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In the spirit of thanksgiving, I have decided to host a thread where you can ask all you ever wanted about banking or PE. Please feel free to ask away.

34

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Comments (250)

  • got_value's picture

    I know kids at bain and the reason they do place into PE over the other McK and BCG is that they have a 6month private equity rotation where you do an externship at a PE firm...alot of times they let (correct me if im wrong cuz im shaky on this last part) their kids, should they choose to, to continue at the firm where they were externing. So obviously that program allows for good PE networking and an opportunity to learn the finance needed.

    Anyone by chance know where the Bain kids mostly do their rotations?....I feel like that might explain the Bainies at HF GG and Bain Cap if theyre externing there

  • In reply to ibanking101
    10xleverage's picture

    ibanking101:
    10xleverage, thank you so much for this thread. You are awesome!

    You mentioned before that at some point you have to stop following the track and just mirroring your peers.

    What are the common things that pre-MBA PE associates do following their two to three year stint? What percentage would you say stay in PE vs. do other things? What are those "other things" typically? And what are the reasons for doing them?

    Thank you!

    Business school is clearly the most common path, many kids are burnt out or want to take a break to find out what they "really" want to do in life. It's hard to quantify because like I said, every year is different given the state of the market. In 2006-2007, the hedge fund opportunities were just too attractive to turn down a 500k a year job at a tiger cub or tiger spin. In 09, there were no hedge fund opportunities, so business school was a bit of a safer bet; there's really no one size fits all. Like I also said, I think KKR/BX probably send a little more to hedge funds while TPG/Bain are very pro business school. Even at KKR/BX though, over half will go to business school in any given year. After business school many of them will go back into PE (not as many as you think though come back to the same firm) or go to a hedge fund or some other type of fund. It is rare I think for someone who has done 4 years of banking and PE to really do a 180 and start working at a non-profit, I don't really see that happening. If that happens, it generally happens after the 2 year banking period. I think right now PE has become as institutionalized as it has ever been (I mean look at how many people are posting on this thread right now), and it has become quite similar to banking in terms of how defined the path is. As such, it will be very interesting to see what the kids who are doing PE right now, or just left to go to business school, will be doing in 5 years since private equity isn't the elusive asset class that it might have been 10 (or really 20) years ago.

  • In reply to 2x2Matrix
    10xleverage's picture

    2x2Matrix:
    10xleverage:
    2x2Matrix:
    This is great, thanks for doing this (though of course we all still love CompBanker and the other PE guys here). Did KKR hire consultants when you were there? Obviously Bain is the most consultant-friendly megafund, but do the other ones ever go that route? And if so, is there anything particular that they're looking for in an MBB consultant?

    Yeah KKR will hire consultants from time to time, really only McKinsey, not familiar with any BCG or Bain guys, and even the McKinsey guys will need to have a finance bent to them (think Wharton UG, or they were in McKinsey's corporate finance group which is a glorofied IBD group within Mck). If you want to do PE, do not go into consulting (even if it's McKinsey), you will have a much more linear path going to one of the main target banks. Bain is far and away the most consultant friendly, they hire about 10-12 people each year, with 6-8 having been consultants (they primarily only look at mckinsey and bain and maybe a little bcg). the other funds may take 1 consultant if that each in any given year. If you're a consultant, there's no question you will be able to do porter's 5 forces nonsense in your sleep, the main question is if you can do finance (which is why if you are some history major coming out of bcg, the odds will be heavily stacked against you since you will not know your finance as in depth as some wharton/gs nerd). If you are coming from consulting, your best bet is to sharpen your finance skill set independently or get assigned on projects with a corporate finance bent where you can get up to speed on these things. KKR will not have any patience though for some mckinsey kid who needs a year to get taught the basics, at this point in your career the time for handholding has stopped.

    If you are a history major coming out of McKinsey/Bain and you're looking to prove your finance skills, would passing the CPA be helpful? Obviously it's an assload of work, but would the combination of that and McKinsey be enough to convince them that you can do the work?

    It might be, but I really don't know anyone who was ever proud of passing the CPA. If someone tells me they have a CPA I tend to think that they are bald and middle aged and probably drive a used red convertible (yes, I'm obnoxious). I just don't have a precedent to judge whether that would work so I don't want to say anything, I can't imagine that it would hurt, but I imagine there might be better ways to channel your time and energy (maybe even just selfstudying corp. finance in your spare time).

  • In reply to 10xleverage
    ibanking101's picture

    10xleverage:
    ibanking101:
    10xleverage, thank you so much for this thread. You are awesome!

    You mentioned before that at some point you have to stop following the track and just mirroring your peers.

    What are the common things that pre-MBA PE associates do following their two to three year stint? What percentage would you say stay in PE vs. do other things? What are those "other things" typically? And what are the reasons for doing them?

    Thank you!

    Business school is clearly the most common path, many kids are burnt out or want to take a break to find out what they "really" want to do in life. It's hard to quantify because like I said, every year is different given the state of the market. In 2006-2007, the hedge fund opportunities were just too attractive to turn down a 500k a year job at a tiger cub or tiger spin. In 09, there were no hedge fund opportunities, so business school was a bit of a safer bet; there's really no one size fits all. Like I also said, I think KKR/BX probably send a little more to hedge funds while TPG/Bain are very pro business school. Even at KKR/BX though, over half will go to business school in any given year. After business school many of them will go back into PE (not as many as you think though come back to the same firm) or go to a hedge fund or some other type of fund. It is rare I think for someone who has done 4 years of banking and PE to really do a 180 and start working at a non-profit, I don't really see that happening. If that happens, it generally happens after the 2 year banking period. I think right now PE has become as institutionalized as it has ever been (I mean look at how many people are posting on this thread right now), and it has become quite similar to banking in terms of how defined the path is. As such, it will be very interesting to see what the kids who are doing PE right now, or just left to go to business school, will be doing in 5 years since private equity isn't the elusive asset class that it might have been 10 (or really 20) years ago.

    Great, thanks again. So post-MBA you would say the vast majority typically go back into PE? But typically with different firms? Is it pretty common for people at megas to end up at smaller firms post-MBA? There aren't nearly enough spots for everyone pre-MBA to continue at the megas, correct? So logically many people would have to trade down?

  • In reply to got_value
    10xleverage's picture

    Gobears88:
    I know kids at bain and the reason they do place into PE over the other McK and BCG is that they have a 6month private equity rotation where you do an externship at a PE firm...alot of times they let (correct me if im wrong cuz im shaky on this last part) their kids, should they choose to, to continue at the firm where they were externing. So obviously that program allows for good PE networking and an opportunity to learn the finance needed.

    Anyone by chance know where the Bain kids mostly do their rotations?....I feel like that might explain the Bainies at HF GG and Bain Cap if theyre externing there

    That is interesting, am not totally familiar with the externship program so that might be the case. I know more bain cap people than bain consulting people so I am not entirely sure where they do their rotations. Bain consulting is obviously a great offshoot into bain capital since they are sister firms (even though they are economically independent entities). Like I said though, if you want to do PE, don't mess around in consulting, it is an unnecessarily harder path.

  • In reply to ibanking101
    10xleverage's picture

    ibanking101:
    10xleverage:
    ibanking101:
    10xleverage, thank you so much for this thread. You are awesome!

    You mentioned before that at some point you have to stop following the track and just mirroring your peers.

    What are the common things that pre-MBA PE associates do following their two to three year stint? What percentage would you say stay in PE vs. do other things? What are those "other things" typically? And what are the reasons for doing them?

    Thank you!

    Business school is clearly the most common path, many kids are burnt out or want to take a break to find out what they "really" want to do in life. It's hard to quantify because like I said, every year is different given the state of the market. In 2006-2007, the hedge fund opportunities were just too attractive to turn down a 500k a year job at a tiger cub or tiger spin. In 09, there were no hedge fund opportunities, so business school was a bit of a safer bet; there's really no one size fits all. Like I also said, I think KKR/BX probably send a little more to hedge funds while TPG/Bain are very pro business school. Even at KKR/BX though, over half will go to business school in any given year. After business school many of them will go back into PE (not as many as you think though come back to the same firm) or go to a hedge fund or some other type of fund. It is rare I think for someone who has done 4 years of banking and PE to really do a 180 and start working at a non-profit, I don't really see that happening. If that happens, it generally happens after the 2 year banking period. I think right now PE has become as institutionalized as it has ever been (I mean look at how many people are posting on this thread right now), and it has become quite similar to banking in terms of how defined the path is. As such, it will be very interesting to see what the kids who are doing PE right now, or just left to go to business school, will be doing in 5 years since private equity isn't the elusive asset class that it might have been 10 (or really 20) years ago.

    Great, thanks again. So post-MBA you would say the vast majority typically go back into PE? But typically with different firms? Is it pretty common for people at megas to end up at smaller firms post-MBA? There aren't nearly enough spots for everyone pre-MBA to continue at the megas, correct? So logically many people would have to trade down?

    I don't necessarily know if it's trading down so much as there are compelling opportunities at places that might not have the same brand name. The problem with the larger firms is that a bottle neck starts to occur at the top end, and the bottleneck will get even more tight as time goes on (now that PE firms have started going public). Continuing at a mega fund is a safer path, but there is only one Henry Kravis at KKR, if you want to make a bunch of money, your best bet is to go somewhere smaller. Different strokes for different folks. I wouldn't necessarily think about it as spots available for people, it's a lot of self-selection. Like I said though, this whole 2+2 thing is still a very new concept, and I think it will be very interesting to see what happens to this generation 5-10 years from now, not enough time has really elapsed to make large generalizations. This is what I'm trying to say, it's about at this point you have to make a decision about what you want to do, you can't keep following your peers.

  • JohnWall's picture

    How influential can a very senior banker be on the PE interview process? I am debating whether or not to accept my return offer at a "lower" BB- according to consensus opinion of this site- and the reason why I'm considering it is bc. the group head has been a very helpful mentor. The group is great (top at the bank), and they do have a strong history of placing into PE (not a frequent occurrance, but have definitely placed at KKR, TPG, Carlyle before). I love the people in this group, so should do you think I should just go ahead and accept....considering I have an MD who will really support me?

    or should I aim for GS/MS?

  • In reply to 10xleverage
    2x2Matrix's picture

    10xleverage:
    2x2Matrix:
    10xleverage:
    2x2Matrix:
    This is great, thanks for doing this (though of course we all still love CompBanker and the other PE guys here). Did KKR hire consultants when you were there? Obviously Bain is the most consultant-friendly megafund, but do the other ones ever go that route? And if so, is there anything particular that they're looking for in an MBB consultant?

    Yeah KKR will hire consultants from time to time, really only McKinsey, not familiar with any BCG or Bain guys, and even the McKinsey guys will need to have a finance bent to them (think Wharton UG, or they were in McKinsey's corporate finance group which is a glorofied IBD group within Mck). If you want to do PE, do not go into consulting (even if it's McKinsey), you will have a much more linear path going to one of the main target banks. Bain is far and away the most consultant friendly, they hire about 10-12 people each year, with 6-8 having been consultants (they primarily only look at mckinsey and bain and maybe a little bcg). the other funds may take 1 consultant if that each in any given year. If you're a consultant, there's no question you will be able to do porter's 5 forces nonsense in your sleep, the main question is if you can do finance (which is why if you are some history major coming out of bcg, the odds will be heavily stacked against you since you will not know your finance as in depth as some wharton/gs nerd). If you are coming from consulting, your best bet is to sharpen your finance skill set independently or get assigned on projects with a corporate finance bent where you can get up to speed on these things. KKR will not have any patience though for some mckinsey kid who needs a year to get taught the basics, at this point in your career the time for handholding has stopped.

    If you are a history major coming out of McKinsey/Bain and you're looking to prove your finance skills, would passing the CPA be helpful? Obviously it's an assload of work, but would the combination of that and McKinsey be enough to convince them that you can do the work?

    It might be, but I really don't know anyone who was ever proud of passing the CPA. If someone tells me they have a CPA I tend to think that they are bald and middle aged and probably drive a used red convertible (yes, I'm obnoxious). I just don't have a precedent to judge whether that would work so I don't want to say anything, I can't imagine that it would hurt, but I imagine there might be better ways to channel your time and energy (maybe even just selfstudying corp. finance in your spare time).

    Thanks. SB for you.

    One of those lights, slightly brighter than the rest, will be my wingtip passing over.

  • got_value's picture

    Can I ask your opinion of the MS Fin Sponsors group in terms of the type of deals they do (I know a few but limited knowledge) as well as your opinion of the group for exit opportunities/bschool. From talking to the people there it seems like some very interesting deals (generalist structure) and great culture but I wanna know if I will pigeonhole myself to that group or only to PE exits. While obviously those would be nice, I really value the option of learning about many sectors as a generalist and then learning what I want to do over the next two years (whether that'd be stay in banking or move to other jobs in or out of finance).

    I know this has been asked before but I figure why not ask someone who actually worked at MS. Like you touched on earlier as well...does MS M&A handle all the analysis for Sponsors deals? I know that Sponsors works side by side with Lev Fin already.

  • ibanking101's picture

    Thanks again so much. I'm going to PM you something because it's a little more personal. I really appreciate your time.

  • Bernanke23's picture

    Thanks for starting the thread-much appreciated.

    Couple questions:

    1. How well did your MS experience prepare you for buy-side recruiting?
    2. What were some of the questions or case studies you got during your megafund interviews (if you remember)? Thanks in advance and thanks again for a great thread!

  • In reply to got_value
    anonymous_analyst's picture

    Gobears88:
    I know kids at bain and the reason they do place into PE over the other McK and BCG is that they have a 6month private equity rotation where you do an externship at a PE firm...alot of times they let (correct me if im wrong cuz im shaky on this last part) their kids, should they choose to, to continue at the firm where they were externing. So obviously that program allows for good PE networking and an opportunity to learn the finance needed.

    Anyone by chance know where the Bain kids mostly do their rotations?....I feel like that might explain the Bainies at HF GG and Bain Cap if theyre externing there

    sorry to hijack... but:

    I think golden gate / bain cap have the strongest history of hiring directly out of bain PEG. Bain PEG is frequently hired by the PE firms to do market due diligence (respected 3rd party opinion) as a "check" / resource (opposing roles) versus the GP's deal team.

    I've never heard of a megafund taking a kid on, banker, consultant, or otherwise, on in an externship function.... seems like a big liability to me to have an outsider sitting inside your walls.

  • In reply to JohnWall
    10xleverage's picture

    JohnWall:
    How influential can a very senior banker be on the PE interview process? I am debating whether or not to accept my return offer at a "lower" BB- according to consensus opinion of this site- and the reason why I'm considering it is bc. the group head has been a very helpful mentor. The group is great (top at the bank), and they do have a strong history of placing into PE (not a frequent occurrance, but have definitely placed at KKR, TPG, Carlyle before). I love the people in this group, so should do you think I should just go ahead and accept....considering I have an MD who will really support me?

    or should I aim for GS/MS?

    Recommendations matter less than most people think. You are still so junior after a 2 year stint in banking that even a glowing reference will not overcome a weak interview performance. I would say to try for a classic ibd group at GS or one of the stronger groups at MS (such as m&a). If either one of those work out, take stock of your options and make a choice, at least you know you'll have tried. I don't know what exact group you are in right now, but if the main thing drawing you back is the prospect of a strong reference, I do not think that this is a good enough reason to pick it over GS or the like.

  • In reply to ibanking101
    10xleverage's picture

    ibanking101:
    Thanks again so much. I'm going to PM you something because it's a little more personal. I really appreciate your time.

    Yes, a lot of people have sent me personal messages, I am too lazy to field them at the moment but will get to them eventually.

  • In reply to Bernanke23
    10xleverage's picture

    Bernanke23:
    Thanks for starting the thread-much appreciated.

    Couple questions:

    1. How well did your MS experience prepare you for buy-side recruiting?
    2. What were some of the questions or case studies you got during your megafund interviews (if you remember)? Thanks in advance and thanks again for a great thread!

    1. Getting my ass kicked on a weekly basis was terrific preparation. Seriously. Look, any one of these bulge bracket ibanking jobs will adequately train you to be the finest number crunching slave money can buy. MS or GS or JPM or whatever, they'll give you the experience you need.
    2. Know how to discuss valuation in depth. By this point you should know the finance vault guide in your sleep, this is not the time anymore for you to be stuttering over how to calculate the unlevered FCFs that go into a DCF. Talk about the economics of an lbo, the drivers of value, be able to talk to the more qualitative elements of what make a good business. Be able to discuss a few good businesses that you know of and why they are good. Be able to do an lbo on excel and know what the logical sensitivities are that go along with them. Nobody is expecting you to debate the theoretical merits of using the APV method of valuation vs. WACC (although if you can, that's a pro). The shit that kids always mess up is that they don't even know their own story, these are the basic things anyone can prep for. If you can't articulate who you are and why you want to do PE in a succinct manner, it's the quickest way to get a ding.

  • In reply to got_value
    10xleverage's picture

    Gobears88:
    Can I ask your opinion of the MS Fin Sponsors group in terms of the type of deals they do (I know a few but limited knowledge) as well as your opinion of the group for exit opportunities/bschool. From talking to the people there it seems like some very interesting deals (generalist structure) and great culture but I wanna know if I will pigeonhole myself to that group or only to PE exits. While obviously those would be nice, I really value the option of learning about many sectors as a generalist and then learning what I want to do over the next two years (whether that'd be stay in banking or move to other jobs in or out of finance).

    I know this has been asked before but I figure why not ask someone who actually worked at MS. Like you touched on earlier as well...does MS M&A handle all the analysis for Sponsors deals? I know that Sponsors works side by side with Lev Fin already.

    MS fin sponsors is good, I don't know an incredible amount about them, but they are a solid group and will provide you exit opportunities. If you can move into M&A though you should try to do that as it will provide you better exit opps. Don't worry about being pigeonholed as sponsors won't do that to you. MS M&A doesn't do all the analysis on the sponsors deals, but depending on which MD is running the process or holding the relationships, M&A can have a more or less significant role in the transaction. For the most part though, as you'd expect, the M&A group will be doing the most analysis of any group in Morgan, so if you can get in the group, it's a good idea. Regarding learning, I admire your interest in learning new sectors, but you're a slave and your interest in learning will quickly subside when you are fat and pale from lack of sunlight 6 months into the job, you might as well make sure you get good exit opps.

The WSO Advantage - Private Equity

PE Interview Prep Pack

9 LBO Tests, Get an Edge, 200pgs+ Learn More.

Resume Help from Actual PE Pros

Land More PE Interviews. Learn More.

  • ibanking101's picture

    Thank you very much, I really appreciate again. This is probably the most useful thread I have encountered on this forum after years of lurking, I hope you will maintain a dialogue. This is all great advice.

  • In reply to 10xleverage
    Olympus123's picture

    10xleverage:
    Olympus123:
    Can you explain what the culture is like among the different companies in the sell-side and buy-side (out of the ones you know)? I hear a lot of rhetoric about this but it'd be great to hear a more straight-forward interpretation.

    Like I said in my earlier post, banking was just more fun for a host of reasons. The shenanigans you can pull in banking just are unacceptable in PE. I would not be caught dead dozing off in PE but as an analyst in banking, there's nothing more comical than a banking analyst passed out in his seat. I will always look back at my banking experience fondly and still keep in touch with both junior and senior people that I have worked with there. The buy-side is a mixed bag, if you are working at sequoia it will be much different than KKR. Some buy-side joints are more laid back, KKR is the other extreme. The culture is more discernible when you have a group of 120 people instead of 12000 people like at a large investment bank. Although MS has a culture, it is not as cogent as KKR's. While there is a lot of cool factor with the KKR culture, it wears off fast when you realize the shit sandwich tastes the same on the buyside as the sellside. Overall though, would work at both places again in a heartbeat, the people I worked with at my times in both firms were top notch.

    Thanks a lot for your response. It was very helpful. From your experience, did you notice a different culture among the industry/product groups in MS, as well as among different banks (i.e. Morgan vs Goldman vs CS, etc.)? ...or are there only differences in behavior between the sell-side and buy-side (the buyside being more business formal/professional)? The reason I ask is because every bank places so much importance on it but I can't find any information on this.

  • In reply to 10xleverage
    Bernanke23's picture

    10xleverage:
    Bernanke23:
    Thanks for starting the thread-much appreciated.

    Couple questions:

    1. How well did your MS experience prepare you for buy-side recruiting?
    2. What were some of the questions or case studies you got during your megafund interviews (if you remember)? Thanks in advance and thanks again for a great thread!

    1. Getting my ass kicked on a weekly basis was terrific preparation. Seriously. Look, any one of these bulge bracket ibanking jobs will adequately train you to be the finest number crunching slave money can buy. MS or GS or JPM or whatever, they'll give you the experience you need.
    2. Know how to discuss valuation in depth. By this point you should know the finance vault guide in your sleep, this is not the time anymore for you to be stuttering over how to calculate the unlevered FCFs that go into a DCF. Talk about the economics of an lbo, the drivers of value, be able to talk to the more qualitative elements of what make a good business. Be able to discuss a few good businesses that you know of and why they are good. Be able to do an lbo on excel and know what the logical sensitivities are that go along with them. Nobody is expecting you to debate the theoretical merits of using the APV method of valuation vs. WACC (although if you can, that's a pro). The shit that kids always mess up is that they don't even know their own story, these are the basic things anyone can prep for. If you can't articulate who you are and why you want to do PE in a succinct manner, it's the quickest way to get a ding.

    Thanks for the response. As a follow-up question, how important is deal experience? I understand that it's important to work on live deals but is it necessary for things to close or can one have "dead" transactions on their resume?

    Also, I was wondering if you could give a brief run-down of a typical day for you while you were at KKR? Thanks again.

  • lolercoasterrr's picture

    Wow this thread is as good as it gets, thanks 10xleverage. I have a couple of questions that I would really appreciate your answering.

    1) How difficult is it to get to a top tier megafund out of H/S/W recruiting given you've only done 2-3 years of IBD alone? Assume that you did a good job at a reputable bb but chose not to do the additional 2 years of PE. pre-mba. Does post-mba opportunities exist for these kids? I'm not talking about bx/kkr or bust, but other top tiers like h&f, warburg, madison dearborne, thomas h lee...etc.

    2) Do you have any idea of how merchant banking is viewed for megafund pre-mba recruiting? Rather than working at a traditional ibd group i'm working in the principal investing / p.e arm of a bank that essentially does smaller buyouts using its own balance sheet (100-500mm), though we will coinvest for larger deals. The exit ops are pretty unclear as it seems like p/e firms only hire pure bankers. Any insights on this?

    Thanks again!

  • Password_Is_Taco's picture

    What is Henry Kravis like? Ever talk to him? Also, does KKR recruit at Columbia?

  • In reply to Olympus123
    10xleverage's picture

    Olympus123:
    10xleverage:
    Olympus123:
    Can you explain what the culture is like among the different companies in the sell-side and buy-side (out of the ones you know)? I hear a lot of rhetoric about this but it'd be great to hear a more straight-forward interpretation.

    Like I said in my earlier post, banking was just more fun for a host of reasons. The shenanigans you can pull in banking just are unacceptable in PE. I would not be caught dead dozing off in PE but as an analyst in banking, there's nothing more comical than a banking analyst passed out in his seat. I will always look back at my banking experience fondly and still keep in touch with both junior and senior people that I have worked with there. The buy-side is a mixed bag, if you are working at sequoia it will be much different than KKR. Some buy-side joints are more laid back, KKR is the other extreme. The culture is more discernible when you have a group of 120 people instead of 12000 people like at a large investment bank. Although MS has a culture, it is not as cogent as KKR's. While there is a lot of cool factor with the KKR culture, it wears off fast when you realize the shit sandwich tastes the same on the buyside as the sellside. Overall though, would work at both places again in a heartbeat, the people I worked with at my times in both firms were top notch.

    Thanks a lot for your response. It was very helpful. From your experience, did you notice a different culture among the industry/product groups in MS, as well as among different banks (i.e. Morgan vs Goldman vs CS, etc.)? ...or are there only differences in behavior between the sell-side and buy-side (the buyside being more business formal/professional)? The reason I ask is because every bank places so much importance on it but I can't find any information on this.

    I can obviously speak the most for Morgan but from what I've seen most banks are generally the same. All banks have their share of nerds, drunken frat boys, beneficiaries of nepotism, etc. The reputations obviously are what they are with Goldman being the elite jewish firm, MS/JPM being more american and wasp oriented, Citi being a hodge podge of all of the above, and so on and so forth. Really though, at the junior end none of this shit matters. When you're working 100 hours a week, nobody cares if you are a "cultural" fit, a cultural fit when you're a slave is someone who eats shit with a smile. Now don't get me wrong, you still have to play the game. When you are in an interview with Goldman you should harp on how big of a team player you are, etc. Just read the vault guide and regurgitate it in a convincing manner (this is harder than you might think). I think on the buyside things are a bit different since again there are less people, KKR's global PE group is probably about 125 people or so, and I could certainly say that there are people who just wouldn't fit in, whereas MS has a broader selection of people. It just comes with the territory of a smaller firm. In general banks place emphasis on culture but it's all bullshit, if you want to see real culture, go to a silicon valley start-up with less than 20 people, that's culture. The one piece of advice I would say is that when you are junior, do not pick a job based on "culture." Go to the best place you possibly can as 9 times out of 10, when you are junior, this will provide you more opportunities going forward in your career.

  • In reply to Bernanke23
    10xleverage's picture

    Bernanke23:
    10xleverage:
    Bernanke23:
    Thanks for starting the thread-much appreciated.

    Couple questions:

    1. How well did your MS experience prepare you for buy-side recruiting?
    2. What were some of the questions or case studies you got during your megafund interviews (if you remember)? Thanks in advance and thanks again for a great thread!

    1. Getting my ass kicked on a weekly basis was terrific preparation. Seriously. Look, any one of these bulge bracket ibanking jobs will adequately train you to be the finest number crunching slave money can buy. MS or GS or JPM or whatever, they'll give you the experience you need.
    2. Know how to discuss valuation in depth. By this point you should know the finance vault guide in your sleep, this is not the time anymore for you to be stuttering over how to calculate the unlevered FCFs that go into a DCF. Talk about the economics of an lbo, the drivers of value, be able to talk to the more qualitative elements of what make a good business. Be able to discuss a few good businesses that you know of and why they are good. Be able to do an lbo on excel and know what the logical sensitivities are that go along with them. Nobody is expecting you to debate the theoretical merits of using the APV method of valuation vs. WACC (although if you can, that's a pro). The shit that kids always mess up is that they don't even know their own story, these are the basic things anyone can prep for. If you can't articulate who you are and why you want to do PE in a succinct manner, it's the quickest way to get a ding.

    Thanks for the response. As a follow-up question, how important is deal experience? I understand that it's important to work on live deals but is it necessary for things to close or can one have "dead" transactions on their resume?

    Also, I was wondering if you could give a brief run-down of a typical day for you while you were at KKR? Thanks again.

    Deal experience is not important to the extent that your excel models are the same whether or not a transaction is actually executed or not. Sure it's nice, but it's not unheard of (especially in a tough market) to land a good PE job without any meaningful deal experience. Of course you should still be competent on everything else, but just because you didn't have anything go through, you will not be held responsible. For the most part you will be interviewing for PE jobs a year into your first job, so the vast majority of people actually won't have probably finished an entire transaction from start to finish, if at all.

    These typical day questions kind of suck because let's be honest, there is no typical day, i'll provide you two extremes

    An easy day (think a day after a deal came to a screeching hault)
    -I roll in at 10
    -Facebook and gchat till noon
    -Eat lunch in the dining room for an hour with my peers, talk about how much Brett Favre has been sucking this season
    -Have a director ask me for some comps
    -Call banker to spread my comps
    -Go to gym
    -Get comps from banker
    -Send comps to director
    -Go home by 430

    A hard day (such as one leading to a memo deadline)
    -Get in at 8 because my inbox is already exploding
    -Modeling at my computer while i'm on a call
    -Principal yells at me for being a retard, is trying to get analysis to a partner before a noon call, principal stands over my back while i'm trying to get numbers out
    -I get numbers to partner late while call has started, he looks at me like i actually am a retard
    -Attend a meeting the afternoon, am trying to take as much notes as I can because the more notes I take the less BS writing i'll have to do when i'm writing the memo
    -Actively participate in the meeting but you can tell the mgmt team is annoyed because i am less than half the age of the youngest member of the team
    -At 3 PM I check dining room to see if there are left overs, there are none, so go down the street to get food and eat at my desk
    -Still have a lot of work to do, try to focus but i instead facebook for a little while i'm eating
    -Keep working on the model and refining it getting new information from the bankers and company
    -Evening comes, people relax I can calm down a little since the senior people have taken off
    -Start working on the memo which can take several hours
    -Work through the night, feel tired at about 4 AM, decide to go home and get in early again the next morning, I know I only have one more day of this because there is a hard stop on the memo deadline

    -As you might expect, the good times are better, and the bad times are probably just as bad as banking. Although there is definitely nobody checking your stuff anymore, and more is expected of you.

  • In reply to Password_Is_Taco
    10xleverage's picture

    Password_Is_Taco:
    What is Henry Kravis like? Ever talk to him? Also, does KKR recruit at Columbia?

    kravis is a douchebag as you would expect (and probably for good reason). i say hi to him in the hall way but he pretends to not know me (i would probably do the same). kkr doesn't really recruit at columbia even though kravis is an alum, mainly just HBS/stanford.

  • ibanking101's picture

    Just read your "day in the life above." When times were bad, did you feel more pressure in PE than in banking?

  • In reply to lolercoasterrr
    10xleverage's picture

    lolercoasterrr:
    Wow this thread is as good as it gets, thanks 10xleverage. I have a couple of questions that I would really appreciate your answering.

    1) How difficult is it to get to a top tier megafund out of H/S/W recruiting given you've only done 2-3 years of IBD alone? Assume that you did a good job at a reputable bb but chose not to do the additional 2 years of PE. pre-mba. Does post-mba opportunities exist for these kids? I'm not talking about bx/kkr or bust, but other top tiers like h&f, warburg, madison dearborne, thomas h lee...etc.

    2) Do you have any idea of how merchant banking is viewed for megafund pre-mba recruiting? Rather than working at a traditional ibd group i'm working in the principal investing / p.e arm of a bank that essentially does smaller buyouts using its own balance sheet (100-500mm), though we will coinvest for larger deals. The exit ops are pretty unclear as it seems like p/e firms only hire pure bankers. Any insights on this?

    Thanks again!

    1. Almost impossible without pre-mba megafund PE experience. Kids with IBD experience are dime a dozen, the PE experience will help you stand out a little more. Again, in frothier markets it may happen, in tougher markets or even okay markets like right now, it will be very hard to get a megafund job without pre-MBA experience. As you go down the food chain to madison dearborn/new mountain/ maybe warburg things will be a little easier for kids without pre-mba experience, but the top shops definitely prefer it.
    2. Merchant banking experience is totally valid, it's just not a hot spot for recruiting for whatever reason. Like all my advice above for anyone not coming from a traditional target group, just proactively engage the headhunters and network and you will be fine. The merchant banking skillset is totally applicable and if you are doing it at a large bank you should be totally fine.

  • Antsman's picture

    Hey 10xlevergae, really appreciate what you are doing here for us young monkeys.

    Anyway, can you add some color to the prospects of analyst coming from Leveraged Finance groups at banks like JPM and BAML trying to break into Megafunds?

  • HappyThanksgiving's picture

    10x Leverage -- this is incredibly helpful, really appreciate all the help!

    1. How does Lazard's restructuring group compare vs the M&A groups? I know it's very busy but does restructuring work limit opportunities or open them?

    2. Relatively, how important is deal experience vs. analyst ranking? In terms of deal experience, are you looking more for size of deals, number, complexity, or a very involved role?

  • ibanking101's picture

    Another thing I commonly hear: The meanest person you work for in IB is the nicest person in PE. Is that true? Where the senior people a lot more nasty toward you?

  • Password_Is_Taco's picture

    10xleverage:
    Password_Is_Taco:
    What is Henry Kravis like? Ever talk to him? Also, does KKR recruit at Columbia?

    kravis is a douchebag as you would expect (and probably for good reason). i say hi to him in the hall way but he pretends to not know me (i would probably do the same). kkr doesn't really recruit at columbia even though kravis is an alum, mainly just HBS/stanford.

    Do you call him Henry or Mr. Kravis?

  • In reply to Antsman
    10xleverage's picture

    Antsman:
    Hey 10xlevergae, really appreciate what you are doing here for us young monkeys.

    Anyway, can you add some color to the prospects of analyst coming from Leveraged Finance groups at banks like JPM and BAML trying to break into Megafunds?

    They're good, not great, they will do the job, but they are not GS TMT / MS M&A. You may not get interviews everywhere, but you will get some top notch interviews in the top tier (KKR/BX/Bain/Carlyle/TPG) and certainly get very good looks at the rest (THL, Apollo/Warburg/Providence, etc.). Like I said before, once you are in the interview, you got as good as a shot as anybody. I don't know how BAML has really placed post its merger, as I know it's legacy merrill groups were great, but don't know how the integration has panned out so far. My instinct though is that it still sends kids to top groups. Lev Fin in general is generally pretty good, not as good as m&a, but okay, because you will have exposure to HY instruments and other debt products. Your understanding of classic corporate valuation and corporate finance will probably not be as good as an M&A banker's though, however, you can self-study the details or try to enrich yourself on your spare time on things you think you might be missing out on. The fact of the matter is, everyone has a different skillset and everyone has to complement what they know, a lev fin banker could read a credit doc better than an m&a banker, but an m&a guy could do accretion/dilution irr math better. The latter is more desirable for PE firms, it is what it is. That said, lev fin places just fine.

  • LIBOR's picture

    So whether you are having a good day or bad, you are on facebook. Good to know.

  • In reply to Password_Is_Taco
    10xleverage's picture

    Password_Is_Taco:
    10xleverage:
    Password_Is_Taco:
    What is Henry Kravis like? Ever talk to him? Also, does KKR recruit at Columbia?

    kravis is a douchebag as you would expect (and probably for good reason). i say hi to him in the hall way but he pretends to not know me (i would probably do the same). kkr doesn't really recruit at columbia even though kravis is an alum, mainly just HBS/stanford.

    Do you call him Henry or Mr. Kravis?

    Henry. Assistants call him Mr. Kravis.

  • In reply to LIBOR
    10xleverage's picture

    <a href=http://www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor rel=nofollow>LIBOR</a>:
    So whether you are having a good day or bad, you are on facebook. Good to know.

    You wanted honest advice. If you don't go on facebook everyday you're just weird.

  • In reply to 10xleverage
    LIBOR's picture

    10xleverage:
    <a href=http://www.wallstreetoasis.com/finance-dictionary/what-is-london-interbank-offer-rate-libor rel=nofollow>LIBOR</a>:
    So whether you are having a good day or bad, you are on facebook. Good to know.

    You wanted honest advice. If you don't go on facebook everyday you're just weird.

    Totally agree.

  • In reply to 10xleverage
    Antsman's picture

    10xleverage:
    Antsman:
    Hey 10xlevergae, really appreciate what you are doing here for us young monkeys.

    Anyway, can you add some color to the prospects of analyst coming from Leveraged Finance groups at banks like JPM and BAML trying to break into Megafunds?

    They're good, not great, they will do the job, but they are not GS TMT / MS M&A. You may not get interviews everywhere, but you will get some top notch interviews in the top tier (KKR/BX/Bain/Carlyle/TPG) and certainly get very good looks at the rest (THL, Apollo/Warburg/Providence, etc.). Like I said before, once you are in the interview, you got as good as a shot as anybody. I don't know how BAML has really placed post its merger, as I know it's legacy merrill groups were great, but don't know how the integration has panned out so far. My instinct though is that it still sends kids to top groups. Lev Fin in general is generally pretty good, not as good as m&a, but okay, because you will have exposure to HY instruments and other debt products. Your understanding of classic corporate valuation and corporate finance will probably not be as good as an M&A banker's though, however, you can self-study the details or try to enrich yourself on your spare time on things you think you might be missing out on. The fact of the matter is, everyone has a different skillset and everyone has to complement what they know, a lev fin banker could read a credit doc better than an m&a banker, but an m&a guy could do accretion/dilution irr math better. The latter is more desirable for PE firms, it is what it is. That said, lev fin places just fine.

    Thanks a lot!

  • ibanking101's picture

    Haha re: facebook, very true

  • In reply to HappyThanksgiving
    10xleverage's picture

    HappyThanksgiving:
    10x Leverage -- this is incredibly helpful, really appreciate all the help!

    1. How does Lazard's restructuring group compare vs the M&A groups? I know it's very busy but does restructuring work limit opportunities or open them?

    2. Relatively, how important is deal experience vs. analyst ranking? In terms of deal experience, are you looking more for size of deals, number, complexity, or a very involved role?

    1. This is a stupid question, the opportunities are generally the same. Both good groups. The restructuring group works with shitty companies that are probably bankrupt or about to go bankrupt, the M&A group is an M&A group. Both place just fine, restructuring will not close any doors and will even up doors to credit oriented hedge funds (think king street or centerbridge).
    2. Deal experience is not that important for the reasons i mention above. so long as you were working on something and you can make it sound like you learned and grew from it you will be fine. Analyst ranking can be important but isn't everything, so long as you are generally top half of your class you will be fine (this isn't hard as about a year in, at least a quarter to a third of your analyst class will flame out). You're generally looking for any experience that you can show that you learned considerably from, so that could mean a complex deal where you were very involved. Nobody is impressed if you did a $10bn investment grade offering for a seasoned issuer, any retard could do that . A $500mm acquisition of a company involving a financing and some strategic element is way more interesting. All in all, you just need to be able to sell your experience.

  • lolercoasterrr's picture

    Thanks for the reply. Really appreciate it!

  • In reply to ibanking101
    10xleverage's picture

    ibanking101:
    Another thing I commonly hear: The meanest person you work for in IB is the nicest person in PE. Is that true? Where the senior people a lot more nasty toward you?

    Both places have nice people and mean people, contrary to popular belief when you go to PE you are not issued a pin stripe suit and buckled shoes and given a license to be an asshole. Senior people in PE are actually probably nicer because you are around them more. In a large bank, you are dealing with more people (product groups, other industry groups, clients, etc.), in a PE group you will develop more of a relationship with the very senior people because you interact with them more frequently. As with any interaction, the more frequently you deal with them, the nicer they will be because they will develop a repoire with you.

  • Bernanke23's picture

    In terms of modeling that is done at the megafund level, can you give an example of some of the complexities? I'd imagine that things can get pretty intense / complicated right? Also, how much of this are you expected to know / understand coming in? While banking is essentially a training ground for PE, I'm fairly certain (from my experiences thus far and from chatting with others), that a ton of the modeling is template based so I'm curious to hear your about your experiences.

  • zooblar's picture

    Great thread - thanks for putting in the time to respond to people's questions, very informative. You've referenced the relative strength of M&A groups compared to other groups - what advice would you have for those in coverage groups with respect to positioning oneself for PE recruiting?

  • 7S's picture

    for post-MBA PE recruiting, what is the cuttoff for pre-mba exp

    would they look at you if you did 3i or summit? what about even smaller growth equities w/ 1~3B

  • In reply to Bernanke23
    10xleverage's picture

    Bernanke23:
    In terms of modeling that is done at the megafund level, can you give an example of some of the complexities? I'd imagine that things can get pretty intense / complicated right? Also, how much of this are you expected to know / understand coming in? While banking is essentially a training ground for PE, I'm fairly certain (from my experiences thus far and from chatting with others), that a ton of the modeling is template based so I'm curious to hear your about your experiences.

    Yes, much of the modeling done at banks is template based but you should try your best to do modeling from scratch. You will learn it better if you can do it from scratch even if it takes longer at first. No two companies are identical and although you may be able to bucket all things into COGS or SG&A for instance, companies should be viewed differently (e.g. one company may choose to grow via capex while another grows by acquiring other companies). For the purpose of the interview things never really get too intense, TPG for instance provides a bit of a template so you are not doing it totally from scratch. KKR will give you a blank excel sheet, but they're not really going to examine your excel output, so much as what your findings were after you completed the analysis. The key is to be thoughtful about your sensitivities, think about how an additional 100bps of margin expansion in the out year will enhance your IRR, think about how an additional turn of leverage will impact your IRR, think about how your returns might be impaired if you cannot achieve your desired exit multiple, etc. You should be actively thinking about the business and what the sources of the returns are. Intense modeling does happen, but not in the interview process. Moreover, by the end of your analyst career at a bank, you should be able to check your modeling from just the output sheet, no model is perfect, but if you see something that is just not economic (for instance capex trailing upwards, while D&A drifts downwards), you should be catching these things. If you wanted a monkey to just do a model, you could get some nerd out of MIT to write an algorithm, PE shops want monkeys that may be able to make a judgement call or two.

  • In reply to 7S
    10xleverage's picture

    7S:
    for post-MBA PE recruiting, what is the cuttoff for pre-mba exp

    would they look at you if you did 3i or summit? what about even smaller growth equities w/ 1~3B

    Yeah that would probably be fine, just need to have a good story. Both those shops are respectable. You would have a decent chance assuming everything else checked off (good IBD experience, good grades in b-school, etc.).

  • In reply to zooblar
    10xleverage's picture

    zooblar:
    Great thread - thanks for putting in the time to respond to people's questions, very informative. You've referenced the relative strength of M&A groups compared to other groups - what advice would you have for those in coverage groups with respect to positioning oneself for PE recruiting?

    Yeah this has been fun, I'm bored as shit so glad I could help. M&A groups are strong because they just generally involve more analysis, they aren't the silver bullet by any stretch of the imagination. If you are in a coverage group that is fine too. GS is the best example of coverage groups because they do not have an M&A group, so all their M&A is down in-house from their coverage groups. Not all coverage groups are made the same either, some will have a greater degree of participation in the execution of M&A transactions than others. They key is to be as involved in the analysis as you can, and even if you aren't fully in the trenches, you should try to be involved as much as you can such that you can leverage it in an interview. Like I said, it's not just about having good experience, you also need to sell it. Yes, in a coverage group there will be some shitty assignments (think a follow-on equity offering), but there will also be strategic things that the coverage group will be involved in. When this happens, to the extent you can raise your hand and try to be responsible for running the model, you should do this. It's not easy, but you have to be aggressive about seizing opportunity when it presents itself.

  • pepsiholic's picture

    Fantastic thread, 10xleverage - I am thankful for a lot of things on this holiday, and WSO is one of them haha.

    1. Did you learn a lot during your two-year stint, or were you simply repeating a lot of the type of the work you did at MS?

    2. Where do you see the industry going in the next 5 years?

    3. To follow up on the good days and bad days: how often did each occur?

    4. Any advice on how to do well as an analyst/associate in PE?

    Sorry for so many questions - really appreciate the help!

  • HappyThanksgiving's picture

    Hey thanks for the advice

    what level school/GPA did you have going in? what are the averages of the other associates?

    just a quick thought though - might be smart to remove that comment on henry kravis since it's probably easy to tell who you are (or at least narrow it down to a couple) if the office is as small as you described

  • 10xleverage's picture

    alright i'm going to sleep, feel free to leave any more questions but i will not get to them until tomorrow. i also know that many of you have sent me personal messages, I will get to those tomorrow as well. I fully expect to not be active on this board at the end of this weekend as I am doing this for kicks, so please feel free to ask away while i am active.

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