Transitioning from M&A to Private Credit – Newbie Looking for Tips & Reality Check
Hey everyone,
Been grinding in M&A for 3 years as an analyst and recently started getting exposure to / moving into private credit side of things.
I'm pretty new to the credit world overall – familiar with basic LBO modeling, debt structures from levfin deals, and some covenant-lite stuff from sponsor-side M&A, but that's about it.
Private credit feels like a different beast: focus on downside protection, structuring seniority/subordination, covenants that actually get enforced, recovery analysis, etc.
A few things I'm trying to wrap my head around:
- How much does strong M&A / sponsor coverage experience actually transfer? (heard some funds love bankers for diligence & modeling skills, but others want pure credit underwriting backgrounds)
- Key things to learn ASAP: credit-specific modeling (cash flow waterfalls? debt capacity / leverage tests?), reading credit agreements, PIK toggles, EBITDA add-backs red flags, etc.?
- Day-to-day differences vs M&A – more monitoring/portfolio management, or still heavy origination/diligence?
- Any must-read resources, books, courses, or WSO threads for someone coming from the equity/deal side?
- Comp / lifestyle reality in 2025/2026 – is the "easier hours than PE but solid pay" narrative still holding, especially in direct lending vs distressed/opportunistic?
Thanks in advance – really value the WSO community for this kind of insight.
Cheers!!!!
AN2 in coverage group - strongly interested in exploring the pivot as well
In a group that sees 50-60% of analysts head to PC after 2 year stint.
Most interviews for these shops include base case / sens cases. Focused on cash flow repayment, credit analysis, financial analysis,Lots of assumptions about refinancing/interest rate curves. Risks and mitigates to the company’s business models, etc etc. For EBITDA add-backs it’s vet case by case, but are to say non cash and non reoccurring are fair game. I don’t deal much with PIK personally. Additionally yes the credit metrics are important and the trends but you have to frame it in the industry context. Example, Utilities rock 60-70% Debt to cap all day, highly doubt you’ll see that in pharma
If your bank has a IB/CIB credit team that models, they would be a good shout to ask about their day to day. Take this with a grain of salt, I’m at a balance sheet bank that was a moderate amount of deal flow.
Would also note most exits seen from my bank are to the types of TPG Twinbrook/Monroe/Crestline/Midcap/Audax size shops. Not many going to Ares/KKR/Apollo, but seemingly those groups are expanding their platforms and may begin to come down market more for talent (more of a prayer from me)
Happy to answer anything else in terms of the underwriting process, or credit specifics comments. WSO needs better functionality in typing this shit out in the phone
Thanks so much for the detailed reply – really appreciate you taking the time, especially on mobile. Super helpful reality check and gives me a much clearer picture. On the modeling/interview side: For base + sens cases, are they usually full 3-statement models with cash sweep/waterfall, or more focused on debt service coverage / repayment sources in downside scenarios? Any specific templates or common pitfalls you've seen candidates mess up (e.g., aggressive refinancing assumptions)? Thanks!
In terms of what I do (again I’m in a IB/CIB group) we are heavily focused on cash flow repayment, collateral coverages (if secured), and covenant metrics. 
We definitely model out ECF sweeps, especially if it’s within the credit agreement but sometimes we just have very relaxed assumptions. Certain borrowers just cash flow and it’s essentially free money lending to them, others it may take us dragging risk across the finish line. My assumption is/ from what I’ve been told the technical model will be a 3 statement type. Main focus is on cash flow though. Most people I know who interviewed said there was a base line template provided, and you had to fill it out with drivers/assumptions. If you are in say E&P lending, you may have a production focused model. If you are in a FIG space, may be more NII focused
In summary, all we care about is getting our repayment, or in EoD we can recover enough/have priority. For lateraling (from the few of friends who have) it’s very similar. If you are applying to Direct Lending/Acquisition financing/Sponsor backed lending positions I believe this is the bulk of what matters.
I’ve heard certain shops tend to focus more on LBOs/Structured credit which is a whole different beast. I’ve done some LBO type frameworks on acquisition financing type deals, but not enough to provide advice, especially in the context of Private Credit.
Refinancing assumptions can be a mess. Typically take SOFR and then generate a macroeconomic assumption relative to it.
For Downside case, common adjustments are cut revenue/increase opex/reduce capital market transactions/cut div payouts. Add 100-200bps to the SOFR curve.
I believe at the end of the day, especially in an interview, having the justification and explanation “why” you did something is critical.
Transitioning from M&A to Private Credit can be a rewarding move, but it does come with a learning curve. Based on the most helpful WSO content, here’s what you need to know:
1. Transferability of M&A Experience
2. Key Skills to Learn ASAP
3. Day-to-Day Differences
4. Must-Read Resources
5. Compensation & Lifestyle in 2025/2026
Final Tip:
Leverage your M&A background to stand out in diligence-heavy roles while quickly building your credit-specific expertise. The transition is very achievable with the right preparation and mindset. Good luck!
Sources: Private Credit Resources and Prep, Transition from RE Development to REPE, Private Credit / Direct Lending Comp, BofA Wholsale Credit vs Credit Risk
Have a few direct lending resources, feel free to pm
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