relevant to the older folks here. I am an associate in a bb firm (analyst promote) but also have a non US MBA. I have actually enjoyed the last 4-5 years in banking and am part of a very highly regarded team. However after going through the pains of seeing teams getting butchered in 2009, I am very uncomfortable with the idea of living through that again (note that I am actually not worried about being directly affected yet). I have been testing the market and am likely to get a senior associate type role in a global PE fund.

I am very conflicted about how I should react to an offer, since I actually do enjoy banking and have done well here. I feel like maybe I am overreactimg and should stay put, but part of me feels very worried about the complete lack of security and potentially lower comp in banking going forward.

How should I think about his fairly uncommon choice? I think I will do well in PE and if I were in a slightly lower ranked bank I might have jumped without thinking but well I am in a good team doing good work and getting good recognition so is a jump worth it?

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OMS's picture

Note: I'm not giving you

PE
(King Kong, 1,886
 
Points)
 on 5/26/12 at 4:15pm

Note: I'm not giving you advice, I'm just curious.

since u enjoy banking have u considered moving to an independent pure advisory shop like lazard, greenhill, pwp, evercore etc instead of PE or staying with your BB? They seem to be a lot more stable than BBs.

tech_pe's picture

did you get an MBA abroad and

 
Points)
 on 5/26/12 at 8:18pm

did you get an MBA abroad and then get into banking as an analyst? and are you currently working in the US?

as for your situation, if you enjoy banking, and perform in a well regarded group as you say, then if things start to head downhill it seems like you could switch to another banking group or firm. if your group is doing well then security shouldnt be that much of a worry. although if you took the time to interview for pe you must be pretty concerned...

randomguy's picture

I am actually in Asia and the

O
(Baboon, 118
 
Points)
 on 5/27/12 at 12:56pm

I am actually in Asia and the pe offer came real fast without too much effort. Getting into another team should be ok, but given the markets I don't expect that to be anything less than a 4-5 month process. Would rather not go through that so this is a preemptive strike so to say. Plus I might just be ready to slow down a bit since I got married recently!

Boutique m&a doesnt do very well in Asia because the balance sheet and capital markets support matter more than actual m&a advice

Really just want to know if there are guys out there who have done this and if they help me think through the downsides

re-ib-ny's picture

Since your primary concern is

PE
(Gorilla, 690
 
Points)
 on 5/27/12 at 6:06pm

Since your primary concern is mitigating platform risk associated with your current bank, I'll try to address the downside of the switch in that context.

Here are some things to consider:

(1) What is the capital position and future fundraising potential of the fund? I've seen a lot of PE funds hiring people in anticipation of raising new funds, though they are struggling on that front. The major LPs (pensions, endowments, etc.) were burned in the last cycle, and have been shrinking the number of sponsors with whom they invest. Also, because many sponsors have arguably failed to mark down their assets appropriately, many LPs are "overallocated" on book value to private investments. I think many sponsors will not see another fund.

(2) What is the staffing situation in the group you are joining? There may be a need for a senior associate at the fund today...will there be a need for a VP tomorrow? How heavily staffed is the firm at your level? With the exception of periodic firm-wide layoffs, it's reasonably easy at a bank to rise to the level of director before there is a "reckoning" and a need to actually bring in revenue and produce. At private equity firms, the responsibility to source and lead projects often comes much sooner, the promotions are less automatic, and the chopping block comes out more frequently (not just when there's financial hardship or you've reached the MD selection phase).

(3) What has this fund acquired? How has it performed? Assuming it has performed well, how stable have the upper management ranks been? When you move to a fund, you almost have to look at it like an investor, since you are virtually (and sometimes literally) buying into its performance. This has a different set of considerations than joining a bulge bracket bank. Your firm will earn profits on promotes, not underwriting fees. Ideally, the current fund that the fund is investing is in-the-money and hitting its return hurdles. If you think you can ask in an appropriate fashion, this is something you should find out.

Hope that helps.

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