Relevant deals for PE recruiting
Is the below list a good representation of best/most relevant to worst/least relevant deals for PE recruiting? Obviously, it is on a case by case basis and you can tweak/sell each one differently, but we are talking about a generalization here. Feel free to add. Also, how important is the size of the deal?
Buy side sponsor
Buy side strategic
Sell side sponsor
Sell side strategic
Activist Defense
IPOs
Sponsor acquisition financing
Strategic acquisition financing
Other debt deals
Project finance
Block trades
buy-side sponsors+strategic for sure, not sure about the rest. but buy-side m&a is usually most relevant due to having the most valuation and analysis experience.
are you talking from experience or...
from experience over two banking summers+friends who've gone through buy-side recruiting already.
I always emphasize to recruiters that the same amount of work and effort goes into each deal, whether it's a $8 MM or a $800 MM deal.
However, deal size takes precedence over deal number, and the candidate that had participated in the more prominent/headline transactions will be the preferred one.
I disagree. Deal size has no relevance when it comes to recruiting. It also makes no sense for PE firms to favor candidates that work on front-page deals since that's completely luck of the draw
You do the same diligence (assuming it's not a $5mm pocket change deal) and probably learn more on smaller deals because the multi-billion deals are often a huge clusterfuck with tons of advisors, 3+ analysts a team, lots of legal bs, etc.
Yes agree with this, I think anything sub $25mm, you will start to see some of the diligence items get dropped as owners might not have systems in place.
That is a surprising revelation. Why does deal size matter so much? Once you're above a certain deal size, the mechanics and modeling are very similar. How much does deal size matter over deal type?
The biggest one.
no love for fairness?
What about LevFin? People say LevFin is a great group for PE recruiting, but you're just providing financing, not advice.
Advice is bullshit. PE firms seldom hire bankers for advice. So you heard your boss advise the CEO of a paper and packaging company about M&A, big fuckin deal. The fact the CEOs listen to banker advice in and of itself detracts from their credibility.
You need to master the technical skills, have a very strong grasp of the PE business model/asset class and more than anything else be a superior critical thinker. The first you'll get from any corp fin/execution-heavy group, the second you'll either get from your own initiative/intellectual curiosity and/or by working on PE deals and the last you've either developed up until this point in your life or you haven't.
Sellside banking is kind of bullshit cuz all you're really doing is running process and feeding people a bullshit story. Buy side banking atleast you get to see the buyer struggle in identifying and developing an investment thesis and trying to find an edge/angle... which IMO is the most valuable part of live deal experience if you're looking to transition into an investor role.
Disagree here, think you're oversimplifying a sellside process. The most technical and complicated deals I was staffed on in banking were sellside M&A deals for bigger public co.'s. Sure, like you said you'll observe the buyer put together an investment thesis and the bankers will kick in their 2 cents, but as stated you're observing and in the end what they say goes and they'll be perfectly fine telling you and your models to fuck off long as your MD's can collect fees on the financing. Any buyer worth their salt will run their own analysis after going through the data room and that's what goes.
On the sellside, they can still very much tell you to fuck off but that defeats the point of even hiring a banker and more so can get their asses sued if they move forward against the recommendation of the bankers best case options and alternatives for the shareholders; assuming the banker is doing their job correctly. The seller "entrusts" the banker to take their co. to market, and if you and seller aren't on the same page valuation wise you're team's going to get canned or, again, the sellers getting sued.
I also disagree with this for a few reasons (I think running a sellside process as an analyst is extremely valuable for recruiting): - You will build a complex model using often messy client data - You will see the full M&A process from start to finish (YMMV on a buyside, people use bankers to different extents) - You will be heavily involved in the diligence process for MULTIPLE buyers. Although this may seem boring / tedious, it's actually the best and most efficient way to glean insight into multiple buyers and they way they approach a transaction, investment process, key risks and considerations. This experience taught me a ton with respect to thinking like an investor. When you have 5 top megafunds breathing down your neck all day you quickly learn what key data is required to evaluate an investment and why - You will perform a wider range of valuations esp. if fairness (e.g. you'll be doing 12 different LBO scenarios in addition to your basis trading and txn comps)
Agree. If you did a marquee sellside and want to talk about it, the most valuable parts will be when you developed and attempted to spoonfeed buyers that investment thesis/edge. At that point, you are basically anticipating buyside analysis and guiding it to be more favorable to your client. The rest is process, and while it might be interesting to see what comes up in different buyer's diligence, half the time you are answering very specific requests without necessarily seeing the whole picture.
No way, deal volume > deal size. The only time deal size works against you is if it's so small that it makes the experience slightly irrelevant. If you're at a shop that's doing $8m deals (a) it's has completely different challenges and processes and (b) you have a substantial credibility hurdle to overcome.
If you're at a reputable bank, deal size is irrelevant. Deal volume trumps all because the more deals you work on the more nuances you're exposed to, the more monkey wrenches are thrown at you, the more experiences/lessons you can refer back to.
If you're at a major bank, you're already operating in a universe where the deal size is of a critical mass... assuming you're not doing MM banking at bank out of Charlotte where you're spending your days on $70' EV sellsides.... And even then, there are swarms of PE shops out there that invest in $70m EV companies that would love to have you.
As to OP, I'd say sponsor deal experience is top of the chain, then M&A. Where the fuck did you get activist defense from? Def no.
I would also talk more about sellsides than buysides unless you really have a lot to talk about on a buyside. Don't think most buyside engagements are great experience for juniors - it's either a way to send some fees to a bank the sponsor likes or there is some other nuanced reason why the acquirer needs a buyside advisor. I know there are exceptions, but that has been my experience.
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Thank you guys for the insightful responses. With the qualitative nature of PE interviews in mind, are there any materials/books with company/investment case studies out there that would be beneficial material to read in preparation for recruiting? I imagine this would be a much more efficient way to get better at talking about and gleaning key insights. I have checked out the Graham books but they didn't seem as relevant.
Thats a bit harder to prep for since its not really memorization but more learning about the world and learning how to think / apply a conceptual framework to businesses/investment opportunities. Best ways to prepare would be:
Be intellectually curious and constantly think about deals you're working on or reading about in the papers... think like an investor, what the thesis, what are the risks, why would/wouldn't you invest in it. What would keep you up at night? Be a contrarian, be dubious, don't take anything as a given.
Consulting case methods: there's more than a few guides to consulting case questions... learn 2-3 conceptual frameworks (e.g., porter's 5 forces, 4 C's). Once you learn a few of these and practice on a few applications, you'll have a good framework for how to very quickly and on the fly understand/assess a business and what questions to ask.
Just read a lot of shit. The Economist, investor letters (Berkshire, Lucadia, Howard Marks), macro white papers from think tanks (practical topics, not bullshit academic studies). This is more of a luxury. Its good to have a view of the world and understand a few emerging trends which you think may be opportune or maybe even over-hyped.
Good consulting case interview resources FYI: http://www.scribd.com/doc/11531644/Case-Book-Harvard-HBS-2004
Luckily, a few months ago, I was interviewing for consulting and probably did about 50 live cases. Consulting frameworks are designed more to diagnose a problem in an efficient manner with a company rather than looking at a company as an investment, although there are many overlaps. One could probably adapt their consulting frameworks to incorporate more numbers, value, and risk to analyze investments.
Are fairness opinions of any relevance in pe recruiting ?
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