Breaking into Private Equity from Banking

Rank: Human | banana points 11,298

Since some of my longer threads/advice seems to have been buried on the forums, I decided to consolidate it via this post. Enjoy!

The majority of the below text is sourced from the following link: "Advice for New Analysts Seeking PE Exits"

Advice for New Analysts Breaking into PE:

The best way to position yourself for PE recruiting will be to develop strong relationships with the senior bankers, particularly the MDs. During PE recruiting, if your MD is not the one who sets up the interview, they will still most certainly be called as a reference. In the PE world, your reference is extremely important. A "luke-warm" reference is instant grounds for dismissal, even if you've successfully navigated the entire interview process.

How do you make the MD like you? The most important thing is attitude. NEVER, EVER complain about the work or how much sleep you didn't get the night before. It will not reduce your workload, it will destroy your mental well-being / efficiency, and no one will like you. Plenty of other analysts will bitch late at night, but its important that you keep a low profile and just agree with everyone. The other analysts don't like the "happy-go-lucky-all-the-time" analyst, so keep this in mind as well.

High quality work

In addition to maintaining a positive attitude, there is obviously not substitution for high-quality work. Everyone finds their own style, but every successful analyst is well-organized. Try to always have every detail at your fingertips and maintain a well-organized workspace. This gives the impression that you're on top of things and have your shit together. It makes a difference. Oh and -- ALWAYS DOUBLE CHECK YOUR WORK. If the experienced analysts don't tell this to you every day of training, they are doing your a disservice. You will find mistakes almost every time. Even if they are silly spelling mistakes or poor formatting, these mistakes will give the impression of sloppy work. People will ignore the content, even if its great, simply because of misspellings and formatting. Sounds dumb, but that's the way it goes.

Make sure you know what you're doing and why you're doing it

It is so easy to be so deep in the weeds that you fail to see the big picture. When work piles up, you turn into a processing machine and ignore everything else. When it comes time to interview at PE firms, you'll be scrambling to remember all the details of the deal, even if you spent hundreds of hours working on them. While I don't have BB modeling experience, I know a lot of MM analysts fall victim to templates.

For example, if you're using a template to do an accretion / dilution analysis, that's fine, but take the time to understand what it is your analyzing. Knowing that the deal is Accretive in year 1 is great, but you'll be expected to know what is driving the accretion. Is it a low cost of capital, the substantial use of cash on the balance sheet to fund the acquisition, or something else? This is the difference between a good analyst and a great analyst. The good analyst produces accurate work, the great analyst can interpret it.

There are obviously dozens of other minor factors that play a role in your job hunt, but I've found these to be the most influential. You can't change your resume once you start work, so you have to rely on relationships and experience to seperate you from your peers at that point.


The bank you worked for / experience you gained

While PE shops definitely want to see a track record of success (undergrad institution, high GPA, etc.), the bank you worked at and the experience you gained is FAR more important. While undoubtedly you will be in a less advantageous position compared to your honor roll ivy league peers, it is definitely something that you can overcome. Unlike most interviews out of undergrad, PE interviews are focused on both fit AND technicals. By technicals, I don't mean things like "define WACC." I mean your ability to analyze an industry, do a modeling exercise live, and articulate about transactions you've worked on.

Models & Interviews

For example, when myself and my peers went through recruiting, a number of us were put through onsite modeling tests. Essentially, we were put in front of a computer, given some financials, and told to build an LBO, a merger model, or some other related model. Sometimes you're given 30 minutes and its quick and dirty, sometimes you have 3 hours, and sometimes they email it to you in advance and you show up with the model at your interview. One of my interviewers flipped over my resume and had me build a very high level model with pen and paper.

Another example: I was given an Offering Memorandum a couple of days before my onsite interview, with no instructions other than to read it. During the interview, I needed to speak to the strengths / weaknesses of the company, articulate what the investment thesis would be, decide if it was an investment I'd make, and give my leverage assumptions. I wasn't told whether or not notes were allowed, but I just assumed they weren't.

How one candidate stands out from the rest

I have numerous other examples of technical-like questions that PE shops inevitably ask their candidates. My point is: Once you've gone through all the interviews, the PE shop will have tons of data from which to assess your candidacy. Your GPA becomes a very marginal factor. In fact, from my experience, there is usually 1 candidate who stands out far beyond the rest -- and that's the guy who usually gets the job, regardless of their undergrad school or GPA.


Great post, thanks a lot for the advice. Question regarding what you said about relationships with MDs:

I'm starting in 2010 as a FT analyst at a BB bank that is known to openly discourage analyst recruiting for PE/HF/VC/etc. (the bank has been making a firm-wide effort to promote more analysts to associates, break out of the two-year analyst turnover mentality, etc).

Older analysts I've talked to in the office that recruited for PE said they had to do it without help from any senior bankers in the office. Even letting MDs/VPs know that you're recruiting is a big no-no. Several said they interacted mostly with headhunters, but I can't say I know much about that process either.

Any specific advice for a situation such as this one? Thanks in advance

Developing relationships

This sounds like a tough situation, but I think you can get around it. When we were interviewing bankers, there were a few that were in the same situation you will be. The expectation was that they would move up through the ranks and talk about exit ops just didn't happen. The solution that seemed to work for them was this:

As you go through your analyst stint, you will inevitably be spending a lot of time with your co-workers. As a result, it is very likely that you'll develop relationships with a few more senior guys that you can trust. While the institutional culture may be one of "promote from within," there will still be senior guys who will be willing to help you out. I'd recommend that you make a point to find and develop relationships with those types of individuals, whether they are associates, VPs, or D/MDs.

When the time comes to give references, you'll finally need to let the people who know you best into the loop. Don't get me wrong, this will be tough, and the culture at your future bank will definitely hinder the recruiting process, but that doesn't mean you have to give up on outplacement.

Besides the above, my advice to you would be to talk to the 2nd year analysts when PE recruiting starts to kick off. They will know better than anyone about how you should go about it and methods that were successful for them. It sounds like you've gotten a high level answer from them so far, but I'm sure they'll have more details to share. On top of that, after a year on the job, you'll have a much better idea of the culture that you're in and will likely be able to navigate the recruiting process on your own.


I have 2 questions:
1. Are your MDs generally discouraging you from moving to PE if they really like you and want you to stay in the team? given that, how would they give the PE / headhunter positive feedback on the person? I just don't quite understand how this works with the MDs.

2. I am a bit scared about that "complaint" point. I think I very very seldom mentioned the hours I worked, but I can recall once or twice I mentioned I worked till 6am last night but it's ok not bad blah blah (when they asked me what time did you leave yesterday etc) still a bit concerned whether I have already left them an impression of "weak mentality". any advice?

How your MD may react to your leaving

1 - Good question. It really is going to depend on the professionals. The bank I worked at openly encouraged moving to PE, so I had a very different experience. However, when I was given my 3rd year offer, they were very open with me. I was told: "We'd love to have you stay around for a 3rd year, but we don't want to encourage it if you're not mutually interested."

Essentially, if you tell your MD that you would like to do PE, he may attempt to convince you otherwise, but he isn't going to throw you under the bus just to keep you around. That said, I'm sure there are MDs out there who care about nothing but their own agenda, but I think this is rarer than you might imagine. If they really do like you, they are going to want to help you out.

Also on a somewhat related note, as an alumnus of the analyst program, you become a spokesman for your old group. If the MD really likes you, odds are you're doing a good job and not struggling through your analyst years. If he sends you off to a PE shop, he now has a very good spokesman for his group working in house at a potential repeat client. Believe it or not, you serve as a great marketing tool for the MD, and they know this.

Talking hours

2 - Sounds like you did the right thing here, I wouldn't be concerned at all. If someone asks you straight up how late you stayed, you can give them an honest answer. A lot of it has to do with your tone. If they ask and you say: "I stayed up til 6am cause the stupid printer was busted and I had to email the file to Johnny to print for me and then X happened, etc." -- that's not good. They know that you're staying extremely late to get the job done, and they expect it. Heck, they don't even expect you to like it. What is expected is that you won't go around telling everyone how hard your life is, cause quite honestly, everyone at the entire bank works hard (or at least has convinced themselves that they do).

If you're really looking to blow off steam, I'd suggest you complain to your other banking friends, your parents (if they don't have a mental breakdown when you tell them what your life is like), siblings, or even your girlfriend. I wouldn't make too much of a habit of it -- they'll eventually get sick of it, but I can be a nice way to maintain your sanity without hurting your career.



For the most part, the analyst experience is the same regardless of which bank you work at (within the different categories -- BB / MM / Smallcap Boutique). Also, the pay is generally the same within the bands as well. However, if you do choose to lateral, you end up losing out on a lot of the goodwill that you've built up. By not completing your two years, you'll very likely be burning bridges with your prior group, especially if you head off to another ibanking role. Also, you'll need to re-establish your reputation at the new bank, and all those long hours you put in to please your prior MD will mean nothing.

When it comes time for outplacement, you'll be at a disadvantage to your peers, as you'll need to explain why you jumped ship for the same job. In addition, your current group will very likely not have enough time to get to know you and evaluate your work, and as a result, your references will suffer greatly. For those of you who think everyone will understand because you jumped from "UBS" to "GS," senior professionals in the industry certainly don't think that way, and you'll find yourself in quite a tough position.


Hey Compbanker, thanks for this great post, I've found it very helpful. Can you provide some insight on whether there are any disadvantages coming from an industry group vs. M&A and Sponsors when it comes to PE recruiting? Traditionally, M&A and Sponsors offer the best PE exits but is it possible to come from an industry background?

Coming from an industry group vs M&A

I worked at an M&A shop, but the majority of my closed deals were in the healthcare space as I became an industry M&A analyst about 8 months into my analyst stint. So, my experience is limited in terms of the experience of someone coming from a pure industry group.

Overall, I'd say that you will be at a disadvantage coming from an industry group compared to M&A analysts when you interview at traditional LBO shops. PE shops are looking for people who can hit the ground running, and there is no better way to "hit the ground running" than to be familiar with all the documents in the M&A process. I'll be honest, I don't know how much exposure industry analysts get to documents such as merger agreements, management presentations, etc., but I know it is generally less than M&A analysts. As a result, there is already a bias towards M&A analysts over industry analysts.

I will say that, for our PE recruiting process, we interviewed a number of industry analysts. The disadvantage is not so significant it can't be overcome, and in certain situations it can even be an advantage. Healthcare is a great example. There are a number of PE shops that focus exclusively on healthcare companies, and understanding the nuances of the industry can supercede M&A process knowledge. The same can be said for industrys such as technology and energy. If you look at a lot of PE shops that focus on technology, you'll notice that their associates generally worked in TMT groups as analysts. It's been awhile since I looked, but ABRY Partners may be a good example of this.


What do you find yourself spending a majority of your time doing? If there's not a heavy emphasis on modeling, and the fund you're at is not based on a "sourcing" model, what do you do?

How I spend my time (in PE)

I won't go into too much detail, but the majority of my time is spent evaluating new deal opportunities (60%), and portfolio company management (25%). The remainder is internal initiatives whether it be recruiting, fundraising, quarterly reporting, etc. I also sometimes do meetings with bankers or other professionals that come through our office looking to offer their services. I'll give you an overview of evaluating new deals, as that should answer your question.

New Deal Opportunities:

The majority of new deals that come in house come through investment banks in the form of a nice, lengthy, overly-repetitive offering memorandum ("OM"). For every new deal that I'm assigned, I need to read the OM. At some point before initial indications are due, our team will get together and discuss the opportunity to decide if its worth pursuing. If we decide its worth pursuing, we will do additional research, run a basic LBO with very high level assumptions, pull together materials into a presentation to the rest of the organization, and sometimes get on the phone with the bankers to answer any clarifying questions. After enough of these, this becomes a fairly quick process.

However, I usually have a number of new deals on my plate at any given time (I once had 3-4 OMs dropped on my desk in a single day). This is generally pretty fun though as you get to learn about a new company and industry without putting in much effort (the banker has compiled the whole thing nicely). If there is no banker in the process, you're doing your research from ground zero, and this generally takes much more time and produces less cohesive results, but it's more or less the same.

If the banker accepts our initial indication, myself and my deal team then go to meet with management and typically tour the facility. We are then given access to the company's dataroom with all sorts of data on the company -- data ranging from corporate minutes to detailed financials to tax returns. I'll sift through the entire datasite and try to learn as much as I can. This includes things such as reading customer contracts, evaluating operational metrics (backlog, efficiency stats, whatever -- it depends on the type of company), and of course, modeling the financials.

Overall, modeling the financials is just one little piece within the broader picture. Also, during this time, our lawyers are generally marking up the stock purchase agreement. In conjunction with my team, I'm reading the stock purchase agreement and giving my feedback to the lawyers (usually our team will get together and discuss our feedback internally so we don't have multiple people giving conflicting feedback to the lawyers). In addition to dealing with the lawyers, I'm also on the phone with lenders trying to get them excited about the deal. We'll share our internal materials with them and they will have access to the datasite. Frequently they will barrage us with questions which we will either answer, or turn to the management team to answer if we don't know. While all this is going on, I'm preparing documentation for our deal team to present to the investment committee to gain approval to submit a letter of intent ("LOI") to acquire the company. If all goes well and everything checks out, we'll submit the LOI.

If the LOI is accepted by the banker, at this point we'll enter into exclusivity (aka force them to cut off all negotiations with other parties and work exclusively with us) and work towards completing our due diligence. This involves continued digging into the data, but also hiring a large number of third parties to conduct diligence on our behalf. Diligence areas typically include tax and accounting, legal review, an industry study, background checks on key members of management, a review of the company's IT system, insurance, and, depending on the type of company, an environmental review. Each of these areas of due diligence are conducted by a separate vendor, so it takes a lot of management to make sure everyone is getting the information and access that they need.

Generally myself and an individual 1 level senior to me will do 100% of the management of the 3rd parties, and between the two of us, we both act as the point person for the different groups. I spend a lot of time going through the materials they produce, and at this stage of the deal, spend a LOT of time onsite at the company conducting my own diligence, overseeing 3rd party diligence, and just spending the time with management. Also, all the while, we're continuing to talk to lenders and I am putting together a final presentation, catered towards the lenders, to enable them to have a day on site with management and hear the story first hand. If all of this diligence goes over well, there are additional responsibilities involved in the closing (preparing the funds flow documentation, reviewing lender term sheets and credit agreements, finalizing the stock purchase agreement, etc. etc. etc.).

Obviously this is just a quick and dirty overview of the deal evaluation process, but as you can see, modeling, while very crucial, is not a major aspect of my job. Given I work in an extremely small and flat organization, I am generally the #1 or #2 guy responsible for all of the activities above. A good deal of the time I'm the only one on the phone with the 3rd parties, the bankers, or the lenders, and I simply report out to the team afterwards. Note that I am on multiple deals at once, though most of them are not extremely active, otherwise I'd be working around the clock.


I might be missing something here, but I do not see anything particularly negative about latering to a BB

As you suggested the downsides are:

1. start over as a 1st yr analyst. Losing a year is def bad, considering you will be a bitch for an extra year. yet it doesn't seem to alter the career path and will give you a leg up in the future as the brand name is bigger on the resume..

2. No recs from former MM bank. Why is this a negative? Would you just want recs from your bosses at the BB anyway?

3. I still don't see why you'd have missed the recruiting at megafunds. You work as a 1st yr analyst for another year and then start looking for opportunities in PE. All you sacrifice is that additional year. Am I missing anything here?

On the other hand, the upside is huge. More modeling experience, larger deal team and deal size, more products exposure, bigger platform and ultimately a brand name. It is similar to transferring from a mediocre liberal arts college to a top Ivy target school IMO...

Associates in MM PE care far less about modeling and more about your ability to understand the deal process and companies. In this way, the modeling exposure gained at the BBs actually hinders you rather than helps you.

However, you're right, the megafunds (and there aren't that many of them), need model monkeys. As a result, analysts coming from MM IB are at an extreme disadvantage compared to BB IB analysts given their lack of exposure to modeling. They are simply two entirely different skill sets. As such, don't expect an analyst who laterals to a BB after having spent a year at an MM to have the same productivity level of a 2nd year at a BB, and vice versa is also true (yes -- it's true, we had someone from a BB lateral to my MM).

In terms of lateraling, you're absolutely right that there is significant upside to restarting at a BB after a year at an MM (the majority of my downsides were if you lateraled during your first year and didn't reset). However, DO NOT underestimate the impact of starting over as a first year. Working 100 hours a week is absolutely and inexplicably painful, and every analyst I knew dreaded it and day dreamed about falling into a 1 year coma so they could wake up and it could all be over. By the end of my first year, I would have gladly forgone my bonus simply to fast forward through year two, it was so bad. Analysts who decided to stay on a 3rd year were ridiculed and laughed at endlessly, because they actually volunteered to stay on an extra year. Typically, very few people stayed on a third year, despite the large number of third year offers, and those who did were the ones who were unsuccessful in PE recruiting and didn't want to go unemployed in a terrible market (although some did choose unemployment).


How much thought have you really given to your list of upsides? Let's take a look at each.

1) Modeling Experience

As mentioned earlier in this post, modeling experience is only useful if you're targeting megafunds, otherwise the MM skillset is actually going to help you get the job.

2) Larger Deal Team

Not sure where you were going with this. Smaller deal teams generally mean more exposure to each aspect of the deal process and less likelihood that you become an expert at a single function. I know a guy who left Bear Stearns after a year because his job was to run accretion / dilution models, and that's the only thing he did for his entire year. Also, larger deal teams give you less exposure to senior folks as you're generally just another face in the crowd or name on the list. You also get limited or no exposure at all to senior management when working in large deal teams, as you're frequently the last on the list for a limited number of seats at the table.

3) Deal Size

Again, not sure what your point is with this. Larger aggregate deal value doesn't qualify you for anything -- especially if you're only a single cog in the machine. I've never heard of anyone getting a PE job offer for having "the biggest deals." Can you clarify how bigger = better? (Serious question, this is a frequent claim, but I've never heard of good support for it.)

4) More Products

Based on my limited understanding of the analyst role at a BB, you only get multiple product exposure if you're in an industry group. On the other hand, the product group guys don't. Also, a lot of the reputable MM shops do exclusively M&A, which is generally one of the few targeted groups by PE firms.

5) Bigger Platform

Not sure how this benefits you. You can't work in more than one group or division at a time. I concede that it would make internal networking a lot easier and give you a larger alumni base.

6) Brand Name

Okay, you win here. That said, I'd be willing to bet my old MM's brand name carries more weight in MM PE than the BBs, including GS. Outside of MM PE or internationally, the BBs easily trump me. Given my career objectives, this suits me well. For those with different career objectives, the BB brand name would certainly be preferable.

So, feel free to draw your own conclusions, these are simply my thoughts. Also, given the above, I'd say that your analogy of transfering from a liberal arts colleges to an Ivy league university isn't really a fair one.


Do you prefer deals that come from banks or not? If it comes from a bank, I would assume that the process runs a lot smoother and it takes some of the work off your plate, but if there is no banker advising the target, then there is a good chance that you're not competing with any other buyers, right?

It's a trade off, and you've hit on the key areas. When a deal comes from a bank, the data is usually very organized and we have a lengthy document explaining the business. This is extremely helpful for a business that I'm not familiar with. You're right in that the process runs smoother, there are set deadlines and the communication and expectations are crisp and clear. However, there is also a very high likelihood that we don't win the auction due to the competitive nature of the process, which is a major turn off. Also, bankers (and we did this too when I was a banker) like to play games, so you need to sift through any BS they might be sending you. For example, if the CEO can't articulate the growth plan because he doesn't believe in it, but the bankers forced him to put various low probability growth opportunities in the OM, it creates the headache of determining what is real and what is created by the bankers. As a result, we pay far more attention to potential acquisitions that are proprietary than we do in processes.

How have you been able to get comfortable with what customer contracts should look like and what specific operational metrics (backlog, efficiency stats...) are important? Is that something that you learned a lot about in banking or have learned on the job once you started in PE? I have been in banking for 2+ years (a generalist as far as industries go) and don't know that I'm that knowledgeable in those areas.

I'd say that this is a difficult area for a generalist, as operational metrics and customer contracts look very, very different depending on the company/service/industry etc. While I had exposure in banking, I'd still say I am relatively new in this area and rely on my seniors for guidance. Sometimes even the senior guys don't know if certain metrics are good or not for the industry. As to which are important, I'd say that once I started looking at opportunities through the lens of an investor, it's enhanced my ability to evaluate opportunities subjectively and ascertain which metrics are important without relying on management (for the most part). I wouldn't be worried if you haven't gained that exposure or that level of expertise yet.

I will note that once you have responsibilities for portfolio companies, it becomes a lot more worthwhile to familiarize yourself with things such as contract structure and operational metrics. It's nice to know that I'll be working with the same companies throughout my years as a PE associate and therefore it is very worth my time to internalize and master material relating to them. In these cases, you would be expected to be an expert regarding customer contracts, backlog, metrics, etc. (depending on the PE shops views towards associate involvement with portfolio companies).


Do you have any insight on sourcing roles? If we were looking at a MM PE shop ($ 2 billion +):
What would pay usually be like (base and bonus)?
Does that kind of role usually lead to eventually working on execution?

I do have some knowledge regarding PE shops that focus on sourcing (I interviewed with TA Associates, though I can't say I was very excited about the job). My knowledge is somewhat limited, but:

The hours are less than banking, but you're still doing a grind. Expect 70 - 80 hours per week. The pre-MBA programs are generally 3-years long, and then you're expected to go get your MBA. In general, you're given a rolodex when you start, with the names of new companies as well as any existing relationships you inherit from an outgoing associate. Your job is to build a relationship with the CEOs and eventually source a transaction. I can't comment on exactly how much the associates make, but there is an incentive structure in place. Basically, you have a minimum number of calls you need to make to hit your quota. After that, you get additional bonus cash for the number of relationships you develop. For example: If you convince the CEO to let you tour their facility, this directly results in additional cash in your pocket. The big payday comes when you source a transaction that eventually closes.

Here is the catch, it is actually incredibly difficult to source a transaction. I know a guy who, after more than two years in one of these roles, had yet to close a transaction. The good news is, if you source a deal, you get to be the one who executes it. However, you're playing second fiddle to the more senior guys at that point, so don't expect to "lead" it by any stretch of the imagination. Also, if you're executing and continuing to cold-call, your hours just got a whole lot worse. Overall, I suggest you pursue PE shops with a sourcing model only after you've exhausted the shops that give you more traditional execution responsibilities. There are some people who are natural fits for this type of role, but it's certainly a tough thing to wake up every day and get excited about.


For all you that have gone through PE interviews (or give PE interviews), what is generally expected when discussing deals? What is appropriate to list on your resume for deals that have been done?

So that sort of strays away from the purpose of this post, but are those two deals good to list, and what should I expect to discuss in an interview?

In terms of what to put on your resume, almost every IB Resume I've seen included a "transaction experience" section. In the section, usually its 1 sentence per deal, and sometimes analysts will include their specific roles, and some will just list the deal. If the deal is closed or announced, list who the seller / buyer were, and which one you represented. If the deal value was announced, I'd suggest putting that in as well. It's also nice to provide a 5 or so word description of the company. Note that it is acceptable to put "Company A" or "Buyer A" if the transaction is pending or not announced. So, any example may look like the following:

Acted as the analyst on the sale of Acquired Company, a global manufacturer of widgets for the telecomm industry, to Buyer, for $x.x billion.

If you were unlucky enough to work on a transaction that died, I've seen people list the deal but put "Busted Process" in parenthesis after the sentence. Note that there really is no set format as long as the reader can more or less understand what the deal was.

As for your question about what you are expected to discuss during the deal, ANYTHING is free game. You will not be expected to share confidential information, but by now you should be capable of "talking around" confidential info to still get your point across. I'd say there are really two areas you should make sure you know cold for each of your transactions, which include: (A) Deal Dynamics & Your Role, and (B) Industry / Company Dynamics.

Deal Dynamics & Your Role: Obviously we're going to want to know what specific tasks you worked on for the deal. You may be asked if there were any key models you built, including high level assumptions you may have made. These might include "Why did you project the top line growth you did? -- what are typical margins for this type of company? -- etc." Don't spend a ton of time memorizing your models though, these types of questions are rare. One area that is likely to be probed is your level of client interaction. I often ask individuals: "If I called up the CEO right now, would he know who you are?" If the answer is no -- you lose major points (note, this is more common for MM IB shops and less so for BBs). In addition to your role, you want to be able to articulate high level knowledge of the deal. This may include things like: "Why did Company A ultimately acquire your client?" -- "Why would it not be a good fit for Company B?" -- "Why might a PE shop be attracted to this investmenT?" etc.

Industry / Company Dynamics: This should be easy to articulate if you played a role in writing the offering memorandum. Basically, you may be asked to articulate what made the company a good investment. Be ready to discuss key characteristics of the company, including things such as: "Low CapEx/WC requirements, recurring revenue stream, dominant market share, etc. etc." In addition to all the company specific questions, they may branch out and speak to the industry. I remember getting asked: "Name an industry that you think would make for a good investment. What about this industry is attractive? What keeps you up at night?"

Honestly, most of my PE interviews did not dive too deep into my closed transactions. Most of them would give me a fresh scenario (typically relating to one of their recent investments) and ask me to think through that.

The best advice I can give you, besides from "know your deals cold," is to make sure you have an opinion on things. If someone says: "What multiple would you pay for Company A," the last thing you want to do is shrug and say you don't have enough information. Tell the interviewer what information you would need to properly analyze the situation, and then give a recommendation based on the limited data that you have.

Mod Note (Andy) - Throwback Thursday - This was originally posted in 2012

Comments (137)

Oct 30, 2010

This is great. I was actually searching for this post yesterday and couldn't find it. Ill definitely be reaching out in the future.


Oct 30, 2010

Awesome thanks a lot. It's not of much direct use to someone who did not get into a really good IBD program, but it has a lot of generalizable advice, I appreciate it. Bro.

Still not sure if I want to spend the next 30+ years grinding away in corporate finance and the WSO dream chase or look to have enough passive income to live simply and work minimally.

Mar 22, 2011


If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

Oct 30, 2010

This should be pinned at the top of Private Iniquity. It has the room.

Oct 31, 2010

Great post compbanker. Silver banana for you.

Oct 31, 2010

Great post CompBanker, really helpful for all the younger monkeys. I second everything above - good stuff, solid advice.

In the interest of consolidating, I'll also add a link to a post I wrote several months ago titled "How to Jump to the Buyside After Your First Year". Should be helpful for those looking to make a quick exit:

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

    • 1
Oct 31, 2010

As a long time reader, I have only posted when I thought it absolutely warrented my time and effort. This is one of those times. CompBanker, I commend you for taking the time to share with everyone this incredibly accurate (from my point of view) overview of the process of breaking into PE. This is by far the most informative post I have ever read on WSO. Good Job.

Nov 1, 2010

If they'd exist I would give you a platinum banana... Awesome post!

Nov 16, 2010

Really informative and helpful. I work as an analyst in a high-tech environmental company, and is expecting to have an interview with a PE in NY area. What recommendations will you give to me since I am not from IB sector and with less experience with hard-core financial modeling, even though I am taking modeling classes from Breaking into wall street. Thank you.

Break Through

Nov 16, 2010

Thanks a lot for your help.

Break Through

Jul 25, 2012

I'm sure this will be a great informative read...when I get around to it.

Here to learn and hopefully pass on some knowledge as well. SB if I helped.

Jul 25, 2012

sb'd, and if i ever make it to your promised land...i'll send something a bit better

If the glove don't fit, you must acquit!

Jul 25, 2012

This isn't a post. This is an epic.

Jul 25, 2012

3) Deal Size -- Again, not sure what your point is with this. Larger aggregate deal value doesn't qualify you for anything -- especially if you're only a single cog in the machine. I've never heard of anyone getting a PE job offer for having "the biggest deals." Can you clarify how bigger = better? (Serious question, this is a frequent claim, but I've never heard of good support for it.)

I'm just a student with who doesn't know anything, but wouldn't being on bigger/more important deals be a signal to recruiters that you earned your staffer's trust (and therefore must be reliable)?

Fucking amazing post by the way

Jul 26, 2012

I'm just a student with who doesn't know anything, but wouldn't being on bigger/more important deals be a signal to recruiters that you earned your staffer's trust (and therefore must be reliable)?

Fucking amazing post by the way

The level of responsibility and client exposure you're given from a deal's MD matters a lot more.

Jul 26, 2012

This should be stickied. Legit post! Thanks for being so detailed.

Jul 27, 2012

I understand that M&A is better but I've heard that one of the best groups to be in for PE recruiting is GS this just an outlier or is TMT in general acceptable?

"I did it for me...I liked it...I was good at it. And I was really... I was alive."

Jul 29, 2012

Lies, damned lies. The only exit op for ANY TMT group is Janitorial Service. Period.

"You stop being an asshole when it sucks to be you." -IlliniProgrammer
"Your grammar made me wish I'd been aborted." -happypantsmcgee

Jun 7, 2013

+1 SB, Thanks Man!

"If you have enough assets plus passive income to cover your personal lifestyle expenses for the rest of your life, and that money allows you to work at something you love, without concern for the amount of compensation, then you are wealthy."

Feb 25, 2014

Bumping this because I think it's probably useful for a lot of people right now.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

Feb 24, 2015

+1 SB

Feb 24, 2015

+1 SB

Feb 24, 2015

If anyone out there has made the shift from IB to PE, please post your thoughts / comments. Are you happier, more satisfied, less overworked, etc?

Any feedback is appreciated.

Transition is a great move. You get a new perspective on finance and you tend to work less hours on average. Lifestyle is much improved -- i am at a middle-market fund...I've heard nightmares at some of the big PE Funds (that they can work you just like banking) but overall, I think working in PE gives you more autonomy. You are much less likely to have someone standing over your shoulder while you model, but you also have more responsibility to take initiative and be an is actually not an easy transition if you're used to being told what to do all day then end up in a fund where nobody bothers you until real work needs to get done (like building an lbo model or digging through some OMs).

Feb 24, 2015

should i go pe or direct promotion to assoc.

Feb 24, 2015
Dan Bush:

should i go pe or direct promotion to assoc.

depends. do you like your job? are your hours reasonable? if you can get promoted directly to associate after 2yrs i'd consider it. i was offered a 3rd yr analyst position before i left w a direct promote to follow, but i knew i couldn't and didn't want to last 2 more years working 90 hrs a week.

it's all about trade-offs. if you can get intot he right PE fund, i'd do that, but i'm biased BC that's what i did.

Feb 24, 2015

Dan Bush.. What percentage of analysts get A-A promotion w/o MBAs?

Feb 24, 2015

nychimp, what do MM pe shops pay for analysts with 2-year banking stints?

Feb 24, 2015

nychimp, what do MM pe shops pay for analysts with 2-year banking stints? NYC i've heard everywhere from $65k - $100k base and 75-100% bonus potential. usually no carry for the analysts / associates.

Feb 24, 2015

What's more demeaning / depressing / infuriating / annoying:

A failed day of attempted deal sourcing, getting treated like a telemarketer and just leaving a bunch of messages,


A (typical) day as an analyst, working 16 hours straight on 4 hours of sleep for half a dozen masters, getting shit from each one because your preoccupation with the others inevitably impairs your ability to do quality work?

In other words, how does a bad day as a PE associate stack up against a bad day as an IB analyst/associate?

Seriously, this is important to me.

Feb 24, 2015

those are the sorts of messages that leave me with a slightly sickly feeling. iBanking may not be worth it after all.

Feb 24, 2015

It's not like b-school is a career-switcher for these kids. They get the MBA so they can make partner one day in PE, that's all.

Feb 24, 2015

what can you do if you dont want to do PE anymore? Pretty easy to transition into industry? VC? HF?

Feb 24, 2015

upper level PE people have left my firm to do various things -- become entrepreneurs, go back to industry (corp dev), start their own funds, etc., join HF, join FOF, join IM..

Feb 24, 2015

Most PE funds though with the exceptions of the mega funds like Carlyle and Blackstone (and correct me if I am wrong) dont really have career tracks...even if you are hired as an anaylst or associate they dont want to add more partners right, so after a few years you need to just move on?

Feb 24, 2015

is the fund old and established with partners already in place or is it up and coming with a lot of room for upward movement? can't really generalize on all funds that way. i know that in silicon valley, although people do move from PE firm to PE firm, b/c the PE community is so small, jumping around PE firms is really frowned upon. its viewed as betrayal. it's better to leave a PE firm for a non-PE job than to jump from firm to firm. when people see this on a resume (and the time period per PE job is short -- say 3 years or less), people are suspicious and ask questions. PE isn't like banking where you can just hop off after a bonus and its not a big deal. they like long-term team players, esp after business school.

Feb 24, 2015

this could totally be wrong for PE firm culture on the east coast, which I hear is slightly different.

Feb 24, 2015

thanks. so would the ideal thing be to just ask straight up if there is room for growth within the firm? and hope they dont bull shit...

Feb 24, 2015

when you interview, you want to get a feel as to whether the post-MBA position is a partner-track position (most pre-MBA positions are non-partner track). you can tell if it is partner-track also by seeing how old the partners are, how long they've been there, etc. and you should find out about carry (as you know, the big bucks for the investment professionals in PE funds are in the form of carried interest since you are a limited partner in your own fund). you invest your own money in the fund (anywhere from $5,000 to $300,000 to $1M) in order to get a portion of carried interest. if you invest in the fund though, you better be in there for the long haul, for the benefit of the fund and for yourself. as you see this is very different banking in which the only loyalty you have is to yourself. in PE, you have an incentive to stay, to make good investments. such is the nature of the buy side.

since the investment period for PE funds are long -- around 10 years, as long as the fund is doing well, you should have job security and room for upward movement. this is why if youre at a good PE firm, people dont leave.

of course, if you plan on being anything above the VP level of a PE firm (Director, MD or Senior MD), this requires a different set of skill sets than junior or mid-levels. you need to have good contacts in the industry, understand on the spot what is a good investment, etc. thats the way to promotion to the big man. also, very different from good MDs in banking, who are really more deal "rainmakers" who just want to close the deal. not so in PE.

Feb 24, 2015

Mostly through headhunters and have contacts.

Feb 24, 2015

Mostly through headhunters and have contacts.

Thanks for the reply. Is it common practice to forward a resume to a headhunter? Or are you generally contacted by them first with an opportunity?

Feb 24, 2015

Depends on the PE shop. Most PE shops use headhunters and even if you network your way in, they pass your resume to the headhunter with a note to grant you an interview. I found headhunters to be generally ineffective if you don't have a key name on your resume. Basically, they pick the same set of people from their resume collection and those are the ones who get all the interviews. If you work at GS, this is great, otherwise you got to take other approaches.

The most effective way I found was to use your senior professionals. If they send an email/resume on your behalf, you're almost guaranteed an interview (at least at the MM PE shops that I applied to). Also, if they do this, you've got an instant endorsement on your side which is a plus while going through the interviews.

That's pretty much it. No magic to it really. Goodluck in your search.



Feb 24, 2015

Yep, agree with Compbanker. I would also add that if you had colleagues who went through the process and are willing to refer you to the headhunter they worked with, it helps. The submitting resumes online thing is usually a dead end, especially given the current hiring environment.

Feb 24, 2015

PE firms buy companies so they need M&A bankers that can model that... aka - grunt work
consultants do high level strategy work- They don't need 23 year olds to do high level work for them
However, if you're a MD at a consulting firm, they will hire you.

But at times, PE firms do hire consultants at junior level... They do everything, but modeling.

Feb 24, 2015

bankers do deals, which implies:
they are (more) familiar with capital markets
Parsing and understanding financial documents
(more) familiar with legal deal terminology
(sometimes) industry knowledgeable and how businesses work
(more) quickly and effectively (than an untrained equivalent from a non-deal oriented industry)

points 1, 2 and 3 are what give ex-banking analysts over ex-consulting analysts. Not skills that are unlearnable, but a hassle to pick up as you are trying to execute a transaction for the first time, which directly carries over to point 5.

Feb 24, 2015

Bankers help sell and buy companies and PE shops buy and sell companies. Whatever skill set you need for one translates well to the other.

    • 1
Feb 24, 2015

Bankers do everything PE needs. Bankers model companies, do DD, review financials, negotiate debt terms, IPO companies, facilitate trade sales, etc. The actual running of companies at most PE firms is done by industry experts, NOT by ex-consultants or PE execs (at most firms). Very few firms are focused on running companies.

At the MM level, many PE firms like to focus on partnering with mgmt and roll-ups. This means either you get one good management team or keep all of the good management teams you find in small companies and just provide the capital they need. At the megafund level, ex-CEOs are hired to do turn arounds as well as actual consulting firms. The notion that a Pre-MBA associate who is an ex-consultant is hired because they know about running companies is laughable.

--There are stupid questions, so think first.

Feb 24, 2015

Like how tiny? Is it like a 3 person company with 1 deal/year?

Feb 24, 2015

would be interested in this as well. from what I understand it seems to be pretty similar to the US, though people choosing to do MBAs are quite rare in Europe... so there are more direct transitions after a few years of banking (2-3 years) into PE.

Feb 24, 2015

Would be interested also. Specifically: timing (i.e. second/third year); importance of bank; importance of MBA; recruiting precedents (i.e. networking/agencies).


Feb 24, 2015

Not much experience for mega fund recruiting, but here is what I know for MM:

  • The process is not as structured as in the US.
  • PE firms recruit based on needs, not a set calendar.
  • A lot of the recruiting is done through recruitment firms.
  • Typically PE shops look for people with 1 to 4 years experience - less is not enough, more is too much (of course there are exceptions). There is not a precise time to make the move (you don't have to do it at the end of your second year).
  • Banking is not the only path; many PE funds recruit from BIG 4 advisory (M&A and Due Diligence). But some funds (usually the largest) specifically recruit only from BB M&A analysts.
  • The largest finds focus on bank brand name, smaller ones focus on your deal experience.

I think there was another thread about this if you do a search.

Feb 24, 2015

Thanks for the insights, could you elaborate a bit more on the mba side of things? I am curious of the role of MBA or possibly masters in finance

Feb 24, 2015

In Europe you usually do a Masters before starting as an analyst (straight after UG or as a career switch). In some countries, like France, doing a Masters is standard and a minimum for IB. So having one does not make much of a difference.
You don't necessarily need to do an MBA to get promoted to associate in banking here, so much less people do it. However, the notions of pre-MBA and post-MBA associate do exist, but once again for the larger funds. I think in Europe doing an MBA is much more of a personal choice than a standard route. Really depends on the undergrad you went to.

It seems like you are still a student, so focus on getting a good IB job if you think you will like it. If you work hard, are good and are able to see the big picture there will be opportunities. No need to plan too far ahead, you probably will not want to do PE anyway in a few years time.

Feb 24, 2015

Does not doing a masters make a large difference? Here in the UK some people start out in ibanking without having done a masters, will this be looked upon negatively at a later point?

Feb 24, 2015

Does not doing a masters make a large difference? Here in the UK some people start out in ibanking without having done a masters, will this be looked upon negatively at a later point?

Not sure whether it answers the question, but the Team profiles of some of the funds might help i.e.:
A handful have B.A. only - most have M.A. or M.Sc and just over half, it seems, have an M.B.A.


Feb 24, 2015

You can start with or without a masters.

In the UK you usually don't do one, you just do a BA.

It is not a handicap to have no masters once you work.
When you work full time what counts is your performance, achievements and network.
If you went to Oxbridge you will have a great network even if you only have a BA.
There is no formal need for a Masters or MBA like in the US.

I looked at your past posts and it seems you are doing a summer internship at Moelis or Macq.
Just work hard and don't worry too much about planing ahead, your on the right track.

Feb 24, 2015

Is there a lot of transition from e.g. Frankfurt, Paris etc to London when switching from IB to PE?
Or maybe when lateraling in pe?

Its just so much easier to start in Germany than in London....

Feb 24, 2015

There's an upside and a downside to starting in a continental Europe country.

PEs often cover other countries from London so having experience in IB in Frankfurt would put you in a good position to cover Germany as you speak the language and have experience of doing deal locally.
However, it will not be easy for recruiting to be based outside London. You will be competing with people who are German but based in London and can easily come in for an interview.

So if you are aiming for megafunds it may not be a problem, I suppose if they want you they will fly you in (but honestly I don't know about megafund recruiting). But for MM, I would strongly recommend to start in London while you have an opportunity. Competition for these jobs is huge, you wouldn't imagine the amount of quality people who are on the market for a job right now, for a company to fly you in from abroad you really have to have a unique skill set or something.

Feb 24, 2015

thanks for the advice.

The problem with the German PE landscape is the fact that the real money is made in MM deals.
The engine of the german economy are by far the Medium and small enterprises therefore this is the sector to be in.

I speak regularly to a friend who used to be MBB and is now doing pe for one of the many pe funds (based in munich that has been killing it for the last years .. easy to guess now). When I told him I was planning on going into banking to go into pe, he said that this strategy, assuming you want to work in continental europe, is a waste of time. Most smaller funds are looking for operating talent instead of monkeys as smaller funds employ less leverage and the transactions are rather simple. Moreover the money is made by really turning the company around instead of loading it up.

This seem to be the case for many continental european countries. You seem to be more appreciated when coming from a consulting background as deals are smaller.

therefore im really considering consulting / big 4 advisory or industry for some years....

The only real benefit I see in doing banking in Germany is the option to go to london and still have some shot for pe in Germany... otherwise it makes no sense to work these hours.

Is it common to lateral in european PE? I mean e.g. starting in some country and then moving to another? I would think it is quite hard. The skills might be the same but most contacs prove worthless and they have the chance to take someone who has worked next door.

Feb 24, 2015

OK, if you want to do PE in Germany, its fine to do IB in Germany. I thought you wanted to go to London later.

I did MM M&A in Paris and worked with many small PE shops. They definitely prefer people with M&A experience rather than consulting. All the funds say they focus on operational improvement and not on financial engineering, but really that's marketing.
The funds that have true operational expertise are few. The PE that are really good at operations are often run by business men (former CEOs/CFOs) and don't have many junior people.

Also, consultants that think they are "operating talent" are a joke. They are PPT talent.

Finally, don't go to industry. I spent a year in Business Development & Strategy in a F500. Fucking boring.

Why don't you choose a job based on what you think you would like?

Feb 24, 2015

thanks for the reply,

well actually I want to go to London. I was just thinking whether it might be easier to lateral from PE later on as competition in Germany, tbh, is rather non-existant compared to London (compared!!). I just have read the bio of the big PE houeses that I could think of (Carlyle, BC, CVC, Permira etc.) and saw that the people working there in Germany are not as "good" (i mean good in the sense of heavy competition they had to go through) as the ones in London. Therefore the thought came up to start in Germany and then move to London.

I see your point regarding consulting, maybe it is Germany then, or my experience was with people who worked at the few funds that actually do enhance operations. I agree, it makes sense.

Actually I am chosing on what I like. More or less so. I have worked part time in Big 4 advisory for quite some time now next to university and will go to BB ER this summer. Hence it is still dificult to know what I really like but I am working really hard to finding out. I agree thats the strategy to chose ( doing what u like) but I just want to understand dynamics before chosing what I like and getting stucked (probably like half the people on this board). It seems there are so many "paths" that make life so much easier when you know them (e.g. consulting is not as good as IB to get to PE. Would have never realized if it wasnt for this forum because all info I get as a junior seems to be the marketing material and saddly common sense is inferior it seems :) )

Feb 24, 2015

So does anyone here currently work in MM PE in Europe or the U.K.? If so -- please shoot me a PM, would like to pick your brain. Much appreciated!


Feb 24, 2015

@ awp

"people working there in Germany are not as "good""

They probably have less impressive CVs, but that doesn't make it easier to get the job.
I don't know abut Germany but in France here is what it was like: there are less spots in PE funds, network/connections are more important to get the job (compared to London), experience in London is highly valued, can be overall more difficult to get in depending on your situation (school, background, etc.).
So, I understand what you mean, but don't jump to conclusions.

"I see your point regarding consulting, maybe it is Germany then, or my experience was with people who worked at the few funds that actually do enhance operations. I agree, it makes sense."

My point on consultants was half a joke; they are not only good at power point. Many funds do enhance operations, but if you look at the big picture, most of them create IRR through leverage and "buy low, sell high". Now I know some funds (ex: Andlinger & Company) which have a true focus on operational improvement, and the investors will actually take CEO positions in the portfolio companies> These are rare.

"well actually I want to go to London."

Ok, so here is my biased advice. It's only based n my experience so might be wrong.
Its not just about PE but about moving to London for any finance job. => Go there for your first job. Banks want analysts form all over Europe and you will have a very good shot.
I started to work in Paris but am English. When I started to look to move to London, being based in France made things very difficult. I just didn't get interviews because people as qualified as me on paper where already in London and could just pop by for an interview. So I went to work in business dev with a large company that said they could eventually transfer me to London. When I got transferred, I updated my online cv/linkedin with a UK address and the phone started ringing within days. The number of opportunities I had increased from close to 0 to dozens.
Think about it like this:
(1) you are a recruiter, you need a junior German guy for the M&A team => you need to go and get him in Germany, there are not many German guys in British schools
(2) you are a recruiter, you need an experienced German guy => you can find plenty here in London, the IBs went to get them in Germany when they were at school
So if you want to work in London at some point, apply to all the banking graduate programs, that will be your best shot.
And remember that experience in London is highly valued in the rest of continental Europe. So a few years experience in London might be your ticket to a German PE fund that "enhances operations".

Feb 24, 2015

You learn how deals work, both from the financial side and process side. "Transaction" experience is the key.


Feb 24, 2015

Does that mean someone in "Transaction Services" doing valuation work can move over to PE without spending 2 years in IB?

Feb 24, 2015

No, because they likely see only one, very small aspect of the deal (the valuation work). They aren't involved in the preparation of market materials, due diligence, projection modeling, and all the other components of the deal process.

That said, they are better off that some others in even more remote roles.


Feb 24, 2015

No, because they likely see only one, very small aspect of the deal (the valuation work). They aren't involved in the preparation of market materials, due diligence, projection modeling, and all the other components of the deal process.

That said, they are better off that some others in even more remote roles.

  1. Preparation of market materials: so they didn't get experience pasting in powerpoint, and that will hurt them? Plus, why do PE firms need to know how to "market" deals, ie, play around in powerpoint - aren't they the investors, not the marketers?
  2. More importantly, I thought projection modeling was part of valuation/DCF?
Feb 24, 2015

No, because they likely see only one, very small aspect of the deal (the valuation work). They aren't involved in the preparation of market materials, due diligence, projection modeling, and all the other components of the deal process.

That said, they are better off that some others in even more remote roles.

  1. Preparation of market materials: so they didn't get experience pasting in powerpoint, and that will hurt them? Plus, why do PE firms need to know how to "market" deals, ie, play around in powerpoint - aren't they the investors, not the marketers?
  2. More importantly, I thought projection modeling was part of valuation/DCF?

jimbrown already provided a strong, in-depth response, but for the abundance of clarity:

"Marketing Materials" primarily refers to the Offering Memorandum and teaser sent to potential buyers to kick off the sale process. In order to compile these materials, you need to do a very lengthy data collection and Q&A session with management. The ones I prepared were typically 70-80 pages in length and contained very detailed descriptions of the company, its products/services, as well as why it would make for a great investment. Most times I would start from a blank piece of paper and craft the story myself. For me, this was the biggest learning experience and what best prepared me for the buyside.

You're right that an analyst spends a significant amount of time building powerpoint presentations, but that isn't the only aspect of the job. It's very shortsighted to think that an analyst doesn't gain a lot of business acumen during their two years.


Feb 24, 2015

compbanker obviously is a banker wannabe.
Yes, projection modeling is part of valuation, M&A and LBO.

Feb 24, 2015

Hi guys im curious to know as well.

I understand that a banking analyst is valued for his work ethic, his deal exposure, and financial modeling. However, it seems for many banks, analysts spend a majority of their time pitching (maybe 60%?), from what i understand is really just making presentations look pretty, cutting and pasting from old templates, making charts, profiling companies, fixing errors given by associates etc.

What exactly are his responsibilities in the deal? What kind of exposure does he really get? What is this deep level of understanding of the deal process?

How does the diligence responsibilities of a banking analyst diff from the diligence responsibilities of say someone who works on the investment side at a hf, or pe firm or equity research? Lets say your bank was retained by Company X to help them find a buyer. The job of the middle man (banker) is to find the buyer that is willing to pay the highest purchase price for Company X and that fits into its strategic goals. As an analyst, do you actually come up with ideas yourself through research? Or do the more senior guys already have existing relationships in place and tell you to put these ideas in potential buyer list? Once you already have a buyer, what other due diligence is performed?

Why is buyside transaction experience more valued than sellside transaction experience?

When you spread comps, how are your making all your comps apples to apples comparison? I understand that you take out the one time events and aligning the dates. What do you do exactly to screen these one time events? Do you look at ER reports, press releases, or within the SEC filing? How do you know you are doing it correctly and have spotted all of them? For example, what if im trying to value company X using a list of public comps. I do a screen on thomson or whatever, and come up with a list of comps with similar profiles. One of the companies within the list is company Z. However, projected sales data are overestimated because company Z recently acquired another company Y. How do I account for actual organic growth? Is this something junior bankers deal with? Do junior bankers actually even screen for comps? or does someone higher up do and and let the juniors make sure its apples to apples?

Sorry for the length, I appreciate any insight. Thanks!

Feb 24, 2015

swagon, preparation of marketing materials is important because, at least in my experience, it requires a lot of research and understanding of the company you are selling and the industry in which it operates. You basically have to research, read and understand the company and its industry enough to write 50+ pages about it. If you can't gather why that is important for the buyside, then I don't know what to tell you.

The projection modeling CompBanker refers to is the company's actual model. He's not talking about valuation -- he's actually talking about the company's three-statement, forward-looking model. When you're selling a company, you're probably going to have to work with management on the model -- rarely will management send you their company's model and it will be all set and require no work. Sometimes this means refining projections, cleaning up the model, and sometimes it will require building a model from scratch (I've seen this, and trust me, it's not pretty or fun). Sure, then you can use this model to run DCF, LBO, accretion-dilution analyses, but that wasn't what he was talking about.

Deal experience for an analyst will vary from shop to shop, and will very much be determined by the size of the firm. Speaking from experience, an analyst will generally coordinate/listen in on diligence calls, work with management on the model and management presentations, write teasers and offering memos, communicate with potential buyers regarding their diligence request lists, prepare any required materials for the client (process updates, comp updates, etc.), and a handful of other administrative tasks. Obviously you aren't running deal execution, but you are very close and develop a solid understanding of the process.

I don't know that buyside experience is necessarily more valuable, but it's pretty simple: on the sellside, you're advising the seller to essentially get as much cash as possible. On the buyside, you're working with the potential acquirer to determine whether the target is a quality investment or not -- which is a huge part of PE. Generally, you'll participate in the diligence process, analyzing the target, and just get an idea of what is important and what is not -- something you don't necessarily get on the sellside. I've worked on one successful buyside acquisition, and there was far less actual work than there was on my sellside (and I am thankful for that) but I learned just as much. Just sitting on the calls between my boss and our client and listening to them discuss the investment was a great learning experience -- you get to hear successful senior guys discuss what is attractive and important in a potential target.

Briefly on your comps question, depending on what is required (i.e. generally we only look at forward numbers and don't spread the income statement -- most research won't include one-off expenses in forward projections), you generally adjust for one-time expenses. It's not really that bad -- the P&L in the filing will break out non-usual items (i.e. usually see revenue, cost of revenue, gross profit, opex like G&A, R&D, sales & marketing) and if there's something odd, like restructuring charge, that means one-time. Just tax effect and back it out. At my shop, senior bankers generally select the comps (we have about 10 subsectors with comps pre-selected and generally a potential client will fall into one of those buckets) so as not to waste the junior guys' time (if we did pre-screen and spread comps, it would inevitably result in us doing all the work and senior guys changing the group). In the event we do pre-screen, we generally bring the list to the MD before spreading them and he'll give us insight. Honestly, after about six weeks, spreading comps becomes more of an administrative, automated, tedious task as opposed to something that actually makes you think.

Lengthy Sunday AM response... hope this helps.

Feb 24, 2015

Thanks jimbrown! great stuff very insightful. you deserve a banana

Feb 24, 2015

Why do you want to make the transition so bad? Also, networking... easiest way

"Free Market Capitalism is the best path to Prosperity!" - The Larry Kudlow Creed

Feb 24, 2015

Realistically, you're not going to be able to leave until after your first year - you just don't have enough marketable skills. Think of it this way - why would they hire you for an immediate start (after 3 months), when they could hire any one of the 100s of other banking analysts with 1 year + 3 months of experience.

Yes, I realize banking sucks, but you've got to pay your dues, at least for a little while. In 9 months or so when you actually have a chance at jumping ship, checkout this thread I wrote on moving to PE after 1 year in banking -

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

Feb 24, 2015

I don't know much, but I'm pretty sure CAIA and CFA's are not worthwhile for PE.

M&A is better for PE opps.

Feb 24, 2015

CFA would be more worthwhile, but both will add only neglible value to your candidacy. The only guy I know with a CAIA cert worked at a hedge fund... in sales.

M&A is the better overall group for PE exit opps.

Feb 24, 2015

Restructuring is best for Distressed Debt PE. Otherwise....

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to become the means by which men deal with one another, then men become the tools of other men. Blood, whips and guns or dollars."

Feb 24, 2015

M&A will be best overall, but there are a lot of different ways to break in. Work experience is best, but a CFA might over compensate for less than stellar WE.

Masters in Finance HQ - The #1 site for everything related to the MSF degree!

Feb 24, 2015


I'm making it up as I go along.

Feb 24, 2015

So overall CFA>CAIA?

Feb 24, 2015

So overall CFA>CAIA?

lol this made me laugh for some reason.

Feb 24, 2015

In terms of your second question, perhaps anyone can comment:

In restructuring you often work for the creditors/banks in recovering as much of the loans as possible (when not working for debtors). Would you be pitched against PE companies often (i.e. you are representing the debt holders and pushing out the PE guys)? Could this hurt your PE chances? Or will it help you in terms of getting exposure?

Any responses from people in restructuring?

Feb 24, 2015

CFA > CAIA but like whateverittakes said, the value-add to your resume is negligible.

Feb 24, 2015

CFA is pointless for PE. Primary purpose is for asset/investment managers.

However, it will show you have the patience to power through a fuckton of studying hours to pass all three exams...

Feb 24, 2015

In general, it's not all that useful for PE - it's primarily for portfolio management, AM, research, wealth management, etc. But CFA's value for PE varies with different geographies.

In US, from what I've seen anyway, it doesn't really move the needle.
In Asia, where designations are valued, it can be useful - but still doesn't replace relevant experience and (these days) language skills. Maybe at junior levels, it might help you if your work experience is just a bit shy of what their benchmark is.
In Europe, I don't know - but seeing as how the CA seems pretty highly regarded, I'd imagine they also like designations and the CFA could help a little
In Canada, can help a bit (some PE guys/gals do have it), but again, doesn't replace relevant experience. Just helps round out your resume a bit. A few firms (like the pensions) might like it, but it's a 'nice to have', not a must.

It's more helpful for someone who wants to move into finance in general, but in their past life doesn't have the finance background. CFA is a way for career switchers to demonstrate they're serious about finance, and some firms may then give them a shot.

Feb 24, 2015

I think your best bet is to have one of your friends who works at one of these firms to go to bat for you.

Feb 24, 2015

I have seen this happen a couple of times (Seriously)- I think you definitely have what it takes to make it to one of the MBB's...

It will take a lotooo of work networking, which is going to be difficult for someone coming from a more entrepreneurial background like yourself. But definitely possible...

If not, the second tier shops are always an option... Kill it there for a couple of years and try to lateral (which also happens)

"Sounds to me like you guys a couple of bookies."

Feb 24, 2015

PM me. I'll take a look at your resume and see what I can do to get it looked at. The only tip I have right now is the obvious, to network. I think we'll need more info to give specific advice.

Feb 24, 2015

The truth of the matter is that the top firms do very little hiring outside of the on campus recruiting channel below the engagement manager level. In my 3+ years working in one of the largest offices (a couple hundred consultants) of one of MBB I've literally met 2 people who didn't come straight from undergrad or an MBA. In both those cases the person in question had done some kind of one year nonprofit fellowship with an established recruiting relationship with the firm.

Above the engagement manager level (3-5 years post MBA) though it is a different story. Plenty of EMs who lateralled over from other firms, and not necessarily the big firms you'd expect. Plenty of guys and gals from little 20-50 person shops. EMs are always the bottleneck in staffing. It's actually relatively hard to find people who are both capable of doing the job, and willing to put up with the hours for the somewhat meager pay (not meager in an absolute sense, but relative to positions in finance with similar hours).

Your best bet, other than finding someone on the inside who is really willing to go to bat for you, is to shoot for a small firm and then try to lateral over after 4-5 years of successful experience.

Feb 24, 2015

Should I try to go for MBB MC or IB post-MBA and then try to break into PE?

Feb 24, 2015

transfer to bain consulting somehow and see if u can get into bain PE?

Feb 24, 2015

The problem is that from what I have heard Bain consulting has more places post-MBA then pre-MBA.Should i try to get an MBA and then try Bain?

or are you trying i somehow pull off a pre-MBA transition?

Feb 24, 2015

*to suggest

Feb 24, 2015

MBA is best option.

Feb 24, 2015

but even after MBA there are very few PE spots available so what career path do I take?

Feb 24, 2015

u probably want PE pre-mba to continue it post-mba, which is why i suggested pre-mba transition. obviously, its harder said than done. just my 2 cents

Feb 24, 2015

Not exactly relevant, but it reminded me of this anyways. Hope this at least keeps you inspired:

Read my blog: Bateman Begins

Feb 24, 2015