Q&A + Opinions welcome; Does Commercial Due Diligence actually build 'Investment + Evaluation' muscle better than IB ?

Question for Consultants + Bankers + Investors (PE and Growth), in your experience does the workstreams in Commercial DD (especially by MBB) actually help build/hone 'investment' + 'evaluation' muscle better than junior bankers ?

What would your recommendation be to junior bankers who want to bridge this 'evaluation' muscle on their own ?

How well does the Private Equity Practice of MBB address build/address this muscle ?

6 Comments
 

Based on the most helpful WSO content, here’s what you need to know:

  1. Commercial Due Diligence (CDD) vs. Investment Banking (IB) for Building 'Investment + Evaluation' Muscle:

    • CDD, especially when conducted by top-tier consulting firms like MBB, focuses on understanding the market, competitive landscape, and strategic positioning of a target company. This involves analyzing industry trends, assessing market opportunities, and identifying risks, which are critical for investment decision-making.
    • On the other hand, junior bankers in IB often focus on financial modeling, valuation, and transaction execution. While these are essential skills, they may not provide the same depth of exposure to strategic and market-level evaluation as CDD does.
  2. Recommendations for Junior Bankers to Bridge the 'Evaluation' Muscle:

    • Self-Education: Dive into resources that focus on market analysis and strategic evaluation. Books or guides on private equity due diligence and value creation can be particularly helpful.
    • Networking: Engage with professionals in private equity or consulting to understand their approach to evaluating investments.
    • Side Projects: Work on mock investment cases or participate in competitions that simulate private equity or venture capital decision-making.
    • Transition Opportunities: Consider roles in private equity or growth equity where you can gain hands-on experience in evaluating investments.
  3. Private Equity Practice of MBB:

    • The PE practice at MBB is highly focused on due diligence projects, often referred to as "DDs." These projects are short, intense, and designed to provide a comprehensive understanding of a target company's market, competitors, and potential risks or opportunities.
    • This type of work directly builds the 'investment + evaluation' muscle by requiring consultants to assess what a company is worth and what factors could impact its success post-acquisition. It’s a great training ground for those looking to transition into investment roles.

In summary, while IB provides a strong foundation in financial analysis and deal execution, CDD (especially through MBB's PE practice) offers a more strategic perspective that can better hone investment evaluation skills. For junior bankers, combining their financial expertise with strategic insights from CDD-like experiences can create a well-rounded skill set for investment roles.

Sources: Why private equity practice vs. general practice?, https://www.wallstreetoasis.com/forum/investment-banking/breaking-into-private-equity-from-banking?customgpt=1, A Guide for Switching From Commercial Banking to Investment Banking, Family office Private Equity - help, https://www.wallstreetoasis.com/forum/investment-banking/should-i-pursue-st-or-ib?customgpt=1

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

In your opinion/experience, what gives consultants that edge at the mid-level v/s bankers at the junior level ?

In a nutshell, asking what the difference(s) in hard skill components are that make the consultant/banker more suited for the move at their respective timelines

 

That actually makes sense

Would you have an opinion on PEG/PEPI/PIPE at an MBB v/s their general consulting roles ? 

Intuitively, one would say that PEG/PEPI/PIPE should act as a better feeder to an investing role, has this been your experience as well ? Or does the project diversity in a non-CDD practice actually have a meaningful value add ?   

 

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