Leveraged Lending to PE?
I’m a little over a year into a leveraged lending analyst role and am interested in getting to PE. Would firms consider my background or would I need to lateral to another role beforehand to better position myself?
Based on the most helpful WSO content, transitioning from a leveraged finance role to private equity (PE) is not unheard of, but it may not be the most straightforward path. Here's why:
The primary focus in leveraged finance is on the credit worthiness of the business. This means you might not have as much experience in assessing the equity story behind a prospective investment, which is a key aspect of PE.
While the due diligence in a leveraged buyout (LBO) process is intense, the most thorough exposure you will get to a private equity house and their investment process is if you’re in the M&A / sector team and acting as buyside M&A advisor. This role is likely to be more useful in helping one to transition to PE.
However, there are some aspects of your experience in leveraged finance that could be beneficial:
Your credit experience could be useful in PE, as understanding the financial health of a company is important in this field.
If you're involved in the financing of LBOs, you will conduct largely the same analyses as the PE firm investing in the equity. This could make your transition to PE more tangible.
In conclusion, while it's possible to transition from leveraged finance to PE, you might find it beneficial to gain some experience in a role that offers more exposure to the equity side of transactions, such as M&A or sector team roles.
Sources: Leveraged Finance – 2017 Update, Credit Fund to PE: Is it Doable, Private Debt/Direct Lending Exit Opps?, Q&A: BB LevFin - Mezzanine - Opportunistic PE
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