Hello all,
I've done 3 years in banking and 2 years in private equity and have an outstanding offer to join a well-respected F500 public company in my industry vertical this summer. I'm pretty over working 90+ hours a week, but I enjoy doing deals (within reason), so I think the corporate M&A route may be the right one for me.
My question is fairly simple - how are the hours in corporate better? Understandably I'm taking a significant pay cut, and am comfortable with that, but I fundamentally do not understand how the job can be 8-6:30 when you're executing deals (which is what the folks that I've interviewed with have told me ad nauseam), but...I just don't get it. Doing deals is a TON of work. We routinely stay til 1-2AM at my private equity firm and it's not a mega-fund. Is it that strategic buyers win the process automatically? They don't jump at every opportunity? The personalities are different? (For the record, I think PE could be a 8-7 / no weekends job, but Type A personalities don't really allow for that). They do way less diligence and modeling? The process for approval is more lax? I don't get it! They're doing bigger deals in the corporate world and cutting bigger checks - how does that not require the same harrowing hours expected of junior people in private equity?
People on the corporate side...help me understand!
This is a great question! I have never thought about this, but I suspect your perception is pretty accurate. If I were to hazard a guess, I would say that it boils down to who the ultimate decision makers are in PE versus corporate. PE decision makers are so much more sophisticated on average that corporate decision makers in a financial sense. It doesn't take as much time to prepare deal materials for a CEO who came up through sales or operations because the messaging is simpler than it would be for a partner at a PE firm (I would guess). Strategic buyers have more wiggle room due to synergies, but then recall that 75% of strategic mergers and acquisitions are value-destroying. The lack of rigor in corporate's diligence is probably contributory to that (and CEOs who decide to pay more for acquisition targets than their corp dev people might advise in the name of strategy).
I would imagine a few reasons could be as follows:
Better personalities. People on both sides of the deal want a life outside of work and pace drops to allow for this
Exclusivity more common for trade buyers. If it is a unilateral process there can be less urgency on both sides and deals can still get done. Ties in with point 1.
Lower number of deals to look at. Not always the case but in a lot of corporates you prob wont be looking at 3 - 4 things at the one time.
More internal resources. You're a widget maker buying another widget maker...not only do you know the industry inside out but you have a whole company worth of resources who know all aspects of the industry. Want to look at the targets tax affairs, get your widget tax guy involved, want to know what the targets country is like to operate in, call up your widget plant manager in the country.
Heavier reliance on external advisors. I imagine corporates are quicker to take the word of a DD advisor or a legal advisor whereas PE will want to drill into things a bit more and form their own view.
Less complex deal structuring? Exit not as big a consideration so structures more straightforward. Maybe....
I think they are some of the key reasons but ultimately it comes back to culture and personalities. You said it yourself that PE could be a 8-7 / no weekends and the corporate world generally embraces that view. Having said that, there will definitely be exceptions!!!
Thanks all. I think your thoughts are pretty well aligned with how I was thinking about it. Anyone else with some insight into these questions?
I only worked on the corporate side so probably not the best barometer but some thoughts below...
Generally a more narrow investment focus. Lots of deals get screened out early due to strategic fit on the corporate side. I imagine most PE firms will have a sector focus but will look in the various sub-sectors if the deal makes financial sense.
Deals are ancillary to the day to day business in corporate. They are the business for a PE firm.
Minority investments, JVs, Partnerships, tuck-ins, early stage deals, etc. are a big part of the corporate world. These generally require far less diligence than a large scale change of control transaction.
In-house expertise, as mentioned above, you can walk down the hall and speak with an expert be it tax, legal, regulatory, markets, products, etc. In more formal diligence you become a 'herder of cats' as opposed to doing a deep dive yourself.
Less leverage is used in corporate than in PE. I imagine this creates the need to perform incredibly detailed diligence as there is less margin of safety. In addition, the leverage is gong to be on the port co. versus the corporate parent requiring less diligence for the lenders to get comfortable.
Modeling could be different. Generally corporates are more concerned with detailed revenue builds, cost synergies, and impact on the corporate parent. Per comment above equity investments, partnerships etc. require less intensive modeling. I have never done a PE model but from what I read on these boards it sounds pretty intense.
They lied, lol. Depends on the company and industry but generally CD teams run pretty lean and more often than not you are out by 5 or 6 but there have been quite a few nights and weekends. Really only need to do this when something legitimately needs to get done though, definitely not a face time thing.
Depending how the group is set up, you also work on a lot of strategic projects and board books which have a known deadline or just are not that urgent.
This probably varies immensely by company and industry but overall should be much more chill than a PE gig.
From what I've heard, hours will vary tremendously depending on whether or not a live deal is happening.
I think it also varies by company. Some corporate development groups utilize investment bankers to do all their work, some take a more in house approach that will require more time and hours.
All companies will be different based on how much work is done in-house, but my company is less work because 1) almost all valuation/diligence/legal/etc work is outsourced to an ibank, big 4, law firm, etc. and, 2) most inbound deals are screened out. 95% of the transactions are strategic opportunities that the company has targeted and is willing to pay a premium for, otherwise will build the relationship and wait. Corp Dev is therefore responsible for the strategic vision of the business, M&A project management and execution of the deal, but not a lot of the technical work. When not doing M&A, other high-level strategy work is the focus. You can't build a career in M&A at my co, you'll typically exit to a Director/CFO of a business unit.
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