Evaluate My Offer Please
OK IB/PE experts out there, I really need your help with this one. First some background. I am a recent MBA grad from a top 20 school. I have recently applied and got offered a job with a new PE firm in Los Angeles. At first I was very excited but after getting the details of the offer I am quite worried.
First of all, the base is pretty low (from what I am used to getting in my old career) in the low 80s. The upside shot is humongous; bankers basically get a percentage of the deal size and it is big at 3%. They do on average 15 deals a month with the minimum deal size being $2MM. So the upside potential is big.
The problem lies in the details of the offer. First, they only pay 50% of the health insurance. Second, the bonus is way too big for a fresh MBA grad. Lastly, having the company being this cheap with their health insurance casts a bleak outlook at how cheap they will be at everything else; they'll probably make me pay for my own blackberry, the health plan they picked will probably suck ass (I'll get the details this week), and they probably have no 401k at all, let alone matching. The problem is that I am quite spoiled. In my current career we are treated as prima donnas; the company pays 90% of our insurance, they pay for our lunches, our pay is MUCH higher than 80k in base alone, and they match 100% of my 401k contribution up to 10% of my salary. So this is quite a rude change for me.
My question is this; is this a good offer, bad offer, or is the bonus too good to be true? Talking to the MD made it seem like making a cool $1MM a year is what should be expected, which I find hard to believe. This will be my very first job in finance, let alone banking, so I really shouldn't expect to make that much in comp and I don't understand why they wouldn't offer a higher base and a lower bonus for people like me.
So for the experts out there, tell me if I'm stupid and I worry too much or whether this really is a fishy deal. I basically accepted the offer, if for nothing else other than the experience I will gain (or I think I'll gain if they're not lying) and hopefully I'll be able to translate it into a better position somewhere else. But I am afraid that this is some sort of a sweat-shop and there will be a catch that I'll only find out about 3 months into working there.
So please help me with any advice you might have for me.
How big is the firm - Employees and assets under management? Are there any other post-mba associates that you could talk to? It seems a bit strange that a firm doing $360M in deals a year would not cover more than 50% of your insurance. They should have spelled out your benefits in your offer letter as well. 401k match and other benefits shouldnt be a surprise after accepting a job, they should be part of the offer.
Can you prove that they in fact do 15 deals a month? Have you seen a track record of completed deals? Are you expected to source deals to get your bonus? It sounds a little screwy to me. Basically they are saying that for each banker, they will be giving out a 3% bonus? Are senior bankers entitled to a larger percentage? Sounds like the PE firm is going to have a difficult time achieving a 15 - 20 IRR if they are immediately starting in the red.
Sounds like a good opportunity, but you want to make sure it isn't the Ameriprise / Northwestern Mutual of the Private Equity world.
to being with - are you even sure you know what kind of firm you're talking about? a PE fund that does 15 deals a month? that is blatantly false.
definitely something weird here. Are you sure this isn't a venture capital fund?
15 deal a month or a year? $2mm per deal sounds somewhat more like VC...
be careful, ask for references.
In addition to the deal-related aspects that others have mentioned, their healthcare and 401(k) coverage are very suspect and frankly, 15 deals a month sounds pretty wild for a firm that small...even if it's venture capital. Definitely ask for reference as others have mentioned. This place sounds like a bucketshop.
What's the name of the company?
Possible it might be a small merchant bank that co-invests alongside the deals they advise on.
Thanks guys for your advice. Quite frankly, they never said they were a PE shop, that's what my friend told me after I told him about the company. They only presented themselves as a holding company that holds a portfolio of assets of Business Development Company 1940 Act funds. From what they explained to me they did sound more like a VC, the deals and pitches they received that he mentioned to me sounded more like what a VC would get rather than a PE. But like I said, I'm new and I trusted my friend's judgement over mine. Also, their job posting didn't sound like a VC job: duties include M&A, restructuring and turnaround, private placement...
Whenever I asked them though they stuck with the cryptic (to me at least) BDC under the 1940 act stuff. I'm getting the details of the health care plan, cost and other benefits this week and I'm starting in 3 weeks. So I'll update you guys then.
In either case, is that commission even standard industry practice for a VC or this BDC? Like I said, there is no deal sourcing involved, they just pay a % of the deal size on any deal I'm involved in. So the question is this too high (like I'm suspecting) ?
Thanks.
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