Private Companies - The Stark Contrast In Working Conditions

Disclosure: I have a half baked thesis for this subject, but I think it is an important subject and one that I would encourage others to weigh in on. 

I often spend time thinking about what I wish I knew when I was in my early 20s and entering the work force for the first time. I have had so many lessons learned and this brief rambling is based one of those "lessons". 

Relevance: In the modern day and age, it seems more and more likely that most of us in corporate roles work for public companies. Finance is of course the exception, with many banks, private equity, private debt, and portcos remaining private. 

Thesis (i.e., TLDR): Working for privately held companies can be extremely rewarding, or it can be a truly horrendous experience. 

My Experience: 

Throughout my admittedly brief career (I am still in the first decade), I have worked for privately held companies and had extremely varying experiences. My findings are not meant to be viewed as the amalgamation of countless data points, but quite the opposite, a handful of anecdotal experiences designed to spark discussion. 

Experience I: The PE PortCo 

When I first left Consulting, I joined a Corp Dev team for a ~$2B PE portco. The role was candidly unattractive in many aspects: huge pay cut (objectively non competitive pay even for its role), horrendous location (~50 miles outside a T1 city), and unenticing leadership (1 of 3 people I would report to had heavy M&A experience). I took the role due to desperation - I needed out of Consulting and was having limited luck making the transition into CorpDev - most companies wanted an ex-banker, for obvious reasons. 

The upside, and part of the attractiveness was heavy deal exposure (they had closed two >$100M EV deals recently), a lot of responsibility (I would build all models), and kind / intelligent CD management (dont underestimate the value of working for kind people, especially those with elite backgrounds). And plus, the business was to IPO soon, and if it did, I would be granted an unquantified amount of equity. Their inability to quantify the equity was a huge red flag and candidly I wrote it off, assuming none would be provided. 

In reality, the role was an absolute dumpster fire. The pay remained horrible, the only person with M&A experience was fired in my 3 months of being there, and it became clear that the business had no vision or aligned growth strategy. Executives lacked professionalism, good deal reps was impossible because there was no one who knew more about M&A than I did, and the sponsor was an absolute nightmare to work with. The sponsor was laughably ignorant about their portco, and couldn't even determine which of the 2 business models we operated under (there were only 2 that were applicable to businesses in our end market). 

So what did I do? I left as quickly as I could. I was gone in under 12 months. I took the hit on the resume and never looked back. 

Experience II: Family Owned PortCo

At a different point in my career, I went on to work for another privately held business. The contrast was astounding. Above market comp, team of highly successful Corp Dev leaders, all of whom had strong banking experience, ability to get medium sized (>$250M) deals done with strong regularity, and an intense fire and passion that mimicked that of the startups I had previously worked for. All of this, combined with a strong vision and a management team who was held highly accountable, and it was the polar opposite of the prior experience. 

Experience III & IV: 

To leverage the experience of a close friend, I would say she has also experienced both both I and II. She worked for a PE portco with extremely high turnover, no vision, no ability to execute, and that was one step away from defaulting on their loans. This was similar to the portco I worked for, as I later found out that they delayed payments to consultants for so long the consultants threatened sending them to collections, and would never work for them again. She has since joined a very strong privately held company, with above market comp, below market hours, great leadership, and that outperforms their competition consistently. 

Takeaways: 

So what should a 22 year old, or a 24 year old actually take away from this?

1. Diligencing privately held companies is critical, and arguably more important than that of public companies. Speaking to former team members whenever possible will be the best possible use of your time. M7 MBAs do not mean someone is intelligent or capable, 10 years at a reputable bank does not mean someone actually knows the ins and outs of M&A, heck, or is even a hard worker.   
2. When working on lean teams, teasing out the quality of your group's leadership and level of experience will determine the likelihood of success. Understanding the tangible impact a group has had on the org is critical
3. Getting deals done does not mean you are good, or even educated, on how to run an M&A process. Asking the hard questions, ROI, ROCC, expectations vs. reality, # of deals closed by bankers vs. proprietarily sourced, these are things you should ask about.
4. Understanding the C-Suites ability to execute and succeed will also determine the quality of experience, level of comp, and likelihood of success your business has. Questions like YoY profitability improvement, adaptions to industry trends, most recent round of layoffs, level of hiring across the org, these are good things to understand. 

Admittedly, as I write up all of the takeaways, I realize how obvious they are to me now. For the other experienced professionals reading this post, I acknowledge that you probably knew all of this ahead of time. But at 22 years old, I didn't. Maybe the average 22 year old is much smarter than me, and even for them this isnt novel or helpful. But if it helps 1-2 folks do the additional diligence they need to, then it was worth the ~30 minutes it took to write up.