IBD Associate --> PE
Had a question that I think you guys/gals would be able to tackle from a more nuanced perspective than what I would find elsewhere or from friends who did the typical 2 and out.
I'm going to be a summer associate this year at a mid-tier BB covering TMT. I'm curious to know who has seen the jump from IBD associate --> PE. I know that it won't be MF, but I wouldn't mind working LMM at all. Any advice would be greatly appreciated. The below may help get the conversation started:
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How 'possible' is the transition?
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If so, when is best to do it? Is VP too senior?
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I'm assuming you need to more or less stay in your sector, in this case, TMT
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Are there any funds that come to mind?
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If so, what is comp like at these places?
Do you have an MBA? I have done this jump myself 4-5 years ago without MBA and with 4 years of banking experience (analyst to associate promote). I stayed within my own sector. Market condition might have changed. But it is for sure possible. You need to prepare for a pay cut, at lease from the cash front. Unfortunately, you might have to start again as an associate or senior associate. Senior Associate in PE is actually a real position vs. in banking, SA just means that you are 3 years into your associate position, if that makes sense.
Overall after those years, I would say the work for sure is more interesting to me as it requires lots of critical thinking and your life style might be 20-25% better but the cash compensation at LMM is not there to compared to BB or EB or top tier middle market banks. The carry piece might be interesting but it will take a long ass time to see a drop.
Thanks for the response. Yes, I am graduating in '22 and doing my internship this summer. Yeah, everything that you're saying makes sense. If my lifestyle in IB is as brutal as I suspect it will be I think that a pay cut to mitigate that would be warranted. I do really like LMM and how involved you can potentially be with your portfolio companies. Are there any TMT focused funds that come to mind that work in that kind of TEV range? I'm wondering if it's more of a VC thing at that point than a buyout kind of place.
I've always wondered about carry at the type of places that we are discussing, would have to assume it is highly variable.
I don’t know much about TMT as I spent my whole career in healthcare. My experience has been mostly in the growth equity /VC side rather than the LBO side. What you say about getting involved in operations is very true and is mostly interesting to me. The deal execution gets boring after a while but each business is very unique and you are dealing with different personalities.
On lifestyle, I dont know if it’s true but my buddies who are not VPs at BBs are telling me, if you are a strong VP with a good team, your lifestyle is not that bad.
when you say comp at LMM is not comparable can you specify what type of LMM fund you are fearing to? As in AUM or Fund Size where the comp difference is substantial? I know fund sizes range from 100 M - >1.5 B for LMM so curious where you think the competition is more in line when looking at LMM
Bump
Tough to do, but I've seen folks make the jump. Here are the main obstacles that used to come up when we looked at MBA Associates for PE roles.
1. As a MBA Associate you probably have pretty weak technical skills given you are a career switcher.
2. Given your age, we would need to hire you at a Senior Associate role at a minimum; however, most Senior Associates are expected to be strong technically and/or strong in the investing process. As an MBA Associate, you're not really cultivating either of those skills. It's weird to hire post-MBA Associates as 2 and out PE Associates, so most folks don't really want to take such a big step back.
3. You don't learn to think about how to be an investor in banking, so it's hard for you to be in a quasi deal-lead position at a PE firm.
Where I've seen Associates be successful is, they work in M&A groups at top banks, and the type of work they're doing (execution work) is applicable to MM/UMM/MF in the same industry and that leads itself to a more natural transition. Coverage in general is just worse for developing skills needed in PE as you don't bucket into people that could kind of fall into UMM/MF type of work and honestly, LMM/MM transactions are typically much more hands on, data isn't clean, etc and that's not really a great fit either. Frankly, you'd be better off at a MM bank if you wanted to transition into a LMM/MM firm than at a BB. We used to hire exclusively from the MM banks, just because the analysts/associates were more familiar.
If I were you and wanted to have a shot, I'd try to be in as execution focused of a role as possible and look for newer and up and coming funds. Get close with recruiters and let them know you want to switch early on. Use your MBA to network aggressively and eventually a role will open up. As far as fund type/size goes, the Post-MBA assocaites that do a couple of years and try to get into PE are few and far between. I've seen it happen a little more at the bigger funds and it happens sporadically at smaller ones as well, but no funds I know of are known for recruiting post-MBA Associates.
One last note, depending on what tier of MBA you're at, it's not too late to just recruit for FT PE roles next year. If you have good banking experience on your resume and the backstop of having a good job, why not put all of your effort next year into either recruiting for PE or doing an in-semester PE internship somewhere, at least that will give you a leg up if you try to make the switch down the road. It's not impossible, but you'll just have to be diligent on it.
Thanks for the response, very helpful. Noted on all of the above. To your last question: I would like to spend some time in banking. I understand it will damage my chances, but I'd like to begin my career in banking as it is what I set out to do. Maybe possible to mitigate that a bit as I believe I have a good chance of going to a FT MM/EB that works very closely with sponsors. That being said, I have seen some people do in-semester PE internships and I think it would look good on a resume. I do understand that MBA associates do not offer a lot of value to PE. Maybe given TMT coverage I would be more in the running for VC.
Ehh honestly you'd probably be an even weaker candidate for VC. Perhaps later stage growth if anything, but early stage likes to pull from Product/Entrepreneurs or other misc Finance backgrounds. Unlikely you're going to any good VC fund as a post-MBA Associate. Again the skillset just doesn't transfer that well, the harder aspects of financial modeling/analysis is useless in VC, it's more about networking, deep domain knowledge, ability to connect with early stage founders, etc.
Really the main exit ops will be Corporate Finance roles, Corp Dev, Strategic Finance, maybe Biz Ops etc all at tech companies. Maybe Corporate Venture. Again, I'd pickup as much relevant experience as your can in the 2nd year of your MBA program, whether it be PE/VC, get a year long internship, kill it in banking, and network consistently. It's not completely impossible, but post-MBA Associate just doesn't lend itself that well to the buy-side, especially if you're not at a top BB/EB in a great group.
I was an analyst promote and it is fcking hard. Have to kind of find the opportunities yourself (I didn't see much through head hunters) to get your foot in the door which were few and far between.
Not to say it's impossible, but it is not easy. Analyst level is by far the easiest.
Edit: And just to give some context I was an asso at one of the "brand name" banks that folks would have heard of.
Are hedge funds any easier if you're willing to network hard?
I didn't pursue the public side as much but I think it's easier bc they'll take anyone smart in the door and it's not as structured of a process. Like some of the funds will interview anyone.
Not sure about the networking part. A lot of funds fly under the radar so I don't know where you'd even start but given the above, yes it's possible.
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