Comps in PE
Going to join UMM/MFPE this fall and wondering if PE associates ever spread comps? As luck would have it, I haven’t really spread comps in banking and am wondering if I should spend some time prepping this
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Based on the most helpful WSO content, spreading comps is not a primary task for PE associates, especially at UMM/MF PE firms. However, it’s not entirely out of the picture. While associates in private equity typically focus on higher-level tasks like evaluating investment opportunities, building LBO models, and conducting due diligence, there are instances where spreading comps might come into play, particularly for smaller deals or when working with leaner teams.
If you haven’t had much experience with comps in banking, it wouldn’t hurt to familiarize yourself with the process. It’s a fundamental skill that can be useful in understanding valuation metrics and benchmarking companies. Spending some time prepping this skill could help you feel more confident, even if it’s not a core responsibility in your upcoming role.
Sources: Q&A 2.0: 3rd Year BA/A/AC At MBB Going To UMM/MF This Summer, Is Partner Comp Similar in MM and MF firms?, MF/UMM Associate Comp, Q&A: Barclays IB to MM Private Equity, Q&A: 3rd Year PE Associate ($10bn+ AUM, MBO/LBO, equity, mezz, distressed debt)
That’s incredibly fucking hilarious that you haven’t spread a single comp. You must not have pitched at all, huh?
Comps in PE have 2 purposes: quarterly valuations and also backup support for the multiple you’re paying. Not gonna lie, in MM PE when I did comps 90% of them were private transactions (nothing to spread - take what the bankers tell you or what word on the street is). The other 10%, I just made sure I did them 80% correctly — do the dilution correctly, use gross debt, add pref land other stuff, and called it a day (most of these were CapIQ). There’s a bunch of random nuances in banking (valuing minority investments, etc) that I ignore because I couldn’t be added to so it and nobody would care.
I usually get the intern or some bankers to do it. Sadly sometimes you have to roll up your sleeves given as an ASO you are bottom of the totem pole again.
Have to say though you never have to build the compset from scratch (select the Cos that will be part of your set), you just steal whatever the bankers have prepared already given you will always have a ton of their marketing materials on any topic. So that saves you a lot of time already. You then plug in the firm template, tweak it and then do the relevant adjustments to backsolve whatever your VP is looking for. And if we are being honest, no one will check very thoroughly the work as long as it directionally makes sense (really not scrutinized to the same extent as in banking).
We spread comps, but not as detailed as in banking. It's always funny when the newly recruited associate joins from banking and spends too many hours manually spreading every single comp, making sure it's all correct. To then realize we just take everything from CapIQ/BBG, cross check against common sense (maybe ask some question for outliers) and call it a day.
Currently an analyst in banking but the people at the MF PE firm I am exiting to just reach out to us whenever they need any comps.
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