Possible to Jump to PE as an experienced CPA
This is a hypothetical question, but if a CPA who is currently a partner of a local CPA firm catering to small and midsize businesses with significant mergers and acquisitions experience wanted to jump to a private equity firm would that be possible? Is this kind of move frequently done?
definitely not frequent, but I am sure it has been done
would think role would most likely be accounting-related in PE, not front-office deal generation + portfolio work
think of the classic apprenticeship analogy - PE partner work is learner through years and years of experience in PE - not banking, not capital markets investing, not accounting, etc. For example, most partners in PE are responsible for negotiating legal docs, leading interactions w/mgt teams, setting budgets -- let alone having investment acumen and understanding how businesses work. I do not mean to over-emphasize the complexity of this, but I think this can only be picked up years of experience
Plus, why would a firm hire someone w/accounting experience when it could hire someone w/PE experience?
I do not mean for this to be discouraging, but want to give a real answer / perspective
Others, please let me know if you disagree
What is it that you think CPA partners do, especially those with significant M&A experience?
I think people underestimate the breadth of what CPAs do. Partners in CPA firms frequently do all of the things you mentioned plus more. They are out there doing the wine and dine, conference/seminar presentations, thought leadership articles, shaking hands, playing golf, serving on boards, etc... They negotiate every day and help set up single entities, trusts, holding companies, complex entity structures, along with working on deal structuring to maximize tax benefits and ease integration. They do startups, turnarounds, and exits. They'll do financial statement analysis over lunch with a client and roll that lunch conversation into multiple consulting projects to help take the business to the next level. CPAs have the in with middle market businesses as they are the go to for advice on anything involving money. Obviously not every CPA out there does all of that but it's not uncommon.
Disclosure: CPA
sure, I acknowledge CPAs / accountants are critical for PE execution (particularly during due diligence), however, if a PE firm wanted someone with accounting experience, think firm is more likely to
(I) hire a CPA into firm to lead structuring-related work streams, not PE investment work or
(II) not hire a CPA into for, rather outsource and hire an accounting firm for selected work
in my experience, mid-level and senior PE positions are not easy to come by. Mid-level and senior PE investment professionals have high weight on carried interest pool, so firms are very sensitive about building out these ranks
Yeah, no shit.
To OP, not very frequent at all.
Among the challenges you face: 1. if you're a partner at a CPA firm, you're probably a bit seasoned in your career, a mid-to-late career switch to PE from anything other than banking (which is also very rare) is not very likely 2. if you're a partner at a small CPA firm, I'm guessing you wouldn't really be serving the transaction services roles which the Big4 usually serve on PE deals that would lend some degree of subject matter familiarity, professional network etc
That being said, the service providers I have seen jump to the buyside has often been in VC, where usually a lawyers laterals to a VC in a legal capacity and he is very commercial and capable outside of the lawyer box and as a result his responsibilities end up bleeding into the investment side until he/she completely crosses over.
Considering that you've mentioned that you have strong exposure to middle market M&A, I would think that if you are a sufficiently seasoned rainmaker and can prove that you are able to bring in the deals, it would definitely be possible. Senior level recruitment in Private Equity is often unstructured and rely largely on networks and connections.
But as it has been pointed out, a CPA would most likely be hired into a operations-related role rather than investment focused positions. Perhaps in addition to internal operations (e.g. Fund accounting, etc.), there could be areas in portfolio managing that your expertise as a CPA could be essential for (e.g. secondment into a portfolio company as a CFO or as part of the Board of Directors for audit purposes).
One of my colleagues holds a CPA and he is often seconded into our growth investments as these companies do not have a full suite of C-level executives. An experienced CFO or Finance Controller is essential in bringing the company to the next level. On a side note, it definitely helps us sleep better at night with the knowledge that the person managing the funds from our investment is someone we somewhat know well.
I'm going to back up Marcus here. I don't think you're truly appreciating the responsibilities of a Partner at a Private Equity firm. Some things to think about:
1) The primary responsibility of a PE Partner is to fundraise. Not every partner is directly involved in the fundraising effort, but each one is heavily scrutinized by limited partners prior to making an investment. The thing the LPs care most about is the track record. Someone who has never made an investment before in their life has zero track record. They would be a liability in a fundraising environment.
2) You say a CPA negotiates every day and sets up all these entities and trusts. You must realize that PE professionals are outsourcing these functions to accounting firms and lawyers. They aren't doing it themselves for a reason. When a PE professional is negotiating, they are negotiating to minimize legal risk associated with the business they are buying / selling. To be successful in this role, the Partner needs to know the many arguments and counterarguments associated with the position he/she is taking (which is usually dictated by whether or not they are buying/selling). This generally comes with experience.
3) Networks matter. PE Partners tend to build their network through their job. CEOs of past portfolio companies, investment bankers, etc. These relationships are built and solidified by working together in the past. While CPAs have networks, there isn't a tremendous amount of overlap. Not all CEOs are equal...
4) The way a PE professional looks at a business is VERY different than the typical way of looking at a business. They analyze it for risk/reward profile, ability to leverage, recurring revenue, growth ops, exit strategy, etc. I guarantee you that a CPA would need to "reset" his mindset and relearn how to approach business from a PE perspective. You may not believe me, but this is quite real. It happens to bankers all the time too --- they turn "sell mode" off and need to adjust. It isn't always easy.
Listen, I'm not trying to purposely blast the hopes and dreams of CPAs looking to transition into PE. With the right connections, I'm sure it is possible. But it isn't easy. People who are successful transitioning in at the partner level usually have a niche. Maybe they were a General Manager at GE that brings significant operational expertise. Maybe they worked in government and have sick connections. But I assure you, everyone brings something to the table.
Break into PE with accounting background (Originally Posted: 08/21/2012)
Hi Guys, I know questions related to break into PE have been discussed a million times. Sorry if my question has been asked before.
I read some discussions about transaction service (financial due diligence) at Big Four -> PE. It seems pretty challenging considering the percentage of people in TS eventually getting there. One reply to a previous thread mentioned it typically needs a MBA after TS to PE in U.S. (unnecessary in London, though )
My question is:
Has anyone seen people move across within a PE fund from operational/accounting to investment?
Which way has a better chance, operational/accounting role at PE to PE investment or TS at Big Four to PE?
If the above two have similar chances, it would make more sense to move within a PE fund since the pay at TS big four sucks a lot.
i would suggest you move from TS to IBD then to PE
thanks a lot for all the great advice from you guys. Is TS-IBD-PE better than TS-Consuting such as Bain & Company -PE？
I'm currently in auditing. I'll have to internally transfer to TS and then do whatever it takes to go to PE eventually. Let's say I'm already the manager at TS by the time I make the move. What type of positions at IBD/PE will open a door for me? Is it still associate level?
not exactly the answer you looking for but i moved frm HF BO to PE without a MBA but at the analyst/entry level...refer to my post for further details... //www.wallstreetoasis.com/forums/mission-bo2foi-did-it
Check out some of the background here - a few look like maybe they've done what you're talking about?
http://www.roarkcapital.com/team.php
[quote=petergibbons]Check out some of the background here - a few look like maybe they've done what you're talking about?
http://www.roarkcapital.com/team.php[/quote]
Thanks a lot for this info. It's very encouraging to see that.
.
There are some mid-market places that employ a lot of ex-accountants e.g. 3i in London but they typically move across with a decent bit of experience. It is not very common though and you won't find many/any accountants at the top firms.
I think that Big 4 - IBD - PE is probably the most likely route as it's tough to get into top PE firms out of an MBA with no prior experience. If you can get into IBD (or indeed MBB) then you are in the mix for most PE firms and might even have an edge given your accounting experience.
Is it generally accepted that FDD is the best way to break in?
Laborum non iusto labore nostrum at aut consequatur. Quo consectetur sed sed voluptatum molestiae vel sit. Autem alias perferendis libero voluptatem quia laboriosam. Sint reprehenderit officiis occaecati accusantium consequatur.
Corrupti repudiandae ipsa nulla voluptas sit et odit. Ut totam et eum porro omnis. Qui ducimus cupiditate quam tenetur. At error mollitia dolorum laudantium.
Laudantium ea nobis possimus iste suscipit dolores nihil. Deleniti sint quis est culpa quasi qui hic reprehenderit. Et dolorum consequatur amet quasi. Ipsam quos voluptatem ipsum ut. Vero repellat tempore hic molestiae. Blanditiis iure voluptatem voluptatum sunt. Non eum et perspiciatis perspiciatis ea.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...