Equity Research to Private Equity
Hey guys, I'm currently an equity research associate at an elite boutique looking to transition to a Private Equity role. So far I haven't had much luck with recruiters and have been networking as much as possible. I'm 25/26 years old and work in an industrial sector where there is very limited private market opportunities. I joined research planning to eventually exit to HF/AM but have come to realize my skill set is more geared towards PE. I've been considering everything from trying to do a year of IB or even jumping to another sector then an MBA. I'd really appreciate any insight you guys would be willing to offer around the best ways to make the transition. Thanks for the help!
How do you see research planning skill set transferring to PE?
All day I talk to/learn about companies and their respective growth opportunities, capital allocation plans, and assumptions around industry dynamics. I've developed an in-depth understanding of what a strong business looks like and what makes an investment opportunity attractive. The lack of experience is strictly on the transactional side but I've worked to build my LBO capabilities and feel as if I could absolutely sharpen this tool as I progress. I'd love to talk more offline if you would be willing. Thanks!
lol the transactional side is the job.
Your best and cheapest route is to try and transition to IB for a year, otherwise getting an MBA wouldn’t hurt. The problem is the “skill set” you’ve been learning and the job you’ve been doing for the past 3 to 4 years is completely different than working on transactions.
Playing devils advocate but couldn’t you argue that equity research actually does a pretty decent job of preparing an investor perspective, something that IB doesn’t prioritize as much? For example, I feel like a lot of sell-side IB inflates valuation numbers to get deals, while ER takes a more objective, practical approach and tries to account for risk and downside as much as possible. In PE, you are looking at targets as an investor, focusing on potential bear cases and underwriting with specific minimum return targets in mind. In very simplified terms, it seems like PE and ER look at investments through “does this work?” vs “how can we do this?”.
Also, something that I feel is often not as appreciated in ER is that when coverage companies merge or make an acquisition, you get fairly decent transaction modeling and analysis experience. Of course you do accretion analysis, but we also do scenario analysis to figure out different levers to pull to reach or exceed specific or stated targets.
What you are describing is maybe 5-10% of the job at the junior level in reality. The only people that really believe the ER skill set is similar to PE have never worked in a transaction oriented role.
Eh... ER inflates too... much more effort to defend a bad rating lol
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