Q&A: 3rd Year PE Associate ($10bn+ AUM, MBO/LBO, equity, mezz, distressed debt)

Edit: Wow, did not expect this thread to get so popular. Apologies if you PM'd me and I have not responded - there are dozens of messages I would respond to if I wasn't getting crushed on a deal. My firm must monitor my WSO activity and figured I needed more work to do...

Two quick updates:

  1. My first post on office politics is now here: Guide to Office Politics (Part I)

  2. Many of your PM questions had some common themes around breaking into the industry from various types of backgrounds, compensation, bonuses, carry, etc... one thing I have noticed is that 90%+ of the questions I've received are discussed in WSO's private equity guide. It contains all of the typical basic info you would find in a Vault guide, but also has a ton of intel compiled from WSO's access to practicing industry professionals. If you are serious about breaking in, consider making this small investment.
     

My original post:

Hello monkeys, I used to be quite active on WSO under a different name (before and up to the Eddie / MMM days), until the IB grind turned me into a lurker. I can honestly say that WSO played a big part in helping me land the IB gig in the first place, so when I coach young bankers / college students on "the path", one of my first questions to them is whether they've joined this community.

I then tell them my story, including observations on the "softer" side of the industry - i.e. the politics, career moves, and fuck ups I've witnessed/committed. It dawned on me, however, that all the experience I've gained in ~5 years in finance (mostly through making mistakes, and occasionally by having great mentors to look up to) might be valuable to some of you internet strangers as well.

So as a thank you to the WSO family that helped me get here, I'd like to open this thread up for general questions on investment banking, private equity, and general survival in high finance.

My background:

  • Semi-target / economics major
  • Analyst at a BB for ~3 years
  • Now in my 3rd year as an associate for a large PE ($10bn+ AUM) with multiple funds
  • Areas of focus include MBO/LBOs, growth equity, mezz, and distressed debt

Regards,
NuckFuts

 

Thanks for the AMA.

What are your future plans, will you work into a VP role or go to B-school? Also describe the worst boss you've ever worked under.

26 Broadway where's your sense of humor?
 
Best Response
TippyTop11:

Thanks for the AMA.

What are your future plans, will you work into a VP role or go to B-school?

I am very happy in my job and the feedback / indications from higher ups have been positive so far, so my current plan for the next 1 - 2 years is to transition into less of a modeling role and more of a documentation / deal process role to prove myself as a VP candidate. If for some reason that does not work out (we have no policy on associates out, it's case by case), I could always fall back into banking (like a boutique advisory or restructuring shop) - I've been surprised at the number of recruiters that have reached out looking to place PE guys into these type of roles. I want to avoid B-school at all costs since (a) I think I am learning more in my current role than I would at B-school, (b) massive opportunity cost, and (c) in terms of professional development I would rather consider a CFA or something more technical like programming / stats with a big data spin to it. My ultimate dream is to make enough $ in finance to be able to invest in passive income / real estate. Also, I should mention I have been given carry in a few of our funds, and one or two might see big payouts in a few years so I am strongly incentivized to stay put for now...

TippyTop11:

Also describe the worst boss you've ever worked under

One of my MDs back in banking... it comes down to lack of character, extreme selfishness, and a massive ego. Basically your stereotypical shithead banker who worked his way up and in the process lost every decent part of himself, but got very good at playing the game. When headcount was under pressure, he would lead people to believe they were doing a great job only to berate them in the private year-end review calls, giving them a low rating strictly based on whether or not you were someone's "boy". For example if you went to the same Ivy as him or one of the other MD's, you were good to go even if you sucked ass at banking. There was a ridiculous amount of nepotism. The "outsiders" (immigrants, people from non-targets or in satellite offices) got handed down lower reviews because that would justify a shit bonus and made it easier to let them go / convince them to quit later on. If your uncle was CFO of one of our clients (yes, this happened!) you would get a guaranteed good rating even if you left at 7pm every night. It was all about making the numbers look good for the higher ups in the bank, and preserving the MD bonus pool and relationships. We had a lot of military guys in our group, and I saw them all quit. It wasn't the stress, hours, or pressure - office work was a cakewalk for those guys compared to getting shot at in Fallujah. They quit because they were sick of the non-meritocratic environment this MD created. He would also throw his underlings under the bus to save his own skin, every time. Even senior VPs who had worked under him for 5+ years - if an IPO went sideways due to a miscalculation this MD made, it was suddenly his Sr. VP's fault for fucking it up and he made sure to tell the head of IB as much. I strongly believe in a meritocracy and that you should take responsibility when someone under you screws up - this guy was the polar opposite of that and it rubbed me the wrong way in every possible sense.

 

Thank you so much for these write ups, much appreciated. This MD seems terrible, what is he doing in this BB then? How come they still keep this person on their team. I am very surprised.

 

Thanks for doing this.

Why did you choose to stay a third year as opposed to recruiting for PE during your first year? How did you figure out what path to take in terms of staying on banking, PE or HF, and corporate development? Did you know going into banking?

 
jamthemansam:

Thanks for doing this.

Why did you choose to stay a third year as opposed to recruiting for PE during your first year?
How did you figure out what path to take in terms of staying on banking, PE or HF, and corporate development? Did you know going into banking?

I was fortunate to have a couple of mentors who taught me early on that the beginning stages of a career in high finance are fraught with uncertainty and luck. So instead of targeting a specific sector (PE vs. VC vs. HF and the many sub-types of firms in each of these sectors), I came up with criteria and applied to a pretty broad set of opportunities. This is partly why I stayed a third year - I just hadn't found the right gig yet, but I lucked out with my current position (off-cycle recruiting, turned out to be a fantastic fit for me).

The only thing I knew going into banking was that it would open up doors, and there was this mystical unicorn out there of "greatness" that was somehow achieved after banking -> PE / HF (i.e. the "Break in the Tracks" Leveraged Sell-Out post). So I generally tried to copycat what the older analysts were doing, and eventually found my way once I built up enough confidence in my skillset and interviewing abilities. It took a lot of failed interviews to get there though, and I said no to a couple of "ok" offers that were technically PE but didn't really make sense for me. Saying no was a calculated risk as much as saying yes, and I'm glad I trusted my gut.

My criteria for post-banking job hunting:

  • I had to "stay on track", i.e. no moving to equity research or corp dev or any role deemed to be "less prestigious" in finance. This is because I was not ready to "settle down" and wanted to keep my options open for the future, and it's always easier to get off the track than to get back on the track. I'm saving that card for when I have kids someday.

  • Compensation as a minimum threshold; as long as I am making decent money, I think my future earning potential (which I believe is largely driven by learning experiences in the first several years of one's career) was more important than next year's bonus. Last year my firm's bonus was average compared to street, and I'm happy with that because I'm learning a lot and developing skills / relationships. I could make $50k more at our competitor across the street, but I'd lose out on a lot of intangibles (see below).

  • Culture / skills fit: I had to find a place where I would not be miserable due to culture, hours, nature of the work, etc. In addition to learning, I wanted to go somewhere where I could succeed and build a strong reputation. Can't do that if you hate your job... also, it was especially nice that I had some previous experience and skills that were relevant to my current firm, so I started out with a tiny "niche" already carved out for me. I think this "niche" aspect is extremely important in the long-term as you move up in your firm / industry and the pyramid gets smaller. You need to be able to differentiate yourself - become the M&A guy, the restructuring guy, the [insert industry] guy, the reverse morris trust guy, whatever... if you are good at something that is useful for your firm and hard to replicate by your peers, you have a moat around you that makes you hard to replace down the road. If you can sell a niche in an interview, that goes a long way. If not, you sell yourself as a fast learner, and you look for opportunities where you'll be thrown in the fire. I think that's how you build autonomy as a finance professional, and that's how you make VP... I haven't made it yet, but this line of thinking has worked well so far and was passed down to me by older / wiser monkeys (including here on WSO).

 

SBed, thanks for doing this. A couple of public question to start and I might send you a PM after.

How much interaction do you have with the portfolio companies? Do you have any opportunity/desire to do so?

What was the biggest skill gap you had to make up between banking to PE?

How has your comp changed from year to year? Traditional minor increases to base/bonus? Or do you get co-invest/carry?

 
mrharveyspecter:

SBed, thanks for doing this. A couple of public question to start and I might send you a PM after.

Happy to talk over PM, but keep in mind that questions in the public forum helps future monkeys who may gloss over this post.

mrharveyspecter:
How much interaction do you have with the portfolio companies? Do you have any opportunity/desire to do so?

Quite a bit, actually. portfolio management is not sexy - there is a lot of administrative work, updating quarterly financials, making slight tweaks to models, looking at tiny bolt-ons, etc... and it takes time away from the sexy deal-making side of PE. I have found that my VPs / MDs have been more than happy to throw portfolio responsibilities at associates once they prove they can handle the tasks. By now there are a couple of companies where I'm pretty much the only one who knows the nuts and bolts of what's going on, and I just report up to the MDs every month or so or when something material happens. I used to hate it at first, but I've actually gained a ton of useful experience with portcos... not exactly shiny gold nuggets for my resume, but I have a good grasp on how things like working capital can affect a business in the short and long term, the games management teams play, etc. I consider myself a better investor and better businessperson because of the portfolio work I've had to do, even if it's not that much fun, so it's actually been very valuable. You also make senior people happy when you take this type of work off their hands, which goes a long way towards solidifying your position within the firm, I think.

mrharveyspecter:

How has your comp changed from year to year? Traditional minor increases to base/bonus? Or do you get co-invest/carry?

I got a salary bump when I came over from banking, from ~$85k to ~$100k (using round numbers for confidentiality). My first annualized stub bonus in PE was in line with my last bonus in banking. Since then the salary has increased modestly (~5%/yr) and bonus has increased somewhat slower than it would at a bank. Cash bonus in PE for me has varied from ~80% to 150% of base. It's hard to compare across firms / industries, so the best I can tell you is that my PE bonus as a 2rd year associate was equivalent to the cash portion of what I would have received as a 2rd year banking associate, assuming I was somewhere in between middle and top buckets. You miss out on non-cash comp a bank offers, essentially. We do not allow employees to co-invest - instead you can invest in our new funds when we raise them, but then you get capital calls any time there is a deal in that fund. I have gotten carry and maybe if I stick around for another 3 to 5 years I'll see a huge payout, maybe not. I usually don't count carry as actual comp and more as "option value". Honestly, I'll take carry over the golden handcuffs at a bank (where your restricted stock vests over 3 years and there is an ever growing pile of money just out of reach, forcing you to stay put). I am much happier in PE and to me that is priceless.

 

Thanks for the AMA, NuckFuts.

As a student finishing my 5th year at a B-school my options are pretty limited. I own a small painting business that I manage and market and we're making solid revenue. I'm planning on going into a masters of accounting program at a target B-school either next year or the year after that (depending on if I get any positions anywhere) so that I can write my CPA. I'm also writing my CFA Level 1 next December (I know it's a stretch from now). I'm also going to be applying for a strategy consulting position at Deloitte in NYC through a contact that I know there.

My question is does this make sense? Will taking the time to pursue both a CPA and a CFA, all the while having a MAcc under me, even worth it? Is this my only option? Or can I squeeze in somewhere, prove my self, and work my way up? I've also been thinking about applying to small boutiques involved in restructuring, mezz, M&A, and build my credentials from there.

All the best

 
IwannabethebestMonkeyevar:

Thanks for the AMA, NuckFuts.

As a student finishing my 5th year at a B-school my options are pretty limited. I own a small painting business that I manage and market and we're making solid revenue. I'm planning on going into a masters of accounting program at a target B-school either next year or the year after that (depending on if I get any positions anywhere) so that I can write my CPA. I'm also writing my CFA Level 1 next December (I know it's a stretch from now). I'm also going to be applying for a strategy consulting position at Deloitte in NYC through a contact that I know there.

My question is does this make sense? Will taking the time to pursue both a CPA and a CFA all the while having a MAcc under me, even worth it? Is this my only option? Or can I squeeze in somewhere, prove my self, and work my way up? I've also been thinking about applying to small boutiques involved in restructuring, mezz, M&A, and build my credentials from there.

All the best

This is a tough one as I am not a professional career coach and have not been in your situation, but I'll take a stab at it.

My initial reaction is that you need some more focus. Are you making enough out of your painting business that you could support yourself? Can you focus on growing the business? How much of a time sink is it? Can you sell your equity or hire someone else to manage it for you? I think the first step is figuring out whether you're serious about the side biz or not - when you want to build a career in finance, you can't half ass it by spending a bunch of time on a side project, as you'll be setting yourself up for failure IMO. If the project is viable and has good potential, however, you may be better off focusing on the business instead. You just have to be honest with yourself and carefully weigh the pros and cons of your alternatives, but I don't think you will get away with not making this decision soon.

Assuming you can sell/close or otherwise turn your side business into passive income to the point where it's not a time sink, and that you want to go down the finance route, then here are my other thoughts:

  1. Forget the CFA for now - it seems too early for you, remember you can't put "CFA Level 1" on your resume, so it would be 3 years and a lot of energy spent before this gave you any benefits. I also see the CFA as something to help you get to the "next level" in finance, not necessarily as something you need to break in day 1. Others may disagree (I don't have a CFA so perhaps others have had positive experiences getting a CFA early on) but I see it as opportunity cost - if you spent all the CFA study time networking instead, you may land a gig somewhere and go from there.

  2. It's always possible to squeeze in somewhere and work your way up. How hard that is depends on your background, school, network, interviewing skills, and a lot of luck / chance. However there are things you can do to maximize your chances of being ready for that rare opportunity when it does come - so to the extent you have deficiencies in your resume or profile, you should spend time on things that will cure those deficiencies. Also, network your ass off, send cold emails and cold LinkedIn messages (I don't always respond to these but if there is a shared connection I usually devote quite a bit of time and will spend an hour with the person on the phone).

  3. I don't have a MAcc but my friends who do have not found that it was especially helpful to them outside the context of working for an accounting firm. Why do you want to do the MAcc instead of focusing time and energy into either your business or breaking into finance? Unless you want to be an accountant, in which case go for it.

  4. Same comment for the CPA - I see it as another "nice to have", but if your end goal is to break into finance, there is probably a more direct route to getting there than a CPA. In my opinion, working in a banking / advisory role does more for your resume than a CPA, CFA, and MAcc ever would. Again, this is null and void if you want to go down the accounting route - these types of credentials are pretty helpful if you ever want to be a CFO, but you gotta break in first.

More generally, I will say this: I would pick the candidate with relevant job experience over the candidate with a resume stacked with credentials any day of the week and I think you'll find that this is generally true in the U.S. I think immigrants (especially Asians and Indians in the U.S.) and to some extent Europeans are a bit more obsessed with educational credentials, where in the U.S. I think most people want to see that you had a good GPA at a good school with a relevant major. If you check that box and make it to the interview, from that point on your credentials matter a lot less and the question becomes "is this person a better hire than the other 3 or 4 candidates we've singled out of the resume pool?" That question comes down to your interview performance and people's gut feeling about you, not letters after your name.

As for applying to boutique M&A / restructuring - if that is an option for you, I highly recommend it over anything else. There is not an educational program in the world that compares to 2 years in investment banking advisory in terms of learning skills that are immediately applicable to how corporate finance works in the real world. You can pick up all the textbook skills by googling around once you land a gig and find yourself stuck on a topic or concept. That's the beauty of finance - intellectually it is not that difficult, and does not require years of training like an engineer or scientist would, therefore you can "fake it til you make it" and learn on the job.

 
NuckFuts:
Are you making enough out of your painting business that you could support yourself? Can you focus on growing the business? How much of a time sink is it? Can you sell your equity or hire someone else to manage it for you?

I've thought about this before and the answer is in two parts. To answer you bluntly the business is a big time sink and I have to spend a lot of time on it (for now) so if the opportunity comes for me (internship, etc) I would have to drop it almost completely. The second thing is that if I don't immediately get a job offer out of graduation I have the opportunity to build my business and hire a manager to look after it. At this point I will still be able to retain equity, get paid out in dividends, and not have to spend 100% of my time on it. At most I'd have to spend 5 - 10% of my time once it's set up like this. This state will take about 1.5 - 2 years to achieve.

NuckFuts:
1. Forget the CFA for now

I feel like I've been needing to hear this for a while now, but haven't come across an honest enough person to tell me this.

NuckFuts:
4. Same comment for the CPA - I see it as another "nice to have"

Duly noted. I haven't made any big decisions about the CPA yet so I'm going to think hard about this one. I've heard that having a CPA also helps having a grasp on how a business truly operates and thus it would give me an edge over my competition. Would you say this edge is exaggerated?

I've been needing some solid advice like this for a long time because there's a lot of noise where I'm from (Toronto). A lot of my colleagues are getting the CFA and are telling me to do the same. Others are telling me to switch schools. Then some tell me I have to get an MBA before I want to consider gunning for an IB/PE position. I KNOW that once I get an interview I'll rock it (of course this is accounting for several failures, but I'm definitely a good contender for a position). The hurdle that I have to jump over is the school that I went to and the grades that I received for my first 3 years at school.

Thanks for the solid advice. If you have the time (and the will), can I send you a PM for a few more Q's?

Really appreciate the time you took to reply to me.

All the best

 

I would just chime in to correct that you can put CFA on your resume before being a charterholder. There are strict guidelines. If you are registered for an exam (paid for already) you can say "CFA Level 1 Candidate" once you pass lvl 1 and have registered for lvl 2 you are a "CFA Level 2 Candidate"

Obviously his situation you couldn't put it on the resume yet, but once you register you can.

 
IwannabethebestMonkeyevar:

Thanks for the AMA, NuckFuts.

As a student finishing my 5th year at a B-school my options are pretty limited. I own a small painting business that I manage and market and we're making solid revenue. I'm planning on going into a masters of accounting program at a target B-school either next year or the year after that (depending on if I get any positions anywhere) so that I can write my CPA. I'm also writing my CFA Level 1 next December (I know it's a stretch from now). I'm also going to be applying for a strategy consulting position at Deloitte in NYC through a contact that I know there.

My question is does this make sense? Will taking the time to pursue both a CPA and a CFA, all the while having a MAcc under me, even worth it? Is this my only option? Or can I squeeze in somewhere, prove my self, and work my way up? I've also been thinking about applying to small boutiques involved in restructuring, mezz, M&A, and build my credentials from there.

All the best

Think long-term

A CFA and a CPA with 10 years of B4 audit experience, while not exciting, makes you a strong candidate for CFO and a surefire lock for a CAO position.

More than one way to skin a cat, friend.

 

I think 10-15 years ago this was the case. Honestly 10 years in B4 audit often leads you to taking a minor pay cut to take an assistant controller position. Part of this whole senior managers becomes the CAO if they can't make partner thing is B4 propaganda. Look at CAOs on Linkedin for a more realistic path like below.

Path (Midcap or larger company) (Pay amounts are what I saw at public companies; add 25% for fortune 500 or high paying company): 10yrs Big4 audit (130 all in comp) -> 3 years director of SEC reporting(150 all in comp) -> 3 years exec. director of SEC reporting(175 all in) -> 4-6 years VP of reporting- Group Controller (180 cash, 30 stock)->4- 6 Years SVP Global Controller(200 Cash, 75 stock) -> Chief Accounting Officer (250 cash 150 stock)

I want to note that this puts you around 50 when you would take the corporate accounting throne. I have audited my share on companies and almost all the CAOs I have met where around this age. I want to note that someone who leaves as a 1st year Manager will probably be be a year or two ahead of someone who stayed in the B4, make about 100k more during that time, and had a significant better work life balance. Leaving at that point would also open up doors for then to move out of a SEC reporting or Accounting group and into a business finance, commercial finance or FP&A role if they so chose giving them a significantly better shot of getting to the SVP level as other options could be possible(Commercial fin, FP&A, Budgeting, Treasury, Group Business Fin, etc)

In terms of CFOs, although valuable, if you look at Fortune 500 CFOs today, you will see significantly fewer people that spent more then 5 years in the B4, maybe around 10% of them have. I am sure that number was around 40% 15 years ago. I am not trying to be a downer here, I just don't want people considering their career and thinking that its a sure way to the role, when you pretty much have everyone from ex bankers in corp dev, ex consultants in corp strat, people of various and occasionally top shelf backgrounds in corp fin groups competing with the ex auditors in reporting, tax, FP&A, and Technical Accounting. Often these people are not as much of a cost center that accounting is and have had more opportunities to demonstrate how they can improve/ grow the business.

I am a CPA and I enjoyed my time in the Big4, but the propaganda that people believe about the experience is based on a world near SOX, and it hasn't shown any sign of going back in the direction it was held before. Its been quite a while since then and that issue has been moved further back on a companies financial priorities list, which can be seen in the way fees have worked out the last 5 years.

 

Does coming from a non-target (ranked outside top 100) affect one's chances of getting into a large PE group? Or does it not matter once you are already in a top group at GS/MS/etc.?

 
myr899:

Does coming from a non-target (ranked outside top 100) affect one's chances of getting into a large PE group? Or does it not matter once you are already in a top group at GS/MS/etc.?

This is going to be very specific to who is running recruiting. A lot of PE guys like to hire people that went to their university (even their own fraternity). I've seen my group do that. But I've also seen them say "no" to perfectly groomed Ivy guys from BBs in favor of the guy from a local school and average IB shop, because that guy wow'd everyone during interviews and was just a better fit. I think ranking of your school helps get through the screening process, but once you get the interview it matters a lot less.

I'm from a non-target myself, and the selling point of "coming from non-target we did not have as many resources as Ivy to prepare for banking, but I was genuinely interested in finance and determined to break in so I got good at self-studying and learning on the job" worked very well for me while interviewing for PE. Nobody wants to hold your hand in PE, so they like people who can figure things out on their own and jump over obstacles to get to a goal.

 
computerized:

You mentioned wanting to invest in passive income / real estate eventually. Is there a specific number you're waiting to hit before you start actively pursuing such opportunities? Have you given much thought about locations or businesses etc at this point?

Honestly, I have been thinking about your questions for years and I do not have an answer. I would love to hear others' thoughts here.

I will have a 2 part test for whatever my next big move is. (1) will the quality of my personal life be at least as good as it is today? and (2) will my earning potential (i.e. combination of compensation and the extent to which the next gig provides me with opportunities to grow as a professional) be at least as good as it is today? I need a "yes" to both of these questions before I make a move somewhere.

If the next gig pays $800k a year but will take time away from my gf / friends and make me miserable, I'm not interested. Similarly, if I got to move to Colorado and leave work at 3pm to go hiking every day but would have to take a pay cut or would be exposed to less learning opportunities, also not interested. The ideal next move for me will slightly improve my quality of life (which isn't bad now, tbh) while providing me with an opportunity to keep learning and growing. If these two criteria are met and my comp is roughly the same, I would be happy.

I will also mention that being in finance has made me paranoid. I've seen so many people lose their shirt over bad investments / shitty market timing that I keep over 50% of my net worth in cash at the moment. I'm not comfortable putting any more than that into the stock market or real estate, as I think everything is grossly overpriced. I would like to see some rate raises from the Fed and some of the indicators of systemic risk easing out of the economy before I start putting my money to work in a more meaningful way. Maybe after the dust settles from the presidential election I will use my next bonus to put a down payment on some real estate... some of the guys at my shop have also talked about co-investing in properties together to spread out the risk, which I may consider as well.

 
Macchiavelli11:

Is the MEZZ/distressed debt real estate back or corporate debt?

Some mezz is corporate unsecured (like "debt" structured as pref equity), some may be secured by equity in an unrestricted subsidiary with some assets, some (especially in distressed situations) may be done with a second or third lien on assets of the company... I've seen a lot of creative structures, it is very dependent on the company's specific situation, capital structure, level of distress, etc.

 

Thanks for doing this! I was curious about how PE recruiting really works once you're on the job. Specifically, if you aren't at GS/MS/JPM/BX/"insert top group here" are you fucked for recruiting, or at least given worse looks? I'm not sure which BB you were at, but was there a material difference in exit opps based on group placement (i.e. CS financial sponsors vs CS industrials) and from thereon out bank prestige?

Also, if I'm working in a specific coverage group does that preclude me from generalist PE opportunities (i.e. doing tech so restricted to tech PE/VC)? For reference, although a MF sounds awesome, I would be more than happy working in Upper MM or MM PE, and I'm curious with what you saw in your BB recruiting cycle/your current fund.

 
consultbanklive:

Thanks for doing this! I was curious about how PE recruiting really works once you're on the job. Specifically, if you aren't at GS/MS/JPM/BX/"insert top group here" are you fucked for recruiting, or at least given worse looks? I'm not sure which BB you were at, but was there a material difference in exit opps based on group placement (i.e. CS financial sponsors vs CS industrials) and from thereon out bank prestige?

Also, if I'm working in a specific coverage group does that preclude me from generalist PE opportunities (i.e. doing tech so restricted to tech PE/VC)? For reference, although a MF sounds awesome, I would be more than happy working in Upper MM or MM PE, and I'm curious with what you saw in your BB recruiting cycle/your current fund.

In my experience the prestige of your group helps you get noticed by recruiters / HR. Once you get noticed and make it to an interview, the focus switches to your actual experience. It helps to have a higher up at the bank who is well known in the industry (and whom the PE guys trust) who can speak up for you with a good recommendation - this can help more than the brand name of the bank/group, although often goes hand in hand with being in a top group.

At my current fund, we have turned down average (well ranked, well liked, but did not stand out in any way) guys from top groups in favor of hiring a better fit from a lesser known bank, so don't underestimate the importance of cultural fit and demonstrating market knowledge, strategic/critical thinking about deals, etc... the technicals tend to be a "check the box" test - either you got it or you don't. Once you get past that, intangibles start to matter a lot. PE guys want someone who "gets it" from day 1, can hit the ground running, and can get up the learning curve quickly without hand holding.

As far as group placement, I was never in a FIG / sponsors group but I've heard these groups are not that great for traditional exit opps... they tend to prepare you more for an IR/fundraising role (someone jump in if I'm wrong here).

As far as being in coverage, I don't think that precludes you from being a generalist at all. It depends on your deal experience, I think - if your coverage group ran deals themselves (like mine did) instead of sourcing and passing on to an M&A group (which I've heard is the case at some banks, but never actually saw it myself), you should be good. Obviously though you need to broaden your horizons and do some more self study on metrics / analysis that is not specific to your industry. A lot of guys from my coverage group went into generalist roles.

 
seville:

Do you find the culture (not-firm specific, but the general atmosphere) to be quite similar or different between IB and PE?

In my experience (this may not apply to smaller funds):

The similarities: - The deal owns your life; if you're on a live deal and closing in on a deadline, expect to work weekends and late nights; I had one PE vacation where I worked 2/3 of it (they gave me most of my vacation days back) - General finance culture, senior guys can be image conscious and political, it takes work to find a good mentor, etc - You spend a lot of time in Excel/Word/PPT working on stuff that will never go anywhere - Can't even take a shit these days without compliance sniffing around to see what's going on

The differences: - People respect you as an individual in PE - in banking you are just another kid out of college who just sold your soul to wall street, so people don't think twice about ruining your weekend over some bullshit (it's a rite of passage, really). In PE this part of the culture is missing - people will still grind you but they will be more reasonable about it, they are not in the business of wasting time, which means... - ...Less bullshit work / pitching; it still happens, but we recycle the same pitchbook and have an IR group that does a lot of the heavy lifting - This also means that when you do have to stay late or work weekends in PE, it's actually more enjoyable because you feel like your work matters; on the other hand, the fact that there isn't an army of analysts spreading comps means you have to spread things yourself, you have less templates and resources available to you, and you find yourself calling your old banking buddies begging to send you a research report your firm doesn't have access to - Professionalism matters a lot more; we used to act like children at 2am in banking, cursed openly, got into really inappropriate arguments, etc... in PE you put a tie on and act like an adult all the time, after all you are managing people's money and you better act like it - More autonomy means more ownership of your work, which is harder but more rewarding; if you fuck up a model in banking, that rarely has terrible actual consequences (other than your VP throwing a printer at you) as there are multiple layers of people checking your work and anyone who looks at bankers' numbers should be doing so with a lot of skepticism anyway. In PE you sometimes turn an analysis in to your MD, and he will immediately jump on a call with other senior guys who will be making a decision based on your numbers. If you fuck up the consequences can be scary, and you don't have as many layers above you to check your work.

 

Thanks for doing this, really appreciate it.

What is the prevalence of non-IB backgrounds on your team, specifically in the mezz space? Do you see people from corporate banking or other roles that provide experience with cash flow lending at all and if so, any advice on how to make yourself more competitive against candidates coming in with IB credentials?

 
jcc24:

Thanks for doing this, really appreciate it.

What is the prevalence of non-IB backgrounds on your team, specifically in the mezz space? Do you see people from corporate banking or other roles that provide experience with cash flow lending at all and if so, any advice on how to make yourself more competitive against candidates coming in with IB credentials?

Unfortunately coming from a non-IB background pretty much kills your chances... it does happen, but it is rare for someone from non-IB to break in. I think a smaller fund may be more willing to consider this, but not sure.

 

any advice for someone from a PE secondaries background looking to break into direct PE?

What are the major challenges someone from my background would face when at the interview?

Background: I did not do investment banking.

Thanks for doing this.

 
the_ferry:

any advice for someone from a PE secondaries background looking to break into direct PE?

What are the major challenges someone from my background would face when at the interview?

Background: I did not do investment banking.

Thanks for doing this.

Sorry mate, I have zero experience so don't want to mislead you with too much speculation. Generally PE wants to see that you have deal and modeling experience, so to the extent you have that you may be able to leverage it...

 
goldarmor:

Thanks for doing this!

Just some quick questions:
- What's your opinion about PE recruiting former consultants?
- Does your fund opt strictly to hire IB? If not, how much is the bias towards MBB against other strategic consulting firms?

My fund (and many others) strictly hire IB, but I know certain funds like to hire consultants (e.g. Golden Gate in SF, Charlesbank in Boston, probably others as well). I can't say for sure but would think there is a lot of bias for MBB candidates versus other consultancies.

 

What are your thoughts on the top three restructuring consulting firms (Alix, A&M, FTI) in terms of recruiting for distressed PE? Do you think more or less valuable then strategy consulting?

In addition, what do you think of associates and VPs in banking looking to make the transition to PE. I would think that it is more difficult because you are combining lack of PE experience with a more expensive person. I know it does happen, but I am curious on what you would think if a Laz/PJT,HLHZ associate's resume came across your desk.

The last act is tragic, however happy all the rest of the play is; at the last a little earth is thrown upon our head, and that is the end for ever.
 

Do you see most of the PE associates that you work with coming from BB's? MMs? EB? What's the mix look like?

The fool thinks himself to be a wise man, while the wise man thinks himself to be a fool.
 
Mark Hanna:

Do you see most of the PE associates that you work with coming from BB's? MMs? EB? What's the mix look like?

Mostly BB's, a few EB's, and a couple of guys from MM's. I think the screening out of some MM guys happens at the recruiter level - by the time a resume gets to us, what bank you were in is not a major consideration anymore. Your deal experience and performance in your group matter more when we decide who to call up for an interview. Although if someone is coming from a lesser known boutique or MM shop, we would want to see solid transaction experience and maybe something to make the candidate stand out.

This is all in the context of screening / initial interviews though. Once we establish you have the technical skills and deal experience to do the job, we check that box and move on to cultural fit / industry knowledge / bigger picture. We use the initial criteria (quality of banking group / resume / technicals / initial interviews) to narrow the pool down to 4 or 5 good candidates, at which point it's all about fit.

 

Hi NuckFuts,

Sorry I'm jumping on this a bit late, but I just discovered this thread. You mentioned for a good MM shop, you would like to see something to make the candidate stand out. What kind of things make a MM analyst stand out in a resume or something a candidate can do to materially increase their chances of securing an interview?

 

What are your thoughts on breaking into PE if you are coming from the industry side (instead of IB). Specifically, I'm interested in making the move from Engineer @ E&P company (energy industry) ---> top MBA ---> PE firm w/ Energy companies in portfolio. Do you think this is a long shot? What are some things I could be doing to help out my chances (i.e. self-study on LBO modeling)?

Thanks in advance.

 
Arbitraging:

What are your thoughts on breaking into PE if you are coming from the industry side (instead of IB). Specifically, I'm interested in making the move from Engineer @ E&P company (energy industry) ---> top MBA ---> PE firm w/ Energy companies in portfolio. Do you think this is a long shot? What are some things I could be doing to help out my chances (i.e. self-study on LBO modeling)?

Thanks in advance.

Energy PE is unique in that a lot of PE firms hire in-house engineers to do asset reviews... I actually know 2 guys who went directly from E&P -> PE. Energy groups at banks also hire engineers into A&D groups, both directly from E&Ps and out of MBAs. I would say this is a more common path: E&P -> A&D / IBD -> PE. Some top banks that come to mind in this field are Jefferies, TPH, Evercore... I also know the BBs have their own A&D groups within the IBD umbrella, although I can't speak to their quality. You may want to network with someone who is familiar with the current status of the Houston A&D scene, as it seems to be a pretty small world.

So to answer your question, no your strategy is not a long shot. It sounds like you are on the right track, but I would also open up the realm of possibilities to a couple of years at an A&D shop within a bank (or even straight up energy IBD). Self study of finance/accounting/modeling will go a long way in preparing you, but I wouldn't focus on LBOs as much as on basic capital structure / financing topics, oil and gas NAV valuations, and financial metrics / accounting concepts specific to energy.

One thing to keep in mind - my two engineer friends who are now in PE often complain that they are "looked down" upon... i.e. they feel like they do the real work while the finance guys get all the credit for putting powerpoints together based on the engineers' numbers. It kind of makes sense - at Google/Apple/Amazon you want to be a programmer, at a PE firm you want to be a finance guy, at an E&P company you want to be an engineer. So the MBA -> Energy IBD route may make more long-term sense than going into an A&D group and being forever labeled an "engineer", depending on how much you like the engineering work versus the finance work and what your long term goals are.

 
Toys-R-Soros:

If you had to develop one skill/trait to get where you are now, what skill/trait would it be?

What do you look for in a candidate to see if he or she fits in?

Very interesting question. I would say it's extremely important to be observant and introspective. For example, in every meeting I take mental notes of how people are acting, what ideas they present and how, how people react to certain things... and I am very self conscious about mentally comparing my own habits/traits against what I am witnessing in others. This is a skill I necessarily picked up as a foreigner trying to fit into the northeast culture in high school / college - watching others and learning from their successes / mistakes was the only way I was able to figure out social norms and get people to like me. It takes constant work, but it becomes a habit after a while. A crucial part of this is spending time by yourself reflecting and questioning every assumption and deeply held belief you hold (it can be hard to even admit to yourself what those beliefs really are). Once you become good at this, noticing and taking in feedback/criticism becomes easier and you become more malleable to change, which is another way of saying you are quicker to improve on your shortcomings. I would say this is the greatest gift of growing up in a diaspora, where conflicting views/norms exist and there is no clear path to follow - introspective critical thinking and constant observation of others become powerful habits that allow you to speed up the rate at which you become a better version of yourself.

As far as candidate fit, I personally look for a lot of the traits I described above... critical thinking, hunger to learn / improve, observation and introspection... as well as being generally likeable, smart, and hard working. We don't need mathematical geniuses, we need friendly smart people who work hard, learn quickly, and adapt easily.

 
da chief:

For someone coming from corporate finance trying to break into corp. dev or PE what advice would you give them to mitigate the lack of transactional and/or modeling experience they have?

Your only options are probably self study of financial modeling with some creative networking or an MBA... I can see a move from corp fin to corp dev if you stand out as sharp and motivated at your current firm, but you'd have to play internal politics to make it happen. To be honest I have never heard of someone moving from corp fin to PE without some pre-corp fin banking experience.