Would be curious to get this group's thoughts on the benefits / drawbacks of the PE partner track v. the PE portfolio company CEO track. In particular, I'm thinking more of the LMM / MM space for both.
Recognize that the skillsets to succeed in each are very different but am curious how folks think about comp, work/life balance, etc. between the two. Has anyone here considered these two tracks? What caused you to pick one over the other?
bump
Bumping my own thread - hopeful to get some thoughts from folks here. Thanks!
I think the reason you're not getting a lot of responses is that not many people, if any, get a "choice" at that level. If you do traditional IB analyst program, you don't all of a sudden get to pick between PE partner track vs. portco CEO "track". If I had to answer:
Comp: will likely be higher as PE partner given carry, etc. More risk and reward where as CEO of a $5m EBITDA company probably makes a few hundred grand. If it's a $25m EBITDA company, more likely to be clearing over $1m (probably have options as well).
Travel: both will be heavy in travel although dependent on industry and type of business. CEO will be traveling to meet customers, suppliers, etc. PE partner will be traveling to meet management teams or attend board meetings for portco's.
Hours: both will be working ~50-70 hours. Really hard to generalize
Both are very solid gigs obviously and many people here would love to be in either seat. Some like ops more, some like investing more which will dictate where you gravitate towards.
Appreciate the response and your first point is totally fair.
Maybe the way I'd slightly reframe this is, for someone earlier in their career (i.e PE associate or senior associate), how should they think about these 2 paths.
What would drive someone to pick one over the other? Is that more helpful?
Not a lot of cases + not sure why answers would be particularly helpful to anyone here. But a CEO is the head of a business, usually runs bigger P&L than an average partner and is therefore usually compensated at least just as well. Equity upside is different though - one tied to performances of multiple assets, the other to just one.
Google Kevin Burns from TPG.
from a pure comp perspective I think it’s possible that the ‘CEO of PE portfolio company’ is more lucrative. When the deal is all said and realized, they cash out their incentive plan and usually it’s a hefty sum in the millions (can even be >$10m for some mega deals). this doesn’t take into their co-invest option.
the PE partner on the other hand might make more over the longer term but a lot of it is unrealised. Serious partners are often asked to roll their carry into the next fund. Carry vesting itself isn’t so straightforward (often many clawback clauses) and cashing out vested carry is totally dependent on the fund cashing out and having liquidity itself.
from an interesting career perspective, im of course biased to argue that it’s more fun being a PE Partner, managing via boardrooms of several companies instead of just one. Getting involved in investment decisions vs day to day operational issues etc..
just some thoughts!
Isn't it far riskier? As a portco CEO, all your compensation eggs are in that basket. Sure, if the company does great you can make a boat load, but what if it flops?
As a PE partner, you are getting carry on the fund, so a few bad deals shouldn't ruin your comp as long as there are some good deals to make up for it. The risk is going to be way more reduced, right?
I haven't been a partner at PE firm nor have I been a CEO at a portco, but as a mid-level professional in MM PE, who has worked closely with a number of portco CEOs, I can give you my general thoughts.
At the end of the day whether you're a CEO or an Investing Partner comes down to your both your skillset and what you enjoy doing on a day to day basis. In PE you're ultimately rewarded for being a good investor and a good fundraiser. Management tends to be less of a focus and the PE partners I know ultimately love doing deals. Thinking about them creatively, sourcing, playing out an investment thesis, etc. While they might be able to function as CEOs/operators, I've found that they tend not to be very good and don't love those types of roles.
On the other end of the spectrum, being CEO of a company especially in the sub 100M range, you're kind of a jack of all trades. Management and hiring is huge, you need to surround yourself with good people, from there you need to focus a little bit on everything, product, sales, marketing, customer success, etc. On one day you might be focused on pushing a big deal over the line the next, you have to deal with a harassment claim filed in your marketing department, the next day, a big customer is unhappy with whatever they'er unhappy about, you have to get on the phone/plane and go smooth that out, oh and you have a board meeting in three weeks, you need to start prepping for that...It's a scrappier role with potentially more fires to put out, but potentially more rewarding if that's what you like to do.
Regarding comp/lifestyle, it's really too varied to define that well. I've seen Portco CEOs with average stakes, ~5% of the business, make out like bandits afters a few years of work and a good exit. I'm talking low 8 figure amounts. I've also seen Portco CEOs that join in the hopes of a 3-5 year flip, and then one thing leads to another, business underperforms a bit, covid hits, sale process fails in the final stages, etc and all the sudden they've been working in the business for ~10 years, the PE firm needs to get rid of the portco to raise another fund, and while they might make decent money on exit, annualized over 10 years of grinding plus what is probably a relatively low base salary (depending on size of business), the pay isn't bad by anymeans, but it ends up being what you'd make as a mid-level banker/PE guy/gal. I'm talking low 7 figure amount but annualize that over a decade, a few hundred thousand a year on top of a low-ish 6 figure base. Again all generalizations, but these are actual comp figures I have in my head from our portcos. Hours tend to be the same, if you want to be good, you're going to be working pretty hard regardless, both roles are obviously senior enough that the afford flexibility ie CEO/Partner wants to go to kids little league game and blocks it on their calendar, they get to take that time off. With that being said, I've seen plenty of CEOs busting ass over the weekend and on holidays and I've seen partners do the same. I don't think either is definitively easier in terms of hours worked.
If I had to generalize, I'd say PE is probably the route to take if you only care about money, it's a safer route to doing well. Portco CEO in my opinion would be more rewarding, but more stressful, just way more variables to deal with. PE partner has minor differences in that each deal is different, different fundraising environments, ensuring the portcos are doing well, etc, but I feel that once you get to the top it's slightly more routinized than being a CEO would be.
With all that being said, being a CEO is probably more rewarding from a holistic business success type of perspective. This is purely my opinion, but a great CEO has a lot of influence and for the most part a lot of control over what is going on in the business. You have a thesis on how to run a business and the ultimate agency to carry those ideas out. In addition to that, you have more of an impact on people.
As a PE partner, unless you're a founding GP, at the end of the day it's still just deals and execution all the way down. My theory is that the reason most PE professionals, even the top guys, can't/don't become CEOs is because they probably couldn't do it that well. For better or worse, PE sits in an ivory tower, don't have to get their hands dirty, and theoretically know how to operate a business.
I don't say that with any negativity, PE is perhaps kind of the shortcut, more money to be made less hassles relative to being the CEO. Either way it all comes down to what you want to do.
This is what I tried to say above.... great response.
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