How common does someone with only IPO experience get into PE
It seems that all PE shops favor M&A because that is essentially what PEs do, although M&A people don't necessarily posses superior modeling capabilities or that those models actually matter much at the end of the day.
Know 1 guy who pulled this off but he studied one very specific type of engineering and that big PE shop wanted his background.
I never had this predicament but as someone who was in large cap PE and was heavily involved in associate recruiting, I'd probably want to see the IPO experience spun such that you cover having done diligence work on the company and worked on prepping materials which were being used to solicit investor interest. It's not an ideal situation but you work with what you have.
Also if you worked on M&A pitches or other strategic alternative decks, feel free to mention those as they are usually comprised of modeling outputs and considerations for M&A outcomes. People in PE will definitely consider and give some (even if little) concession that maybe you just got the short end of the stick and weren't staffed on an M&A deal but you need to position it and communicate your experience such that it's not an issue and that you're still well-versed in what they're looking for.
Reality is that there are plenty of people who have worked on M&A deals as analysts going into recruiting for PE who just helped format DD requests lists or were "facilitating transfer of deal-related information from the selling party to the potential buyers" (ie. organizing a data room ;) ) so don't underestimate yourself or your competition.
It's very rare. Not really a lot of technical skill set you build there to exit into PE, great for life style purposes though.
I disagree that ECM bankers have “superior” or on par modeling skills compared to M&A or coverage bankers. It’s just not a part of your skill set in the day to day. How can you be on par with someone that “models” every other day vs. not modeling for you job at all? At my BB, ECM bankers were in charge of the IPO or follow on process, but they never built your typical operating, M&A or LBO model. It’s just a very different job that doesn’t necessarily translate well to PE. There is a reason why most capital markets bankers do another year in a coverage or M&A group before the transition. It’s just a function of the job and not a reflection on them as a candidate or anything like that.
Separately, I think it’s also false that “modeling does not matter.” Yes, your model will never get the actual returns completely right, but it’s supposed to get you a directional sense of what are the biggest drivers and which levers you should focus on as investors in a business. It’s a factor along with a number of things in the investing framework. While I agree that false precision leads to wasted time and meaningless results, you need to understand the quantitative impacts of qualitative findings in your due diligence efforts. Investments will surprise on the downside and upside when you’ve been doing this for a long time, but it is your fiduciary responsibility to try to think as much about these things as you can. People love talking about Warren Buffett (or similar) and how you can be successful without “models”, but come back here when you have a 60+ year track record.
I'm in a coverage group that doesn't hold the model. Out of pure luck, I have not had a single M&A deal because my sole MD has ~0 interest in M&A deals, but only IPOs, which are arguably a more stable stream of revenue compared to M&A. I gotta say it is true. Fees are also pretty good for him and the group. Operating models for roadshows are usually built by the execution team since my MD doesn't care.
Was in non-IB project finance advisory so modeling skills are at least decent considering the fact that I've helped build monstrous models for PE shops like Carlyle. However, my modeling capability deteriorates in my current coverage group.
I also despise the over-complexity of project finance models, which are essentially highly-levered LBOs.
I was somewhat in your shoes and agree with your sentiments. I certainly won’t argue with the idea that day to day modeling would clearly be the ideal candidate, but I think it’s worth noting that that’s not a guarantee. I know a number of banks where coverage analysts don’t do much modeling at all (you and me apparently), and I know number of M&A analysts’ whose “modeling experience” has consisted of reformatting company-produced models to be more buyer-friendly.
Lucky for you, as evidenced by the comment above, you’ve already avoided the group bias so you’re actually in okay shape. I think it’s mainly about over exaggerating other experience, be that pitch work, one-off analyses, etc. And then absolutely being ultra prepared for modeling tests. It’s not a perfect solution and won’t get you everywhere, but it’s not that bleak.
Source: was in a coverage group at a bank w a full M&A team, was on a few M&A deals but also blatantly admitted to people that I didn’t own the model, oversold some other pitch stuff, killed the model test, rest is history
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