I'd like to hear from some of you how you knew PE is the right path for you. I don't despise it, but I noticed deals really stress me out, but I am learning and I have gotten better at managing them over time. My favorite part is interacting with the company executives and learning about the businesses/thinking about value creation (not that I really get a chance to implement it). But the process of building the model and crunching the numbers and memorizing all the company numbers stress me out. I prefer to think about the high level trends and analyze data to see how things trend versus the nitty gritty of digging through financials.
I'm not sure if anyone else feels this way...How did you figure out what is the right role for you?
Don’t the favorite parts of PE match what the Partners/MDs in a PE firm do?
Yes and that makes sense and that’s why I’m working towards being a VP but at the same time I’m wondering if any other associates have felt that way because every associate I talk to says they love crunching the numbers and the modeling aspect but then end up quitting lol.
Maybe they won’t make good MDs. At the top the job is sales + investment judgement (what to buy, how to improve, when to sell).
You are not the only one lol... I was on the deal side for 3 years at a LMM PE firm and the stress of knowing every single number during IC was absolutely awful. I will say it got better over time but I think as a VP it gets worse because you have to "lead" the discussion plus know your numbers cold (assuming your associate doesn't know them).
I'm doing in-house ops work for PE now and can say that IC deal stress is completely gone now.. there are other stressful elements of this job but overall am happier
Seems like a career in MBB might be more interesting in that case
Honestly I don’t think I’d like servicing clients and I don’t think you really get to implement your findings and execute the same way a PE firm does. If anything I’d be interested in becoming an operating partner. But that feels harder to do than work upwards in PE.
YA bEcAuSe gEtTiNg a jOb aT MBB is sO eAsY
Have you considered moving to PE Portfolio Operations? You get to act as an internal consultant for a PE firm, do BD, and still work everyday with PortCo executives without the downside of the client aspect of MBB.
What are some companies that do this?
I have and personally I feel like I would get bored in the PE portfolio ops role since it feels like an investment role but with less career trajectory and way more people in the org to deal with. I I like working with different teams and different companies and seeing that contrast and finding ways to work with different business models and work styles.
"way more people in the org to deal with"
"like working with different teams ... finding ways to work with different business models and work styles."
These two statements are opposite of each other.
Having now worked in investment banking, private equity, private credit, and public credit/equity, I have a couple of thoughts for you. Only one person's opinion, so take with a grain of salt, and please no one be upset with some rather perfunctory generalizations:
1) Career investment banking (key differentiator: relationship building). These bright folks tend to realize early on that while they're not the super-genius, bookishly smart types, they genuinely do well connecting with people. These are the folks who seem constantly to have a friend at every company, and who constantly seem to be best man / maid of honor at yet another wedding this weekend. They also have a certain self-assured cool about them, as evidenced by the fact that they are "whole" enough not to immediately jump to and base their worth on the "prestige" of any of the below jobs..
2) Private equity (key differentiator: stressed out type-A control freaks who want to learn about business). Maybe a controversial opinion here, but this is still fundamentally similar work to banking, but with a much higher nexus of control. Unlike others on this list, private equity typically owns the company outright, and there's a certain thrill these folks get from getting to tell the CEO and CFO what's what. These are generally the "master of the universe" types. These jobs also attract folks who are looking for a trade-off of less finance-y finance like capital markets in exchange for exposure to decision making in actual business. In my opinion, speaking from experience and depending on your shop, this is excellent training ground for being a future CEO/CFO, where "high finance" is only one of many responsibilities.
3) Private credit (key differentiator: nerdy folks who love finance). While the value of a great PE investment is company performance / growth / exit / etc, the value-add of a great private credit deal is structuring. This naturally attracts the people who I would call the "finance nerds". Private credit certainly spends time "understanding the business", but arguably less -- and sometimes much less -- than the folks above. They spend much more time pouring through credit docs and term sheets, and they love it. Also, typically a better work-life-balance than the two above.
4) Public credit / equity (key differentiator: less risk-averse nerds who love finance). This is a much higher volatility career path filled with brilliant, nerdy folks who are willing to take risks. I'll take a moment here to point out how much better work-life-balance is with public opportunities than private ("Bids due tomorrow, sprint!" vs "Only have public data, so let's do our best -- the market will be open next week too!").
At the end of the day, I have found that in the first decade of your career, it's not all that hard to move between #'s 2-4, depending on the labor market. So the key question is whether you enjoy the nerdy number-crunching of the buy side, or the relationship "street knowledge" of the sell-side. Whatever you do, don't let people convince you that you have to decide in the first x months on the job -- recruiting next year will not only be easier, but you'll also have time to learn what you want. Best of luck!
Yeah, I did IB for 2 years and I am going on my third year in PE. I guess the feeling of closing a deal is the same feeling I get when I run a marathon. It has its good moments and bad moments but it's super satisfying to close a good deal. I do like PE but I still find myself still dreading some aspects of the deal process....mainly due to the condensed timeline of trying to download all the data within 2 months is what causes my stress.
I came to a similar conclusion after my first role with a strategic acquirer of niche professional services businesses (a roll-up) and then after a stint in banking. I liked doing deals and working with our clients but when the transaction closed I always had the feeling of wanting to stay involved. I didn't want to just jump to the next deal, I wanted to see the integration through, work to realize any synergies, and actually be part of a firm as opposed to a mercenary.
That led to my current role which is essentially a strategy role at a Portco (not exactly a PE Portco, but similar). I still get to lead acquisitions but the scope of my responsibilities have widened dramatically. I'm doing far more operational work, which I actually enjoy. I get to be forward looking on new service offerings, build data warehouses, establish firmwide reporting standards, influence and provide all the analysis around key business decisions, and have a seat at the big boy table wrt to management.
Hey - I felt the same way and quickly realized during my IB days that going through endless iterations of models and editing CIM wasn't really right for me. What I really enjoyed was building relationships with smart management teams and understanding the strategy of how to implement growth within companies.
After 1.5 years of banking, I took a risk and joined a sourcing function at an established UMM PE fund and haven't looked back over the past 5 years. I know most people associate sourcing as a "smile and dial" role, but given the competitive nature of transactions these days, I think of it more as a role that requires you to understand a company's vision, product, and go-forward strategy to build genuine relationships, and forming an idea of how a fund can be an additive partner to a potential target.
The culture of sourcing differs firm by firm, but I think you would benefit from exploring this path.
Very interesting - could you explain more about your day-to-day, personal and firm-wide sectors of focus, etc? Feels like sourcing gets pigeonholed negatively on here, but this is a refreshing take on it for anyone looking for fulfilling avenues in PE.
My day-to-day is very different and no day is ever really the same. My day is typically composed of 3 different parts 1) Research 2) Outreach and 3) Calls.
Given that I work for a UMM with a clear equity check mandate, my firm evaluates my success/performance not based on how many calls I hold or how many emails I send, but rather the quality of company relationships I can provide. This means that some weeks, I'll have 5 calls and some weeks I will have 25.
My firm organizes our sector/sub-sectors by assigning MDs/Directors with different swim lanes. I will get staffed on 5-6 platform coverage areas as well as add-on projects for portfolio companies. I have weekly/bi-weekly standing meetings with the MDs leading the respective coverage areas, which means I get a lot of autonomy around actually executing on the sourcing activities. But at the same time, I am expected to bring results and have a lot of responsibilities. The last thing I want to do is to show up empty-handed for these discussions.
On platform areas, I like to do a lot of research upfront for 2 reasons 1) Through knowledge gained, I am able to better organize which players do what, and remove noise and eliminate any non-relevant targets so that I am not wasting my time; 2) When I speak to CEOs of these companies, I can actually hold my ground and ask intelligent/technical questions so that I am not wasting their time. As part of my research efforts, I like to build out a pipeline list of companies that I should reach out to. This takes tremendous amount of time - along with building relationships with bankers, consultants, and other 3PAs to understand the latest market/industry trends/deal flows and identify who is interesting or not, I also hold a number of expert network calls to map out the space.
The hardest aspect of the job is conversion. Any CEOs of great companies are getting bombarded by hundreds of PE/VCs on a regular basis, and are often annoyed at getting generic emails. Therefore, it is up to me to figure out how to stand out. Often times, the way to achieve this is personalization - e.g. if you recently see a PR that a company has opened a new office in London, you can get a sense that international expansion is an important part of their strategy. Or if a company has recently announced a change in key sales leadership, you can likely get a sense that they are organizing their sales team, etc. All of these little "signals" or "cues" help me develop a thesis around how our fund can be helpful to the company's future growth plans, and this helps formulate my pitch. If I am successful in receiving a response from companies, I also take time before the calls to prepare accordingly.
On add-ons, this in my opinion is much more fun than platform (because the mandate is crystal clear). I basically act as a corp dev extension arm for the portfolio companies I work with CEOs/CFOs think about which companies to go after. This also requires a lot of strategic understanding of how "buy and builds" work. To give an example, if a software portco is looking to enter new markets or introduce new features - you have to first figure out whether or not it make sense to invest time & resource to actually develop those features in-house, or just acquire a small player to accelerate that product roadmap. For me, this is an incredibly tangible aspect of my job where value can be easily measured. To give an example, an add-on I sourced for one of my portfolio companies supercharged their position in an adjacent industry, contributing consistent 20-30% YoY growth in ARR bookings. This is meaningful to me as I can point the results to my IC and justify my "existence" within the firm. I have sourced 9 deals in the last few years and 7 of them have been add-ons.
Sourcing is an incredibly tough job. It's easy to be underappreciated in the wrong settings, but ultimately it's up to you to prove your worth. If you're consistently delivering quality deal flow to your MDs/Directors, they will WANT to work with you as you bring value to them. To be quite honest - most juniors at shops will look down on you because they think you are not as technically capable, but this is an unproved bias. My sense is good sourcing professionals require both financial and technical understanding of a business - because you are speaking with CEOs who are experts in the space. Deal professionals will rely on you to be the "first line of judgment" to weed out irrelevant businesses and not waste their time.
what about pay? it wont be same as front office right? because bonus at end of year and being hungry makes to work even harder.
Base salary is slightly lower, but bonus is uncapped depending on how many deals you can bring in.
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