What has been your experience working for PE portcos?
I’ve worked at 2 different MF portcos in FP&A/Corp Dev over 3 years and thought I’d share some takeaways. Interested in others’ experience.
The good:
- Portcos can be highly acquisitive (mine was) and I got a ton of great deal experience. That also meant longer hours, but well worth it for me.
- Depending on the firm, deal team can be exceptionally smart and you’ll learn a ton if you work directly with them. Learn to model 70% as well as a MF PE associate and you’re ahead of 95% of your peers in corporate finance.
- Opportunities for equity comp and likely monetization on an exit. No guarantees here but I’ve also seen some significant payouts
The bad:
- PE guys can be control freaks and they never stop working. Will breathe down your neck and create a ton of unnecessary work. If your portco is underperforming, multiply this by 100x.
- Questionable job security if your portco exits to a strategic. CFO is usually the first to go (but gets a nice payout).
Overall, I’ve had a pretty good experience, but I’ve been lucky with the portcos/PE firms I worked for. Not sure yet if I want to do this long term.
Based on the most helpful WSO content, working for PE portcos can indeed offer a mix of rewarding and challenging experiences, much like you've described. Here are some insights that align with your observations:
The Good: - Acquisitive Nature: Many portcos under PE ownership are on the lookout for strategic acquisitions to drive growth, similar to your experience. This can provide employees with invaluable deal experience, which is a significant advantage in the finance world. - Learning Opportunities: Working closely with the deal team from the PE firm can be an incredible learning opportunity. The level of financial modeling and strategic thinking required is high, and mastering these skills can set you apart in the corporate finance landscape. - Equity Compensation: The potential for equity compensation and significant payouts upon exit is a notable perk. While not guaranteed, successful exits can lead to substantial financial rewards for portco employees involved in the value creation process.
The Bad: - Intense Oversight: PE ownership often comes with high expectations and close monitoring. The pressure to perform can lead to a demanding work environment, especially if the portco is not meeting its targets. This intensity can be magnified in situations where the portco is underperforming. - Job Security Concerns: The exit strategy of the PE firm can impact job security, particularly for senior positions like the CFO. While exits can result in financial windfalls for some, they can also lead to job losses if the acquiring entity decides to make changes to the management team.
Your experiences resonate with what's often discussed in the WSO forums. The decision to continue in this path depends on one's career goals, risk tolerance, and the specific opportunities that arise. It's clear that working for PE portcos can be both rewarding and demanding, offering a unique set of experiences that can significantly impact one's career trajectory in finance.
Sources: Random Things I Wished I Knew About PE, Q&A: 3rd Year PE Associate ($10bn+ AUM, MBO/LBO, equity, mezz, distressed debt), To all Consultants considering PE, Random Things I Wished I Knew About PE, LMM PE compensation, recruiting and port co. work
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Thanks pretty helpful
What are you looking to pivot to? Are you looking for something with fewer hours / less pressure?
When does equity/incentive based comp come into play? Starting at a PortCo next week coming from FDD, no equity since it’s a senior level but wondering if it would be reasonable to expect when promoted to manager.
What’re your plans for the future? Move to different PortCos in Corp dev/strategic finance, try to become CFO, possibly FP&A or performance improvement consulting, etc? At first was worried if going Corp dev would pigeonhole me but I would think it’s still a great path with different exit ops if you want to.
Also, should I plan to stay a long time or should I not get too comfortable? There was just new funding in the fall so I would assume an exit wouldn’t be for maybe another 5 years.
Highly dependent on the company, but to give you one reference point, I've seen equity awarded at the Sr. Manager/Director level at a ~$300M revenue tech company.
My plan is to work my way up to CFO through Corp Dev and FP&A. Ideally do a couple CFO stints at PE portcos. Would also like to be a PE Operating Partner (but only after years of CFO experience). I don't think Corp Dev pigeonholes you unless you've been in that role for a long time...personally think M&A is a lot more challenging and demanding than other corporate finance roles so if you can excel in CD you can easily transition to other things.
What rank and comp can someone who exits IB after a 2-year analyst stint at a BB/EB into a corpdev role at a portco expect?
Worked in a business unit at a MF Portco. Didn't get any visibility to the sponsor but loved my time there. Fast-tracked my career pre-MBA with the help of my managers and helping with one of the integrations after a large merger with a competing company.
Goal is eventually to go back into PE Portco space at the LMM / MM space with hopefully a title bump and be more on the corporate side (interacting with the sponsor).
When did you pursue your MBA and after how many years at the PortCo in CorpDec? Joining one next week, and could see myself staying there for awhile, but the thought of an MBA has always been in the back of my mind.
I wasn't in corp dev. Was honestly in a highly regarded business unit that helped with some company wide integration. Didn't get to work at their fancy headquarters (where all the sexy 'corporate' type of jobs were) but a satellite office in the suburbs.
I spent 2.5 years there. Got acquired recently and is struggling unfortunately. Prior to the acquisition and going to get an MBA, I had a lot of mobility across my ~50-70 person department. If it was still privately owned and doing financially well (like it was when I was there), I don't think it was too far to ask the company to let me return in a corporate development / corporate strategy function.
I enjoyed the fast pace nature of the job. Had some crazy hours worked some weeks but I got notable pay bump every ~6-8 months or so without even asking. Got lucky with having a phenomenal boss too.
Thought I would like big companies coming to campus to recruit at the MBA level. Struck out at all of them and honestly found it more interesting talking to alum at smaller companies. Had a recent call with a Corp Dev director whose an alum and his current role sounds like the dream. Didn't have a finance background nor did he work in finance post MBA. Got into the space mostly through networking.
My first Corp Dev role was at a MF Portco. Stating that the experience was underwhelming is a massive understatement. Here are some of the issues I had:
1. Comp: Comp was heavily below market. I was desperate to enter Corp Dev at the time so I took a massive pay cut. The position also had a ZERO % bonus. We could close 0 or 50 deals, the company could grow at a -10 or 100% growth rate, and my comp stayed at just base.
2. Knowledge: 2 of the 4 people on my deal team had no background in M&A. That meant it was just the SVP and myself running processes, building models, etc. So I was reporting to people who knew materially less than me, tweaking my models based on opinions with zero quantitative knowledge.
3. Horrible PE Management: We had a great deal that we were about to close. The company performed so well our main concern was "getting in the way of their massive success". The fund's Principals and Associates were cued on the target every step of the way and were fully supportive. Yet, when we went for LOI approval, the Head of [INSERT MF NAME]'s coverage group shut the deal down, saying he didn't see meaningful synergy opportunity. I have kept close tabs on this business and it has grown EXPONENTIALLY since we kicked the can down the road for 1+ years, extending exclusivity but never getting Head of Coverage Group support.
4. Expectations: From amount of time in office, to midnight on Christmas Eve requests, I couldn't believe the shit I had to deal with. I was looking for a new job within my first month.
5. The Office: Coming from IB and Consulting, I was accustomed to adequate offices (snacks, decent coffee, drinks, etc.). This office was run by a f**** minimalist, to the point where you had to bring in your own pods to make coffee. It was candidly embarrassing to work there.
6. The Irony: The PE Associate on all of our deals couldn't even understand the fundamentals of our business model. Lets say we were in manufacturing, and there were two business models; one was buy components and combine them into finished product, the other was manufacture components using raw materials and combine them into finished products. This guy had worked with us for years and still couldn't determine which category we fell into.
I want to put the MF on blast so badly and name and shame but I'm not going to do it, sorry in advance.
Did you never feel the need to go back to IB or change into an investment PE role, given the slave hours you worked in CorpDev?
I.e. PE Associate knowing very little but likely getting paid 3x your salary.
Good Question - I had a bit of an unconventional background which would've made the transition to PE difficult, and I really didn't want to return to banking, so I used this short but miserable experience as a crucial stepping stone to getting the role I have now, and one that I greatly appreciate.
One thing people don't seem to realize is once you have a Corp Dev title you can rotate much more freely within the industry after 1-2 YOE. So suddenly I became a candidate for the not top tier roles (think M&A at Apple, Google, etc.), but the tier 2/3 opportunities (think major healthcare players, auto OEMs, etc.).
Now, if I had been at say a top bank I would've been in a very different position, but I didn't even come from a strong MM player, so I counted my blessings and worked with what I had.
Not trying to be cheeky but I feel like joining a role with no bonus is a red flag in itself
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