Explaining what I do for a living to my parents
Long story short - does anyone know of any good "Private equity for kids" / "Sellside IB for kids" or "M&A for kids" youtube videos that would help explain what they do for a living to their parents?
I'm a BusDev analyst at a PE shop. My previous job was buyside IB. For context my dad is American and a mechanical and electrical engineer, and my mom is from Taiwan and has a CS background. Neither have any real financial background nor much understanding of anything finance. For example, as a sophomore in college, my dad let me change his 401k allocation and we tracked the difference between the old allocation and the new one (by changing his allocation he made an extra 10-20k in a 12 month period).
Explaining the buyside IB was pretty easy as our clients were all PE groups / their portcos and the job at the analyst level mostly centered around list building and calling business owners to see if they'd want to sell.
But now that I'm in PE my day-to-day has of course changed. And no matter how many times I explain it they get confused.
For example, we have a neighbor back home who runs a small sellside IB. I tell my parents "Our neighbor runs a sellside investment bank and it would be great if you could connect me as we may want to buy one of the businesses he's trying to sell."
So my mom asks me what she should tell our neighbor - my response was "Tell him I work in private equity."
She says "Okay what is private equity?"
I tell my mom "Private equity groups buy companies, take them over and run them, and then sell them after 5-7 years hopefully for a profit." She says okay.
I check back a few weeks later and asked if she got his number/email. She said that the banker didn't want to talk to her for that long and probably isn't interested in connecting with me. So I ask my parents what they said to our neighbor. They said "My son wanted to connect with you as he works in finance. He is on the buyside and the sellside in equities."
Fast forward to me going home to visit my parents a few months later - I run into the banker while walking the dog, say I'm PE BusDev, 60-second elevator pitch our firm/criteria, and give him my business card. By the time I get home he had sent me an email saying he'd love to connect. Turns out our 2 firms were a great match - my parents just have no idea what I do.
I tried an even more basic analogy with my parents - real estate agents can represent a buyer or a seller of a house - real estate agents who represent house sellers are equivalent to sellside investment banks representing a business owner looking to sell their business. Private equity firms are the buyers. Sometimes PE firms have a buyside banker (aka my last job) akin to a real estate agent representing a buyer. Analogy doesn't seem to be sticking. Among other questions, today they asked me "what does M&A stand for again"
Does anyone have a better analogy or a quick and easy resource that could help explain what PE firms / IBs do?
Don’t worry, I’ll make sure to tell your mom tonight
Lmfaooo, I’m of asain background and my parents work blue collor job and they only know of engineering or doctor as jobs, at first they thought I was going to become a bank teller, they still think that I’m a failure even though I made it to IB and I didn’t become a doctor or engineer, just move on there’s no point in explaining to your parents as long as I’m proud of myself, that matters the most, don’t give a shit if my parents aren’t proud of me because I don’t become a doctor or a engineer
I think I would just try to explain it to her repeatedly (when it's brought up naturally) in simple terms like you did. To be honest she was kind of close and at the end of the day she may not care that much about specifics as long as you are doing okay. It doesn't seem like they'll have many more contacts for your biz dev so I'd probable just drop it for now.
Partner (software engineer) asked me to explain private equity to him. At this point, I'd been in the industry a while, and was thinking of using Warren Buffett as an (imperfect, I know) example of where you buy a company and hold it for a time.
Me: OK, so you know Warren Buffett, right?
Partner: Is it a McDonalds menu?
Me: ......nvm
Keep it very ELI5. What does PE do? They buy things that need fixing and then sell them later after being fixed... instead of buying something like a car, fixing it up then selling it, or buying a house, renovating it then selling it, Private Equity companies buy businesses, improve them, and then sell them.
You’re on the right track with the real estate broker analogy for sellside/buyside IB. I would extent the real estate metaphor further for private equity as house flippers. They buy houses with a little equity and a lot of debt (a mortgage/LBO), fix them up, and sell them after a few years for a profit.
I always explain it as follows:
Various investors such as pension funds, insurance companies etc give us a bunch of money to invest on their behalf. We then buy entire or very large portions of companies for that cash. Once we have bought the companies, we use our expertise to increase the profits of the companies. After having spent about 5 years improving the companies, we sell them and divide the profits between us and the investors.
You can always make a simplified example if people don't get it.
“It’s kind of like flipping houses, but we flip companies. It gets more complicated than that, but that’s what it is at the core.”
Then they can ask questions if they want.
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