What are the pros and cons of taking a megafund analyst role (e.g., KKR, Bain Cap) vs. an offer from a bulge-bracket bank or MBB? I've heard some say that megafund analysts are basically guaranteed return offers, but also heard from others that PE analysts really struggle relative to bankers/consultants when they transition to the associate role.
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Good banking group: - most rigorous experience - good odds at access to prestigious PE firm as associate
Megafund analyst: - least rigorous experience - most prestigious - very good odds at reentry as an associate
MBB: - rigorous experience like banking, but a bit more variability, because only 1 project at a time - also very prestigious - hardest one to enter megafund from, but still happens decently often (lot of the bigger funds have bias towards bankers, with exception of Bain Cap)
Megafund analyst role is a much more rigorous experience than a good banking group if you want to become an investor and it is not even close. Why would PE analysts struggle relative to bankers/consultants when they transition?
Because it's not even close to as rigorous. You work on fewer deals, you don't get the reps, and the associate above you takes most of the technical work, whereas at banks, the associate wants to push that work on you.
Would argue the exact opposite (and I have experience from both). Yes, might work on fewer deals - but the level of depth / analysis and actual thinking required at the MF far outweighs the benefit of working on more deals (at a more shallow level). Rigorousness of experience is to me what you actually learn at those places in order to become a better investor - and at least from my experience (and pretty much everyone I know who has done the same track) - it is not even close between MF / good banking group at BB. Depth > Velocity.
Seems pretty unlikely you were a megafund analyst and IBD analyst... why leave IBD early to be an analyst, when you could join as associate?
To each their own, but I think you're wrong. As I laid out above, there are trade-offs. Megafund analyst is by far the most prestigious, but I don't think the experience is as good.
No offense, but if your experience is outside of the US, it is practically irrelevant to the discussion at hand.
A BB/EB Analyst position - in the USA - is a very standardized level of experience: a lot of modeling (where you are in charge of the model), pitchbook making, etc. A MF/MM PE Analyst position - in the USA - is completely subservient to the PE Associate, which is 95%+ of the time a person with two years of BB/EB Analyst experience and fully fluent in modeling and PPT work. PE Analysts come on to kind of help out with some small aspects but never get to run a process, whereas their banking counterparts take on the bulk of work. For the vast majority of Analyst candidates, banking experience is superior in the long term compared with joining a PE straight out of undergrad. I could go a lot further on this topic if needed.
Honestly, people here pass off advice based on their own niche experiences as gospel. Please refrain from doing so. I have many years of work experience outside of the US and don't try to pass on my experiences as what a person in the US should expect. Outside of the US the junior levels are given a lot broader experience. In the US it is very standardized, specialized and technical, with highly defined roles.
No offense but you are talking bullshit. It is standardized here as well, I was just making the point regarding that the track does not always need to be 2+2, not that the work would be different. I know most of the guys at the analyst level in the US at my firm as well and their experience is very close to mine (both at BB and MF), it also happens a lot that there will be cross-continent staffings so you see how US deal teams work as well. Your description of what a PE analyst does is beyond ridiculous and quite the opposite. The PE analyst will run the model and outsource all the stupid tasks that they don't want to do to the banks, we would never let a bank run the model. Analysts also very much get to run the process (or at least workstreams within it).
Why do you even try to pass on experience if you haven't experienced both?
Okay, to be productive to the discussion, rather than talk past each other, let's do a thought experiment. We'll take the same hypothetical LBO deal. I'll describe the role of a banking analyst, and then you can describe the role of a PE analyst (again, not counting what the Associate does).
Banking analysts will primarily do:
Model (full responsibility). This includes running the whole model by themselves, including S&U, PF Cap, projected three statement model, LBO returns / IRR, DCF, WACC with comps, etc.
PowerPoint work. If in sell-side M&A, could be the CIP, Management Presentation, pitch book, etc. Involves heavy industry and company analysis.
Industry specific work, e.g. covering a specific sector or a set of companies, ad hoc analysis, etc.
From what I have seen, a PE Associate does the bulk of the modeling as well as splits PPT work with the Analyst. However, most work at PE shops is looking at potential deals (doesn't make it past the IC / first round bids) or work with existing portfolio companies (hello, quarterly updates). Occasionally you will be on a deal that goes the distance, but in two years of being a PE Analyst that might be a small handful of deals. Compare that to an Analyst at an equally busy bank which sees probably 5x the number of transactions. PE experience at the junior level can be very deep but not particularly broad. At the beginning of your career I just think it's not the best blanket advice to give to the vast majority of candidates. PE training also sucks in comparison to the 2+2 banking track, again, some candidates may not need the training or transactional experience but this is the exception rather than the rule.
Curious to know your thoughts.
Fair enough and agree that is more productive.
As you pointed out there are different modes with different set of tasks / responsibilities. I would say that you have a live phase II deal ~30-40% of the time.
In a live deal, I would primarily do (and I distinguish between the different workstreams):
What I would not do and outsource to banks: trading comps (long-term and current), transaction comps, benchmarking exercies, macro data / analysis, random / ad-hoc analysis (often in the vain of, can you please go through all of the competitor's annual reports the last 10 years to check x figure)
Commercial Workstream (shared responsibility, associate has lead). Focus on all commercial / market aspects of the company - basically we are trying to prove/argue why all of our assumptions in the model are believable how it is supported. We really focus on the quality of the business (i.e. what are the barriers to entry, competitive landscape and inherent quality of the business model), the quality of the company (what capabilities / management), understanding the growth and then finally how do we make sure we can underwrite this. The associate will typically lead the workstream (i.e. scope the advisors e.g., industry experts, senior advisors, commercial consultants and manage most of interactions), but the analyst will typically do "most" of the actual analysis. It is often here VDR / database analysis comes in, very dependent on the company you are looking at.
Financing Workstream (associate has lead and will manage most interactions). Limited work here except doing covenant models, bank models, helping out with grids etc.
Memo Workstream (associate/more senior deal team member has lead). Most of slides will focus on analysis me/associate has done so far but putting together it as a story. I will do all financial / numbers oriented slides and the associate will write most of the content / key takeaways from the analysis pages that I have done in the past. Would say I do ~25% of the pages, associate 50% and then more senior deal team members will do ~25%.
Yes not all deals will go through (but neither will they in banking), but on average I would say that you bring ~2-3 deals to final investment committee per year (and maybe 10-15 to the early stage committee) - and in terms of learning how to become an investor, it doesn't really matter if you do the deal or not - the work leading up to it is the most important in terms of development. Sure doing deals are always great and it is good to have done some in order to learn the full process e.g., financing, syndication, closing accounts and what have you - but not really in order to be an "investor".
~50% of the time will be early type work (pre-phase II) and it will often revolve around figuring it out if it is worth spending time / resources on or not. Think this phase is pretty interesting as well as you have to take more high level investment views (you don't have access to all the data) and need to learn to think about an investor. Often you will often just get a name (and figure everything out yourself) or you get the CIM and then need to take a view if it is worth spending time on or not (typically an early stage model will be done and a high level investment thesis). Phase Is are light version of what I described above.
0-10% I would say is portfolio companies. Quarterly valuations, sure that happens... once a quarter. Most of the involvement will be regarding bolt-ons / re-financings where we help-out.
On average over the two years I think you would have done on average 1 deal, brought 4-6 companies to final investment committee, brought another 20-30 (and gotten an in-depth look at those as well) to earlier stage committee and probably looked at 100 companies or so in total that you have evaluated, hardly a narrow experience in my eyes.
As I said I have done both - I vastly prefer MF (even though hours are arguably worse and it is more intense) - you actually need to think while doing stuff at an in-depth level, not just execute. I also much more prefer doing early type work (where I can really develop investment accumen and looking at a wide variety of business) vs. the type of work that you do in down-time in banking e.g., pitches, comps, company profiles and other random stuff.
Again, depends on what professional you want to become - but to become as good of an investor as possible, the earlier you start the better.