I don't get it
The common path to PE seem to be 2 years as an analyst in IB, then starting as an associate at a PE firm. But after 2 years as an associate, I hear that firms will ask you to get an MBA. But after you get an MBA, don't you go back to PE as an associate?
So wouldn't it be better to jump to b-school right after IB instead of working in PE for 2 years?
For example, here's 3 different ppl's paths:
Person A: IB 3 years as analyst -> IB 3 years as associate -> now VP
Person B: IB 2 years as analyst -> MBA 2 years -> PE 2 years
Person C: IB 2 years as analyst -> PE 2 years as associate -> MBA 2 years
it seems that person A and B have the quicker path. So I guess my question is, why 2 years of PE after IB if you're going to be back on the same position after b-school?
its very hard to get into PE after MBA without having done PE before MBA
Also assuming C, you would typically go back as Senior Associate with more responsibility and more pay.
how many times does this come up... like philliesphan said, it is extremely difficult to get into pe post mba if you have dont prior pe experience.
i apologize for the naive question, but why do PE firms require candidates to go get an MBA then? what do they learn that is so important for promotion?
An MBA program is good for PE for two main reasons - a) academically, it's good to have a conceptual basis for how businesses work. the analyst experience locks down your modeling skills, but that's hardly the be all end all of understanding how to invest in companies. Difference between being able to build a calculator and understanding math. b) the network you develop in b-school is a very valuable part of your experience
I would also add that perception is important in PE. It looks good to LPs to have MBAs on your roster. To build off of the above, the pe firm takes an active role in creating value in its investments via operational improvements. Understanding the different ways this can be accomplished is important aside from simply saying "we need to grow ebitda at x rate to generate our targeted irr". MBA can help with this.
regarding learning about "operational improvement" , surely it would be more appropriate for someone to spend 2 years (after a 2-3 year stint in IBD) in MBB rather than pursue an MBA and then apply for PE jobs. I bet you'll learn much more about what makes businesses tick and how to improve their operations by doing 2 years at McKinsey rather than spending 2 years at HBS, for example. To sum up, in my opinion, 2 years in IBD+2 years in MBB>2 years in IBD+2 Years MBA . That way, one will have both "Financial Modelling" experience but also "Operational Improvement knowledge/business acumen". I think this is by far the best combination for someone to land a PE job (without the need of an MBA)! Would appreciate your comments/replies on this.
CompBanker, since you are a PE guy,I would particularly appreciate your thoughts on what I just said.
I'm going to have to disagree with your comment. While it is true that MBB will give you a better experience at learning operations than an IB stint, I don't think it is better than getting an MBA. I personally believe that one's experience at MBB can be hit or miss when condensed to only two years. You're at risk for being staffed on only a couple of assignments or for focusing on only a small segment of a company's operations. Maybe you only get staffed on manufacturing companies and never learn anything about business services or general management rather than plant management. I'm not saying that all MBB analysts are siloed, just that the risk exists with only two years of experience.
On the other hand, the MBA is a very, very predictable degree. You get your fair share of finance classes, general management classes, and you build the network. This network can be extremely valuable for more than just fundraising. Undoubtedly each HBS class sends a few individuals to GE in managerial roles, individuals that you would be able to turn to for advice when your portfolio companies need guidance. The network aside, the classes hold value as well. They provide a strong foundation in numerous areas from which you can build your knowledge.
All this said, most PE shops don't seem to hire people for post-MBA positions if they don't have PE experience beforehand.
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