Growth equity to Buy out?
I work in VC/GE and have only worked on deals that take minority interests. I’m thinking about potentially trying to get into traditional PE (buyout) and was curious how different/difficult that pivot might be. I imagine most of the due diligence and the deal process would be similar. The main differences that I can think of are (i) modelling (LBO), (ii) deal dynamics, (iii) portfolio management. I understand the concept of an LBO and have seen LBO models but I’m also curious as to how difficult they are to actually build in a shop.
Questions: 1 - How difficult is it to switch from GE to Buyout? 2 - What are the main differences in the process? 3 - What would be the best things to mention in an interview that would speak to me switching? 4 - How difficult is it to learn to build LBO models? (Given that I have experience building DCFs, NAVs, Comps/precedents)
What level would the switch be?
Would be moving as 1st or 2nd year associate.
What's your background? If you did the prototypical IB thing you could probably position it as "I screwed up and want a do-over" and re-enter as a 1st year Associate. If you grew up in VC / minority growth, I think you'll find this move pretty challenging.
As an Associate at a shop like yours I'd expect you're focused heavily on sourcing, your DD is a little more qualitative (lots of expert calls to validate product / market opportunity, etc.) and the quantitative side of things is going to be related to unit economics, cohort analyses, etc. That's fine and not irrelevant to a buyout firm, but very different than building a complex buyout model where even small differences in leverage, etc. can materially impact return profile. While I think people often overstate how quantitative these jobs are, if you don't come from a background like that and don't have any exposure you may find it tough to sell the story of "why this is for me" (in terms of interest and capabilities)
Appreciate the info and perspective on this. I started at an early stage venture firm out of school and moved to growth equity after two years.
I think you hit the nail on the head with the responsibilities, except that some of the opportunities that I build models for are more mature than early-stage (i.e. +$100MM revenue) and still do involve a significant amount of quantitative skills in addition to all the qualitative that you mentioned. Maybe it’s worth me ripping a few LBO modelling courses to allow me to speak to them during the interview process.
I’ve seen it done by people going to “growthy” shops that do both minority and buyout - think TA, Summit, Insight, etc.
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