Mega Fund PE or IB out of Undergrad?
I am having a hard time deciding between Mega Fund PE and Bulge Bracket IB. I have offers from both for summer but don't know which one to choose. I have always wanted to do PE and definitely think that if I start in IB I will end up doing PE after my 2 years. But I am thinking about further down the road if I decide to do something different, I am worried that PE might not open as many doors as having IB experience will. Looking to hear everyone's feedback and what they would/have done in this position.
You should do IB. If you can’t use the wso search function then you’ll definitely want to choose the job that requires the least amount of thinking possible
you would be a clown to take the BB IB role
I've seen two posts today that are similar. Two great offers, they want to do PE eventually, but aren't sure. If you know your end goal, why wait two years (realistically more since these are internships) before reaching it? Makes no sense. If you went MF and stayed in finance for 4 years, guess what? You have four years of MF PE exp. compared to two years ib and two years pe.
Take IB. Clearly you’re not set on PE and plus IB pays marginally better than PE at the junior level anyways. PE will still be an option and you’re more than likely to get it again considering you already have an offer. Good luck, and huge congrats!
Don’t be stupid. PE open pretty much the same door/. Plus this is MF we are talking about. Yes you can do BB IB, but chances of getting a MF offer again will be smaller. IB skillset is alright, but don’t think it’s anything you won’t learn in PE.
What? First of all, return offers are harder to get as an intern doing PE compared to IB. Second, working in a good coverage group will allow for you to have more choices if OP does end up recruiting again, and even explore different industries their interested in. OP seems to be in a good spot regardless and it’s highly unlikely they won’t get an offer in PE if they do decide to go through the IB route.
I would say it depends on what you'd actually do at each one. If you are just sourcing at the MF then maybe not the best unless you plan to stay into associate there. For IB, itll depend on the group. If that group is active and youll do a lot of deals thats good. Cant really say but take whatever trains you better
MF PE by a mile
Only caveat is some MF SA programs (BX, KRR credit in particular) are stingy about return offers. Be smart.
In what way are they stingy? What is the return offer rate for BX PE Summer Analyst? I have a first round scheduled with them so would love to know.
Incoming at one of these - please explain?
MF PE will open significantly more doors down the road and it’s what you want to do anyways. Take PE. And don’t listen to the dumbass prospect he’s probably salty he couldn’t get a PE spot and trying to justify his own positioning.
The PE versus IB debate is an interesting one. The truth is college kids don’t know what they want to do and it’s really hard to say what is actually better for your future. I think the actual answer is it doesn’t really matter contrary to what prospects and others will say, with both having pretty solid pros and cons. Also, both likely can lead to the same path down the line. Most the Megafund PE analysts seem to jump to another Megafund PE firm for associate anyway, or go to a HF. WSO will take this as a prestige debate, but I’m going to tell you some differences in what I learned in IB and PE (although growth) and why despite hating IB I’m actually very glad I did it. My personal take really is it’s actually less meaningful than people think, with potentially IB teaching you a skill set that is beneficial the rest of your life and undergrad megafund PE potentially being a quite impressive position that gets you to where you want to be sooner. I don’t know if there’s an obvious choice and both are great places to be. I think it’s more a coin flip than people would think based on the benefits of the skill set you get in IB and the ability of both to get to the same end destination.
Background on me, I did IB at a MM and thought when I recruited I was pretty certain I would do PE or broader investing long term. Some of the advice I received from mentors was IB and PE can often times be similar, but there are subtle differences that can teach different skill sets. I also was told to do mm IB specifically (again really contrary to this website, so hang on!). Doing IB for a little bit could potentially be helpful for making you a better investor in the long run or just an overall more knowledgeable business professional. I sorta knew I would leave IB when I did it, but I was surprised by how much I hated my time in IB. There was less critical thinking, more abuse, less interesting work, worse people, and tons of people who just completely lost sight of the bigger picture. That said, There are a few things I learned that were really important:
Now at a megafund pe job, you likely would learn most these. However, a huge part of investing is the 80/20 rule and further most the time in investing your role is looking at potential investments and saying, “yeah, this one isn’t for us”. So it’s very possible to go to a private equity firm and spend a great deal of time not seeing the process of a company getting bought or sold. People refer to this as deal execution. IB your job is literally deal execution, so you will get more reps seeing processes than you would at a private equity firm, the con is you don’t evaluate opportunities in IB and are always trying to frame a company as great when many aren’t. Further, the reason I say I am glad I did IB is I know how to raise capital and market a business—you wouldn’t learn this at a private equity firm outside of hearing from an investment bank that is helping you sell a portfolio company or participating in a process, which isn’t the same thing. I have assisted numerous early stage and growth companies in creating materials and preparing them for series A, B, and C raises and it’s a skillset that I learned from banking. Had I done PE, I wouldn’t have this skill set and really wouldn’t know how to prep materials or provide advice on a process like an ex-banker would. Ultimately understanding how to fundraise and market a company as well as deception used by banks to make companies look better than they are is a skill set that is invaluable for 1) running/working for a growing company (entrepreneurship, startup work etc.) 2) assisting growing companies (VC, growth equity) 3) to some degree understanding the deception used can be helpful for evaluating opportunities (large-cap PE, other types of private investing).
Now PE will help you be a better critical thinker when IB actively discourages critical thinking. That said, in IB you can look at each deal you are on and think critically about whether you think a company is worth what a buyer is paying for it and what you would pay.
Finally, something that also is very relevant: your first year on the job, you are very useless anywhere and likely won’t really learn about an industry. Notice how some of the biggest skills I listed were outlook/ excel/ ppt proficiency? The truth is no matter how smart a person is, out of undergrad they just need reps writing emails and doing tasks to become effective in a working environment. This takes time, and really makes the first 6 months of a job in any IB firm or PE firm virtually the same.
You know Megafund PE is arguably the most prestigious position an undergrad can get, which provides superb optionality. There’s some pros to IB and switching as I listed. IB really does suck though and I think would be a more miserable experience than a megafund PE role. Ultimately both are great options and you can’t choose wrong. I think that’s the weirdest part about being an adult—for the first time in your life you need to make a decision that will close doors. Up until the end of college, most your decisions just open doors, but post, you start needing to make choices that will close opportunities. My advice, pro con the paths of each, call people who have had to make that decision before and ask them how they handled it, and trust your gut. The one thing I would caution you on—getting advice from people who are ignorant. This thread will likely have 10+ college undergrads saying “megafund PE for sure” without any idea of the pros and cons. Weight knowledgeable peoples opinions heavier than random ignorant peoples views. Good luck!
Edit: the one other thing I would say is to be careful about maximizing optionality above all else. My favorite type of person is the IB—> buyout PE —> HBS person who has no idea what they want to do with their life despite being almost 30 because they have never listened to their heart and pursued “optionality” above all else. Have a spine and take a chance at some point otherwise you will just be a wondering corporate shell continuously using other peoples definition of success to define your own, which from what I see is the best way to be unhappy and unfulfilled.
This was the best write up of the two fields and one of the most accurate takes on becoming a professional, I’ve read in a while. Silver Banana
Appreciate you saying this. Reposting another comment I have made in the past that breaks down what the role of banking is actually like as an analyst for EB’s/ MM’s/ places that are very M&A focused. PE I would argue is more straight forward/ people understand it better, but I think banking at times is hard for people to understand the function.
What an analyst does:
First off, we are going to assume we are talking about a sell-side M&A transaction. There are other functions a bank fills, but most of the time when people imagine investment banking they picture sell-side M&A. At the highest level, a bank in a sell-side process acts as a representative to help sell a business. In theory if you were a CEO or more broadly an owner of a business, you could sell the business yourself, but most the time owners are in the business of owning and running things and don't have the time or the experience to know the right price to set for their business or the buyers who would be interested in buying their business, or even what makes their business unique and special compared to others in the market. So, they hire an investment bank to help shop their company around and answer questions for buyers so they don't have to stop doing their actual job which is running and owning a business.
Step 1) Pitching: A investment bank must win the mandate by "pitching" to a company. Sometimes called a "bake-off" where multiple banks will put together a slide show for the owners of a business and say,"hey, we are the best bank to sell this business on behalf of you here's why"
This part of the process is weird because the job of senior investment bankers is usually to win business and get these mandates by building relationships with owners long before they are selling. As a result, it's not uncommon for senior bankers to know the company they are pitching to for even decades prior to the pitch. As a result, who will sell the business can many times be decided long before the pitch actually occurs. However, at the end of the day, this "bake-off" will have MD's very nervous because it determines whether the MD's and the investment bank will receive millions of dollars of fees and an MD's salary is often calculated based on the size and number of deals they bring in.
This is a long way of saying, analysts and associates during this process will put together a PowerPoint presentation in about a week or two that will be super high stakes with MD's on edge. MD's will be demand last minute and late-night changes, while treating things like misaligned logos as an attack on their livelihood because they are worried the owners of a business will see the presentation and think, "this presentation shows a lack of effort-they will probably put little effort into selling my business" This part kinda blows. It's also why getting into a bank that just "pitches" is considered particularly shitty.
Step 2) Pre-prep work/ drafting: We are assuming you win the pitch, but note this doesn't happen all the time. Often you have a ton of theatre and a circus and stay up till 3am for 2 weeks creating a PowerPoint about how your bank is the best bank to sell a business and ultimately it was for nothing because they select someone else.
If you win, there is a few month stretch where materials are prepared. Most notably, often a business gets audited by an independent third party (not the bank or the client) to verify there isn't fraud going on-this is called a QoE or Q of E (quality of earnings). This takes awhile, so while the third party is doing this, the bank begins getting the company ready for questions buyers will ask as well as drafting presentations to market the company. No matter the company, there are some standard questions that usually are asked and an investment bank will help a company prepare the answers to these questions.
Examples:
There are so many more topics that I'm not going to list them all, but for reference there often are hundreds of questions that a bank helps a company prepare in anticipation of buyers requesting that information. In fact, some questions are so common that buyers will just assume they will have access to it otherwise they will assume something is wrong with the process and company. Something to note in terms of workload: during this part, analysts and associates track which questions are answered, organize the files that answer those questions, and talk to management to get them to provide outstanding requests. While it might sound simple answering questions, each one can often take a lot of work for a single answer due to the company not tracking the data properly. As an example, for something like a customer analysis, buyers commonly want to know things like customer concentration, repeat customers, the geographical distribution etc. and a company might not track that information or they track it, but the last time they did that analysis was a year ago. So, to fix this, they will provide the analysts and associates at an investment bank a list of every customer and transaction they have done and the bankers job will be to analyze the data in excel and maybe make a graph in PowerPoint to show buyers the answers to their questions relating to customers.
On the highest level: imagine anything someone might ask if they were to buy a business or spend hundreds of millions or billions of dollars on a purchase, banks prepare that from the initial question list, to analyzing the data, to making presentations surrounding it.
One thing to note that undergrads often don't get-modeling is actually a very small part of this process. It's a large deliverable, but in reality, its only a focus for a very small portion of the time when selling a business from a broader perspective (Probably <1/6 the time of a sell-side M&A process does an analyst sit in a model).
As mentioned, during this process, marketing materials will also be created. So utilizing the raw data a company provides, banks will create fancy materials that say, "here's what this company does and why you should buy it" Usually there are 3 major presentations:
Creating all these takes a ton of time manipulating data in excel, creating graphs from that data, and making slides that look pretty in ppt. There also is a ton of strategy in these presentations where banks need to understand what a company does and what buyers want to hear to properly show off the company in a way that gets people interested.
Step 3) Marketing: You market a company. Some processes are marketed to a small group, some are a large group. Smaller deals in the middle market more people will be able to pay for the business so you can have even 200+ parties that are contacted. For bigger deals or assets that owners want to be more selective they might pick just a handful, it just depends.
Usually senior bankers will send the teaser in an email and say, "hey, let us know if you want to learn more" If they do, junior bankers will work with buyers legal counsel and a clients counsel to negotiate an NDA (non-disclosure agreement) so the buyer can receive more confidential information and the company won't be afraid the buyer will use it maliciously.
Once this is complete, the junior bankers will send the CIP they created and say, "let us know if you want to setup a call with management of the company to explore the opportunity further"
Some buyers will get more under the covers with the CIP and say, "actually we aren't interested. Others will say, yup, we would love to meet the management team and see what they think about their business"
Also during this process, junior bankers will create a VDR (virtual dataroom) which is basically a high security Dropbox or google drive for files. In this VDR, junior bakers will upload the answers to the hundreds of questions that were prepared in the previous step in an organized fashion. Often they will hide access and potentially only reveal some parts of information if buyers request it or they will upload things to make it look like people are asking questions so other buyers think, "wow, people must really want this company, we should bid high to win!"
Step 4) MP's: There will be some chats with key buyers and management. Investment banks help ceos practice speaking about their companies strengths and junior bankers prepare that management presentation with a ton of feedback from management. Junior bankers will coordinate with secretaries of buyers to get a call scheduled between busy buyers and the busy management team they are representing.
Honestly, as an aside, scheduling is a huge part of the job. Throughout this entire sell-side process analysts and associates will be scheduling calls and putting together little mini presentations from the bank to the client to help guide regular check-in meetings to discuss updates in the process or questions either side might have.
Step 5) Bids: Depending on the process, you could have one round of bids or several. We will assume it's a two-step process in which case buyers will submit an IOI (indication of interest) that states roughly what they think they would pay for the business, although this isn't binding and likely could move. This is done usually to narrow the field of buyers and determine which buyers really want the business as well as get a first look at what buyers think the business is worth. That said, since the price isn't binding it's mainly utilized to eliminate buyers who are less enthusiastic about the business. Junior bankers will create a presentation to show the company they are representing what bids came in and what it looks like the company is worth-this discussion will then have senior bankers talking to the company about their view on the process and what they think the next steps should be.
For the two step process, once the lower bidding buyers are eliminated then the remaining buyers are given more access to information and potentially additional calls are scheduled with management for the remaining parties. Also, senior investment bankers could call buyers privately without the company and let them know things like, "if you pay north of $3B, the owners said they would accept it on the spot and stop talking to all other buyers (exclusivity)" The job of a senior banker here is to guide buyers to pay a high price for the business while also making sure the business gets sold. It's really quite difficult in practice and this is a huge part of why they get paid the big bucks. They need to convincingly communicate to buyers that they can win the competitive process for a price that is in their best interest while also getting them to pay as much as possible.
Step 6) pre-final bid and final bids-
With the more narrow buyer field, buyers will have specific questions they want to ask before giving a more binding price. Rather than ask a company directly, an investment bank will serve as the middle-man and will answer buyer questions with files prepared earlier in the process in a timely manner often selectively revealing stuff in the VDR. During this stage, junior bankers will respond to emails from buyers and run adhoc analyses as well. It sounds simple, but you could get close to a 1000 emails a day and tracking to respond to all them and answer each request takes a lot of people being organized and working as a team.
Eventually, banks submit LOIs (Letter of Intent/ final bids) where there is some negotiation before eventually deciding the buyer that is able to buy the business/ is the winner.
Step 7) diligence-the buyer having won, then will have a huge list of questions they ask a bank to really determine if there is anything material that should shift their binding price down. Additionally, there usually is some negotiation that occurs between the LOI and the purchase agreement that is a more lengthly agreement stating detailed things about what will bring down the price of the deal and whether some cash should be left on the companies balance sheet, what will happen to management etc.
Step 8) signing/ closing: The deal signs and everyone hi-fives because it 95% of the time means the deal will go through. Lawyers need to do diligence and junior bankers help them find files that allow them to do legal/ closing diligence. Also, there usually is filing required for Antitrust regulatory matters.
Step 10) Post closing: the junior team documents the transaction internally which can actually be more involved than you would think. junior bankers create materials to show future clients what happened in that transaction and create closing documentation. Also, usually deals have "closing dinners" and "deal toys" in which the junior team will plan an event with management to celebrate the closing of the transaction. Also, they will have little participation trophies created for everyone involved in the transaction so VP's can collect them like Pokémon cards and brag to their friends that the number of deals they closed is totally worth them being a 32 year old virgin.
In terms of timing, this process can be done anywhere from 3 months-years. The weird thing about these deals is that everything from what deals are in the market, to the price ownership is expecting to get, to whether buyers are familiar with the story, to the number of buyers, are all going to play into the price and whether a transaction actually get closed. Some deals get to the marketing phase and everyone says, "nope, not interested" Others, you might have ownership who say, "we will only sell for $X and that number doesn't get met, so they pause the process and resume it a year or two later.
Probably take the MF PE offer and don't look back. Although, would make sure it is A) actually buyout (versus credit or secondaries, unless you're into that) at a good MF and B) a (summer) analyst program with a good track record (i.e., alumni get returns and go on to do cool things or stay at the firm)
If it's secondaries or credit, I honestly would just take the IB gig. Would probably take most IB roles over secondaries or credit at BX/KKR/etc.
Don’t agree with the IB over secondaries or credit remark. IB is definitely more desirable than it was a few years back with the pay raises, but people at every EB and BB are still jumping ship to way worse exit ops than MF investing positions. With IB, you can land buyout PE down the line or you can end up doing accounting work at a questionable startup.
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