Growth vs Buyout day to day life
I am currently associate at a well known growth shop. I spend 50% of my time sourcing (identifying companies, managing pipeline, speaking to companies, going to conferences etc). When a deal gets into exclusivity, I focus fully on execution. Then do some portfolio work when needed.
WLB is quite reasonable but I have some FOMO what I’m missing out for not being at a buyout shop. What do buyout associates do on daily basis if sourcing is not a component at all? I’m worried I’m missing the more technical building part.
Also if someone has insight on VP life at buyout shops would be keen to hear
What are your hours?
In MM PE - so consider it ‘growthy’ buyouts.
Main difference is less sourcing like 20/25% of time. More time on portfolio management (working with Mgmt on bolt-ons, refi’s etc.) and execution of new deals.
Bump - interested as well!
Bump to hear difference in hours too
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Bump
10-15% sourcing-related (hopping on initial intro call, thesis building)
15-30% evaluating BS early stage Opps that typically go nowhere (so includes model, desktop DD, market research, maybe lender indications)
25% Portco work (can flex up or down based on above)
Rest for deal sprints / Post-2nd round bids, which can start at ~40% of time and ramp up to 75%
Hours-wise for a checked out 2nd yr Associate: 55 without deals, 75 with deals. Add 10-20 on either end if you're a first year lol...
Seconding this as the unfortunate 1st year in your equation
I would say there is very limited "sourcing" in the traditional sense in the buyout world.
Depending on the size of the deal that you are pursuing, especially at the MF level, it will likely be an auction process 95%+ of the time (i.e., will be a bank-run process and they will reach out to you, so you don't have to look for targets actively).
My firm isn't big on take-privates, but some PE firms may be, and that would probably constitute most of the "sourcing" in that case.
At the associate level, the split is probably as follows:
(a) Sourcing (5-10%): Talking to bankers on the latest available targets, sector updates/activities etc.
(b) Prelim Evaluation (40%): Evaluating CIM, prelim diligence (limited expenses incurred at this stage), preparing prelim investment memo (probably will have industry and market overview, a few expert calls to evaluate the business, a simple buyout model with CIM projections - with a haircut) for a 1st round bid
(c) Full Blown Diligence / Execution (20%): Probably 2-3 months in a year you'll get into a "real deal" (i.e., 2nd round bids or beyond where you would have counsels and advisors involved) with all aspects of diligence (FDD, CDD, LDD etc.), negotiating SPAs, lender management (securing leverage, negotiate covenants and terms), full-blown IC memo presentation etc.
(d) Portco Management (25%): LP reporting work, market mapping for potential bolt-ons, executing and helping the management team on aforementioned bolt-ons, attending board meetings (likely as an observer at the assoc. level), helping portco FP&A on issues (incl. lender communication) and sometimes even projections
(e) Downtime / Others (5-10%): You'd get some downtime where you'd just be catching up on financial news, or you might get tasked with doing industry whitepapers for potential sectors your firm might be interested in investing in
I would say at the VP+ level, you probably spend a bit more time with portco management, internal stakeholder management, and full-blown execution work relative to the juniors... and as you climb up more, you probably get less and less involved in the diligence / analysis workstreams and move on to more portco management, "sourcing" and LP management.
This is very similar to MM PE in my experience (London).
Sourcing - maybe a bit higher at like 10 - 15%. I do agree with you that even in MM, most processes will be auctions. The only 'angle' is maybe having had a chat with Mgmt. team before in some capacity. But it doesn't usually matter because it comes down to price in the end...
Prelim Evaluation - maybe a bit lower like 30 - 40%
Full blown DD - 20 - 30% (difference is we may or may not have buyside advisor so you end up doing the sh*t IBD advisory 'clerical' work)
PortCo Mgmt - 20 - 25% - very similar in nature. Anything relating to capital structure we'd probably have an eye on. Having catch-ups with the CEO's / Chairs during the week.
Other stuff - 5 - 10% - maybe spend a few hours reading newsletters etc. or market research relating to a sector.
Do you feel you get substantial operational experience after being in PE for a few years? Everyone says PE gives you operational experience but I find myself mostly working on valuation / reporting work when it comes to portco mgmt and some M&A. Other than that nothing too strategic. Not sure if I missed out something …
I think this highly depends on your PE shop.
Some firms are very operationally heavy and may even require you to spend time in a portco (directly as CEO or CFO, not sitting on the board) to get promoted to partner/MD (a few firms necessitate this).
My firm isn't. So based on my experience, you do get some operational exposure in terms of how they think about FP&A and strategy - but it's quite limited.
I don't think this materially changes as you get higher up in the ladder either.
The bigger question is - do you really enjoy operational experience? Going into a portco and helping them set up "one source of truth" CRM/ERPs isn't exactly what I'd want to do. If you're thinking of getting your hands into more strategy like which markets to target and go into - that just sounds like consulting work to me and doesn't seem terribly interesting either.
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