Q&A: PE Associate at a single-sector mid-market fund

Easier than the other way around. Unless you speak European languages I higly recommend targeting UK focused (LDC is one) shops or shops that have local teams ie Equistone - what I mean by that is that the london office is only working on UK deals, french office on french deals etc. Note that many of these shops have a very ‘British’ culture and often hire from the Big4 too.

UMM will be very hard unless you speak european languages.

Not impossible at all I'd say. Seen numerous guys do that. Most commonly, it'll be someone at a fund with a London office or at a fund looking to set up a London office. A smaller number of people who move to a different fund to London, but it does happen. Less so for juniors, VP and upwards are the typical guys to make a move.

Haven't been in banking since the referendum, but overall impression is that little has changed in the fields I encounter. London remains the financial centre of Europe - I don't see that changing. Big banks will keep their sector teams in London. Frankfurt, Paris, etc. will remain geographic coverage teams.

MBAs are rarer in Europe than in the US. Most PE recruits will be between Analyst 2 and Associate 2. A top tier degree (finance, economics, etc.) will open a lot of doors. For the very few Analyst positions at PE funds, this can be extremely useful. I think mainly because you will need outstanding internship experience. Coming from a top uni, you are much more likely to get into a good shop for an internship.

One of the so-called "Elite-Universitäten". Definitely not a target uni for investment banking...

Some banks will use grades to filter candidates (e.g. JPM) others won't (e.g. GS). In PE recruiting they rarely matter, unless it's for an Analyst or Intern role. To me, grades mean very little. It's not a comparable framework, as grades will depend on your ability to answer questions with a predetermined answer...

tl;dr response: No sector specialist fund without being a sector specialist. You'll pitch yourself as a specialist and are invited to processes because of that. You will/ should need little or no advisors. Little or no synergies among portcos. Industry knowledge built is vastly greater at a specialist fund as you're expected to grow into a sector expert fairly quickly (probably 2-3 years). Full response: I would say most sector specific funds will be borne out of inherent knowledge of that sector, be it seasoned bankers, someone with an entrepreneurial or operational background, or someone who ran a sector team at a larger fund starting out on their own, etc. In my view, for any fund to focus on a single sector, there has to be intrinsic sector knowledge before you even begin to fundraise - otherwise, what's your value-add? When it comes to management and sellers' meetings, you will engage with them on a completely different level compared to a sector agnostic fund. Your pitch to the seller is based on your ability to support and help drive growth with knowledge and expertise/ experience, rather than writing a cheque. The sellers' field is very much split into these two sides: companies looking for funding and companies looking for a team of experts to help drive growth. There is some degree of reliance on advisors, for example when entering a new geography or sub-sector, but this is mostly focused on expert calls and perhaps CDD. In most cases, you'll only need FDD and LDD, as you already have deep knowledge of the sector and the geography you're looking to invest in. In my sector, almost all of the handful of sector specific funds will look at all same assets coming to market, regardless of size. You'll often see a larger fund team up with a sector specialist if it's a larger deal and the specialists going alone on smaller tickets. Synergies between portfolio companies are extremely rare in my view and will mostly be client introductions and cross-selling. But in my experience, cross-selling between two companies within one group is already pretty difficult to achieve, let alone between two independent companies. I can see how the specific sector knowledge built over time at a generalist fund is very little. Think about it like this: I will look at c. 20-30 deals a year in my sector, 5-8 of which in thorough detail, developing a strong knowledge base of the sub-sectors that I can build on through each deal. Assuming at a generalist fund you will look at the same number of deals, but only 1-2 in each sector in thorough detail, it'll take you some 5 years or so to develop the same level of knowledge a sector specialist acquired in 1 year… not to mention that there is an exponential learning curve involved…

Yes, absolutely worth it. Check-out the podcast where I talk about the importance of location and reputation of your uni when it comes to recruiting - it's absolutely key. You will have forgotten about tuition fees by the time you finished your Analyst training...

Maybe.

Factors that will boost your chances: 1) Eligibility to work in the UK (no one will sponsor a visa) 2) European languages (fluent!) 3) Outstanding deal experience in relevant sector

There are tons bankers and junior PE guys in London (same as in the US...). The way to get into a room with people that matter is to stand out from the crowd.

In your case, you seem to have fairly specific knowledge that will be relevant to a select number of funds. Identify those funds and find an angle to make yourself stand out, would be my advice.

I can't speak from experience re corporates. Generally, they'll look for someone with great deal experience. International firms will also have better means of being accommodating to your circumstances, e.g. visa, etc.

Proven M&A execution experience.

LevFin and Sponsors generally stand a good chance. It will depend on your experience and who you've worked with, however.

In my experience, the people from these teams that have moved to the buy side will go to a fund they've worked with (extensively).

I think it is important to understand that in PE you'll work on all aspects of the deal (execution, funding, strategy, etc), which rarely happens as a banker. The more experience you can gain across these, the more interesting you'll become to funds.

Say, you're in LevFin, working on a deal for a PE. See that you can get stuck in on the modelling or at least understand enough of it to be able to discuss eloquently in an interview. Same if you only worked on M&A execution and the likes.

I'd say it's a rarity as the skill set is quite different. In PE your modelling and DD work will be of much greater detail, for example. You'll also look at businesses from a strategic and operational point of view, rather than merely a financial one (in the mid market anyway...). Out of PE and into Direct Lending is a much more common route.

The thing with moving back to an advisory role is you'll have to explain your motivation moving from lending to M&A, which can derail your changes unless you have something really solid. For you to have sufficient M&A experience, you'll need at least 2 years on a desk, which could put you quite far down the career path. The PE window of opportunity is very small, so that might also harm your chances. I'm not sure there is a great deal of value in going down this route.

In terms of reaching out opportunistically, the best timing is when PEs begin fund raising. Follow the news around fund raise announcements and you'll get a pretty good overview.

The advantage is, every sector will have verticals that are cyclical and verticals that are counter-cyclical, so a downturn in a sector 1) doesn't usually affect all companies alike and 2) isn't necessarily a bad thing. Especially in PE where you're in the business of buying and selling, this works to your benefit. This would apply more to a product specialist rather than a sector specialist. If you're in ECM and the IPO market is hot - great. But you do run a risk of it turning cold and you getting the Deutsche treatment. If I'm a health care investor and the valuations are full, I start considering exiting businesses, even if it's earlier than originally assumed. If the market is in a downturn, I start looking out for discounts. Obviously this is an oversimplification, but I think you get the idea.