Reneging on a Lateral Offer
Just wanted to get some second opinions about potentially reneging on an offer...
Background: 3rd year associate at a MM PE fund that has a very mixed track record (overpaid during 2021 era big time), decided to interview, got an offer from another MM PE shop that has a better team and portfolio, accepted the offer, but recently received another offer from a large SWF (likes of Mubadala, ADIA, QIA etc.) that pays a lot more.
On the fence about reneging the MM offer to join the SWF. Some people I spoke to told me it shouldn't be that bad since they would still want to keep the relationship alive for potential LP dollars, but they'd still be super pissed.
Reneging on an offer, especially at the lateral level, is a delicate situation and can have significant consequences. Based on the most helpful WSO content, here are some key considerations:
Reputation Risk: Reneging on an offer can burn bridges with the MM PE shop. While they may want to maintain a relationship for potential LP dollars, the immediate team and individuals involved in hiring you will likely feel betrayed. This could impact your reputation in the industry, which is tightly knit.
SWF Opportunity: If the SWF offer is significantly better in terms of compensation, career trajectory, and long-term goals, it might justify the risk. However, ensure that this move aligns with your priorities, such as work-life balance, growth opportunities, and location preferences.
Handling the Renege: If you decide to renege, do so professionally. Be transparent and express gratitude for the MM PE offer while explaining that the SWF opportunity is a once-in-a-lifetime chance that aligns better with your career aspirations. This approach might soften the blow.
Industry Norms: While reneging is not uncommon, it is generally frowned upon. Some firms may blacklist candidates who renege, while others might be more understanding, especially if the new opportunity is a significant step up.
Risk Assessment: Consider the potential fallout. If the MM PE shop decides to escalate the situation or spread the word, it could harm your reputation. On the other hand, the SWF might view your decision as a sign of commitment to their offer.
Ultimately, weigh the long-term benefits of the SWF role against the potential damage to your reputation and relationships in the industry. If the SWF role is truly transformative for your career, it might be worth the risk, but proceed with caution and professionalism.
Sources: Current IBankers: What would you do if a summer candidate reneged another offer to sign with your firm?, https://www.wallstreetoasis.com/forum/job-search/offer-rescinded-after-negotiating-salary?customgpt=1, Reneging BB SA Offer?, Is Reneging Actually That Bad?, Very Tough Decision - Short-term Comp vs. Long-term job
A firm wouldn’t think twice about letting you go when shit hits the fan. Take the better offer always
Curious - were these for VP roles or Sr Associate? How were the offers (just ballpark / difference)?
Sr Assoc. Pay differential is quite big... like 40%.
You gotta do whats best for you
Do what’s best for you
Maybe dumb question, but aren't these roles pretty different? I assume the SWF will be more indirect investing (co-invest/LP/minority) versus the MM PE will be a more traditional direct investment role. The SWF is probably cushier, but I think the MM role is more marketable down-the-line if you want to stay in traditional PE.
Some of these SWFs (Mubadala specifically) pay $1M cash at the SVP/principal level with extremely good WLB and much better job security than working at a GP. Not the path I would take but can easily see why others would. You won't see a cent of carry ever though, lol.
Also I feel this board is very hyperfocused on the megafunds where you can see similar cash comp to the SWFs, but a typical MM PE seat pays a very hefty cash discount to the SWFs especially at the mid level... VPs at my fund make a 50% discount to SWFs which is a big deal at that point in your career.
Take the SWF, this is a no brainer with this pay difference...
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