Hey guys,
I was wondering how middle market lenders such as GE Capital, CIT (corporate finance), NXT, etc. place into PE. What kind of exit opps can analysts from these kinds of companies get? I know mega funds are essentially out of the question, so I was wondering if analysts in the past have been able to break into MM shops.
Are these companies sought out by the buy side, given their focus on providing to small/mid cap companies?
Thanks!
| +77 | Ex Apollo Associate Q&A (But I Actually Answer) | 119 | 37m | |
| +61 | Q&A - Anything about PE / MBA / Life | 64 | 1h | |
| +45 | How to Model SaaS Projections for Interviews | 49 | 1d | |
| +37 | [Technical doubt]: Cash sweep and mandatory amortization | 10 | 7s | |
| +23 | European Megafunds (based on PEI 2023) | 17 | 2d | |
| +22 | Partners Group Long Term | 8 | 1d | |
| +22 | Is internal reporting at most funds really so Excel & PPT heavy still? | 8 | 12h | |
| +18 | Advent NYC Culture/WLB - 2024 update | 9 | 4h | |
| +18 | How is your life in PE? | 12 | 4h | |
| +18 | How much thematic work / industry research do you guys do? | 1 | 6h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
There are some guys that move from MM lenders to MM PE. However, it is more common to move from MM lender to a MM mezz fund or BDC. But, yes it is possible. Leverage your contacts from previous deals.
Thanks. Could you possibly name a few funds that have taken guys from said lenders? What specific skills learned cater to mezz funds/BDCs?
I'd focus on gaining experience and less on looking for exit ops when you just started. As mentioned above you can go into a variety of areas, but the path of least resistance will be on the debt side of things. You'll be looking at things as a lender which is different that as an equity investor.
You'll be working with sponsors and have the ability to build a network with them. That would be your best shot if and when you do decide to do something else.
Pick a BDC. They invest similarly in the capital structure (ACAS, Ares, etc.). Mezz funds include Avante, Spell, Maranon, Stellus. PE includes HIG Capital, Blue Creek, Morgenthaler, Hamilton Robinson.
If you have IB experience, that's a good combo.
Also, if you are into distressed or SS PE, they tend to look favorably on lenders if you were involved in financings around those types of companies or the bankruptcy process.
Bump. Aside from networking connections, what are some ways to market yourself to the equity side? I have decent contacts in this space, but wondering about the importance of CFA level 1, wall street prep modeling course, etc. These are all good things to do, but are they worth the investment of time and money, relative to their marketability?
You would have an easier time moving to a bank from there for an analyst IBD stint and then moving on from that into the PE gig. Like the above have said, debt is just very different and not analyzed the same way (or, frankly, analyzed with the same level of depth) as the equity structure is analyzed in an IBD role, and PE firms are looking for the equity level analysis from their associates. PE firms work with the lenders all the time, therefore, PE firms know what type of experience debt investors are getting and they know it is not what they are usually looking for. The exception to this would be a BB Lev Fin groups because they often work with much larger deals where they really do have to dig in similar to the equity side.
On the point about debt investors not having the same experiences, I will provide some more color on that point (since I know someone who has no experience will try to debate it). Debt trades much more frequently and has a safer spot in the capital structure, therefore, it is often diligenced far less than the the equity slug. The frequency thing is just a matter of resources, hopefully self explanatory. As for capital structure position, a firm is putting in a full equity slug representing 25-40% of the total capital structure behind you. So they have to lose ALL their investment before you lose a dollar of yours.
(Ok this is not technically true because for a debt investment by that point the required yield on your debt will have to go way up and drop the price. But in terms of yield to maturity it is true and the equity holders are underwriting gains for themselves as well, so you have that cushion as well)
So as a result of being higher in the equity structure, the debt investors can piggy back off the diligence that is done by the equity slug. Successful equity investors with good track records have easier times getting better financing, because debt underwriters / investors will have greater confidence in their diligence process, which they are using as a partial substitute for the debt diligence. That's why when firms come towards the end of a highly confidential deal they've spent 6-8 months working on secretly, they can usually get the financing lined up in way shorter order because the debt investor does not require as much diligence. Similarly, when lev fin at a bank is brought onto a deal cultivated by IBD, they are brought up to speed on the main points and the story by the IBD team (which has crafted the story and prepared it for market).
So, for those reasons you are not getting the same experience on the debt side as the equity side, and therefore PE is much harder to move to from debt shops
IBPrepared, thanks for the comment. Would SB if I had any. After looking at several deals already, I can see what you mean by the level of diligence conducted on the debt side.
I've looked at due diligence conducted by sponsors for acquisitions on certain deals and that, along with some further due diligence will be enough to satisfy us. Would like to do deeper, more meaningful analysis.
How would you suggest explaining the transition from this type of role to a IBD analyst gig? FWIW, I'm in an industry group
Thanks
great advice. That's what i've been figuring.
Does Middle Market lending look good when applying to PE? (Originally Posted: 07/04/2012)
One of my friends is doing middle market lending for a decent sized bank. He thinks he can transfer to PE if he works hard enough. Does MM lending look good on your resume for PE firms?
yes and no. Really depends on the work you did. But yes, it can look good for PE.
Atque a sint doloribus nihil perspiciatis porro. Et quisquam impedit aliquam similique quos. Eos tempore voluptatem reiciendis maxime.
Impedit eum molestiae animi sunt inventore quasi. Iste quasi ut quos distinctio sit deleniti sed.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...