MBA Considering Pre-MBA PE Role

I just wanted to get some feedback from those of you that are/were in the space. I feel like I have a somewhat unique background and would like to make the transition into PE.

Background
I went to non-target undergrad, then spent two years in Securitization Origination and Capital Markets, and now getting my MBA (H/S/W).

Question
Given the fact that most post-MBA Associates have pre-MBA PE experience and I have less work experience compared to other candidates, what are thoughts on considering pre-MBA roles (1 or 2 years)? Big picture, you could look at my 6 years after undergrad and just consider it rearranged. Any other advice or insight is helpful.

Thanks.

 
Best Response

I have to say, without any investment banking experience (coverage / M&A / lev fin, not product / capital markets) it will be VERY difficult to break in no matter what (at last to what you are thinking). The only reason you have a prayer is if you do very well at H/S (if you're W, from a PE perspective they are behind the other two, so don't think that would be enough).

Here are the range of options available and what reasonable expectations for each group.

1) Established PE firm with pre-MBA program who hires post-MBA's to vice president positions

This will be the vast majority of firms, and unfortunately, the opportunities for you here will be almost nothing. Firms like this will have their range of picks between 2 yr IB + 2/3 yr top pre-MBA PE + H/S candidates, and so hey have no reason to pick someone without the first 4/5 years of that pedigree. I understand your point here about potentially coming in as an associate, but no one would go for this because 1) it would be a cultural shock; you would have MBA's your age as your bosses, and you would be equals with pre-MBA's who are going to be well ahead of you from a preparedness standpoint and looking to do an MBA when they're done. It creates a difficult dynamic, and again, there's no reason for these firms to take that risk. And 2) PE firms would rather have top analysts out of an investment banking program rather than top MBA candidate with no experience.

People who have worked at a bank have seen this dynamic in the top analysts vs. new Associates with no finance background. In the investment bank setting the MBA's have an opportunity to catch up over time by leveraging the training resources / opportunities investment banks have, but PE firms don't have a training environment because everyone they hire should already be extremely well versed in those topics.

2) PE Firms who Hire Post-MBA's to Senior Associate Roles

This would be your opportunity to come in as an associate. There are firms who regularly do this as their practice and it avoids the cultural issues of hiring you as an associate because it is common place. However, you still run into the issues where they would likely rather have their IB + PE background candidates. But at least here you would not be asking to come straight into a VP role, maybe that helps somewhat? (I still have to say, i see almost no chance here, but more than category 1). A great internship could maybe give you a very small shot? (see below)

3) PE Firm / Distressed Debt Investors

There are many firms that cross over between these two areas to do debt (usually hoping for control) and direct investments. With a role at a place like this you could leverage your capital markets background to get in to help more on the debt side, but still get exposure to direct investing. These shops are usually much more open to people with trading backgrounds, and your MBA will take you much further at a shop like this. The reason for this difference is that the pedigree of professionals at these firms is usually varied. Everyone has a strong background, but it's not all exactly the same background like a standard PE firm, some have the standard PE background, some have trading backgrounds, some have come through HF's, asset managers, lev fin, private debt groups etc. At a place like this you would be able to leverage you unique experience and they would be more likely to hear you out on why you would work out well and why your background is good for the role. Again I have to highlight, this would still be difficult, but I could envision a situation where this could work (depends somewhat on the specifics of your capital markets background).

4) Startup PE firms

I throw in this category because I would feel like I had a big hole in the landscape if not. This group is the least set in their ways and willing to do things differently / take chances to get themselves up and running. But again, I think you have issues with many other very well qualified candidates competing for these positions and I just don't see what your edge is here. There is such a big funnel of people with top ratings from 2 yr BB-IBD + 2 yr pre-MBA PE and even they can't all stay in PE, so you have to realize you are competing against them for all of these positions.

I don't mean to say all this to disappoint or discourage you, but you should be aware of what these firms are thinking about when they hire and you need to be aware of the obstacles you face. A couple things you can do to help your chances and maybe help get you somewhere longer term.

First, you MUST do something heavy finance related during your summer internship between your two years. Summer associate at a BB investment bank is by far the best choice because 1) they are willing to recruit top MBA candidates with no finance background, so it's something attainable, and 2) you can at least get a taste of that background which you are missing relative to all other candidates. You would need to essentially be super human and pick up everything you possibly could over those 10 weeks (and obviously would need to get a full time offer at the end). And frankly (I know you have no control over this) getting staffed on a live deal that announces at the end would be a huge help in legitimizing your experience. It is really tough to buy into someone's finance experience after only 10 weeks, but being on the big deal means you got more responsibility than most in your position (shows you were excelling) and would give you a a chance to talk about a known situation and maybe impress someone.

Secondly, you should consider staying in a BB bank at an associate role for 2-3 years if you are serious about finance. As mentioned above, investment banks have good infrastructure to help train / teach you up, you would come out of that time with legitimate finance experience and skills which would significantly mitigate the issue of not being as well qualified as other candidates (you would still not have the pedigree of 2 yr IB + 2 yr PE, but you would definitely be in the conversation for having similar experience). You would have a MUCH better shot at getting hired as a senior associate somewhere, or a VP at a smaller firm in your vertical or something like that. Realistically, this would be your way into finance and you would have to get some experience and then get back on this message board in 2-3 years and ask about how to make the jump to PE.

I am sure this is not what you were hoping to read, but I hope this was somewhat helpful.

 

@IBPrepared Thanks a lot, I really appreciate your candid response. Most of what you hit on were some of my main concerns, especially the dynamic that would play out. I do like the approach you suggested of just doing the IBD for the summer and trying again for next year or even the route for 2-3 years and then jumping over. My background is very finance focused (Regulator Internship for two summers during undergrad, MS in Finance, Capital Mkts and Structuring), but still not quite the corporate perspective.

@BlueShirt Was actually part of deferred admissions which focused on non-traditional backgrounds. I think the actual number with 2 years of work experience is around 5%. If you have more specific questions, feel free to send a PM.

 

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